<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1997
REGISTRATION NO. 333-22999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHYSICIANS CARE FOR CONNECTICUT, INC.
<TABLE>
<S> <C> <C>
CONNECTICUT 6324 04-1467896
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
------------------------
1520 HIGHLAND AVENUE
CHESHIRE, CONNECTICUT 06410
(203) 699-2400
(Address and telephone number of principal executive offices)
------------------------
EDWARD J. BERNS, ESQUIRE
1520 HIGHLAND AVENUE
CHESHIRE, CONNECTICUT 06410
(203) 699-2400
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD L. TREMBOWICZ, ESQUIRE JOHN A. PICCIONE, ESQUIRE
HUTCHINS, WHEELER & DITTMAR SULLIVAN & WORCESTER LLP
A PROFESSIONAL CORPORATION ONE POST OFFICE SQUARE
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 338-2800
(617) 951-6600
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 17, 1997
PROSPECTUS
PHYSICIANS CARE FOR CONNECTICUT, INC.
3,000 SHARES OF CLASS A COMMON STOCK
AND
3,000 SHARES OF CLASS B COMMON STOCK
--------------------------
NOPQRSTU
For a more detailed description of the risks associated with the purchasing
of stock offered in this Prospectus, see "Risk Factors" beginning on page 8 of
this Prospectus. For definitions of capitalized terms not otherwise defined
herein, see "Glossary" beginning on page 52 of this Prospectus.
Physicians Care for Connecticut, Inc., a Connecticut corporation (the
"Company" or "Physicians Care"), is offering (the "Offering") two classes of
stock, Class A Common Stock, no par value ("Class A Common Stock"), and Class B
Common Stock, no par value ("Class B Common Stock" and together with Class A
Common Stock, "Common Stock"), to Eligible Purchasers (as defined herein, see
"Terms of Offering--Eligibility Requirements to Purchase Stock."), for a period
(the "Offering Period") of one hundred and eighty days from the date of this
Prospectus, with one sixty day extension at the discretion of the Board of
Directors of the Company (the "Board of Directors"). All Common Stock will be
sold to Eligible Purchasers at a price of $4,000 per share, subject to a "prompt
subscription" price of $3,000 per share for Eligible Purchasers who execute and
deliver to the Subscription Agent the completed Subscription Documents in form
sufficient to establish eligibility to purchase Common Stock within ninety days
of the date of this Prospectus. The Offering is subject to receipt of the
payment and completed Subscription Documents prior to the expiration of the
Offering Period committing to purchases of not less than $8 million of Common
Stock. In the event this threshold is not satisfied, the purchase price of each
share of Common Stock, plus interest thereon, shall be refunded, minus $450 per
share, which shall be retained by the Company to offset the costs associated
with the Offering. See "Risk Factors--Retention of Proceeds." Up to 3,000 shares
of Class A Common Stock and 3,000 shares of Class B Common Stock may be sold in
this Offering. The Common Stock will be marketed on a best efforts basis by a
licensed broker-dealer, Newbury, Piret & Co., Inc., (the "Underwriter"), which
will receive a sales commission on all Common Stock sold plus reimbursement for
expenses incurred in connection with the Offering. Additionally, Newbury, Piret
& Co., Inc. will serve as Subscription Agent. Under certain circumstances,
Common Stock may be marketed by the Company's officers, directors and the
members of the Company's Physician Advocate Council, none of whom will receive
compensation in connection with any offers or sales of Common Stock.
The offering price has been determined by the Board of Directors, based upon
estimates of the capital necessary to begin operations of a Health Maintenance
Organization ("HMO"). The offering price does not necessarily bear any
relationship to the Company's asset value, net worth, or other established
criteria of value and is greater than what its Involuntary Redemption Price is
anticipated to be for at least the first five years after the Offering. The
securities registered hereby are not intended to be a liquid or a quickly
appreciating investment, but do provide an opportunity to develop the Company's
healthcare delivery system and to provide healthcare services to Enrollees
insured by the Company. See "Risk Factors--Restrictions on Transferability of
Common Stock and Absence of a Public or other Trading Market for Common Stock."
Purchasers who meet the eligibility requirements set forth in this Prospectus
may purchase the Common Stock regardless of where they reside, subject to the
Company's compliance with federal and state securities laws and regulations. See
"Terms of Offering--Eligibility Requirements to Purchase Stock."
--------------------------
THESE ARE SPECULATIVE SECURITIES WHICH INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Transfer of the Common Stock by investors is subject to restrictions and
limitations pursuant to the Company's Certificate of Incorporation and Bylaws.
Consequently, no market for the Common Stock currently exists, and Common Stock
offered hereby should be purchased only by Eligible Purchasers who have read and
understand this Prospectus and the benefits and risks of the investment. The
terms and conditions under which the Company is required or permitted to redeem
Common Stock are set forth in this Prospectus. See "Description of
Securities--Transfer Restrictions and Redemption Provisions."
<TABLE>
<CAPTION>
MAXIMUM PRICE TO UNDERWRITING DISCOUNT MAXIMUM PROCEEDS TO
PUBLIC(1)(2)(4) AND COMMISSIONS(3) COMPANY(5)(6)
<S> <C> <C> <C>
Per Class A Common Share........................ $4,000(1) $280 $3,720
Per Class B Common Share........................ $4,000(2) $280 $3,720
Total minimum................................... $8,000,000(4) $560,000 $7,440,000
Total maximum................................... $24,000,000(5) $1,680,000 $22,320,000
</TABLE>
(1) Class A Common Stock will be sold at a cost of $4,000 per share, subject to
a "prompt subscription" price of $3,000 per share to Eligible Purchasers who
execute and deliver to the Subscription Agent completed Subscription
Documents to purchase shares within ninety days of the date of this
Prospectus.
(2) Class B Common Stock will be sold at a cost of $4,000 per share, subject to
a "prompt subscription" price of $3,000 per share to Eligible Purchasers who
execute and deliver to the Subscription Agent completed Subscription
Documents to purchase shares within ninety days of the date of this
Prospectus.
(3) The Underwriting Discount and Commissions are equal to seven percent (7%) of
the price to the public ("Underwriter's Discount"). In addition, the
Underwriter is entitled to a non-accountable expense allowance of one and
one-half percent of (1.5%) the price to the public plus direct compensation
for certain specified expenses associated with the Offering ("Underwriter's
Expenses"). See "Underwriting."
(4) In the event the Company does not receive subscriptions for an aggregate of
$8,000,000 of Common Stock, the Company shall terminate the Offering, and
will retain from the proceeds $450 per share of Common Stock subscribed to
be used to offset expenses associated with the Offering. See "Risk
Factors--Retention of Proceeds."
(5) In the event all Common Stock offered hereby is sold within ninety days of
the date of this Prospectus, the Maximum Price to Public, Underwriting
Discount and Commission, and Maximum Proceeds to Company will be
$18,000,000, $1,260,000 and $16,740,000, respectively.
(6) Before deducting Offering expenses payable by the Company estimated to be
$1,109,408.
NEWBURY, PIRET & CO., INC.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission (the
"Commission") Washington, D.C., 20549, a Registration Statement on Form SB-2
under the 1933 Securities Act with respect to the securities offered hereby.
This Prospectus, which is part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement
and the exhibits and the schedules thereto which may be inspected, without
charge, at the Commission, or copies of which may be obtained from the
Commission in Washington, D.C. upon payment of the requisite fees. Statements
contained in this Prospectus as to the content of any contract or other document
referred to are not necessarily complete, and where such contract or other
document is an exhibit to the Registration Statement, each such statement is
deemed to be qualified in all respects by the provisions of the exhibit.
After this Offering, the Company will be subject to the informational and
reporting requirements of the Securities Exchange Act of 1934, as amended and,
in connection therewith, will file periodic reports, proxy statements, and other
information with the Commission. The Registration Statement, as well as any
periodic reports, proxy statements, and other information filed by the Company
with the Commission can be inspected without charge and copied, upon payment of
prescribed rates, at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material and
any part thereof will also be available by mail from the Public Reference
Section of the Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http:// www.sec.gov.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------------------------------------------------- ---------
<S> <C>
Available Information............................ 2
Prospectus Summary............................... 3
Risk Factors..................................... 8
Use of Proceeds.................................. 18
Dividends........................................ 18
Capitalization................................... 19
Dilution......................................... 19
Plan of Operation................................ 20
The Company...................................... 24
Business......................................... 24
Management....................................... 38
Conflicts of Interest............................ 42
Related Party Transactions....................... 42
<CAPTION>
SECTION PAGE
- ------------------------------------------------- ---------
<S> <C>
Terms of Offering................................ 43
Escrow Arrangements.............................. 45
Subscription Agent............................... 45
Description of Securities........................ 46
Underwriting..................................... 50
Experts.......................................... 51
Glossary......................................... 52
Index to Financial Statements.................... F-1
Appendix A: Questions & Answers.................. A-1
Appendix B: How to Subscribe in this Offering.... B-1
Appendix C: Sample Physician Fee Schedule........ C-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
appearing elsewhere.
THE COMPANY
Physicians Care was incorporated in 1996 as a Connecticut corporation to
develop a statewide physician-owned and -directed insurance company licensed as
an HMO which intends to offer a comprehensive array of health insurance
products. Presently, the Company is a wholly-owned subsidiary of MedServ of
Connecticut, Inc. ("MedServ"). However, upon completion of the Offering, the
Company will be substantially owned by the Eligible Purchasers of Common Stock.
The principal goal behind the formation of the Company is the creation of a
managed healthcare plan that will become the managed healthcare plan of choice,
preferred by employers and individuals to provide for their health insurance
needs in the State of Connecticut. The Company believes that it can achieve this
goal by developing health insurance products with value that are clearly
identified as the premier products in the State of Connecticut.
The Company believes that physicians will play a critical role in the
overall success of the Company and that the Company will be predominantly owned
by physician shareholders practicing in Connecticut, who are expected to
participate actively in the Company's affairs. The Company currently intends to
reinvest in its products (through infrastructure development) to foster the
commitment of physicians to participate actively in the Company's marketing
efforts and programs and to manage medical risk while concomitantly maintaining
patient satisfaction. The Company believes the principal difference between the
Company and its competitors is that the Company is founded on the belief that
physicians play an important role in both defining and managing the healthcare
delivery system of its health plan products, and the Company intends to support
those efforts of physicians accordingly.
Initially, the Company intends to offer a modified open access product,
pursuant to which each Enrollee will select a Care Manager who will coordinate
medical care to the extent consulted by the Enrollees or informed by a
Participating Physician or Plan. Although Enrollees may access any Participating
Physician at any time without a Care Manager's referral, the Company believes it
has structured its benefits design to encourage Enrollees to utilize their Care
Managers to coordinate referrals, for example, through a reduced or waived
copayment if a referral is coordinated through a Care Manager.
The Company will prepare and file an application for a Certificate of
Authority ("COA") with the Connecticut Department of Insurance (the "DOI") to
operate as an HMO throughout the State of Connecticut and will seek such other
regulatory approvals as necessary to offer its products, should the COA be
approved. The Company intends to provide coverage for comprehensive healthcare
services to Enrollees under its insured products for a fixed, prepaid enrollment
fee paid by or on behalf of the Enrollees.
The Company intends to enter into a long-term Management Agreement (the
"Mangement Agreement") with MedServ, pursuant to which MedServ will conduct the
day-to-day operations of the Company, develop the physician and provider network
and oversee clinical service delivery. MedServ has sub-contracted responsibility
for the development of the physician network and for the clinical aspects of its
operations to MedServ IPA, Inc. ("IPA"), a statewide independent practice
association of physicians that is controlled by physicians.
An important piece of the Company's design is that IPA is also managed by
MedServ. As a result, a physician organization will manage both the
administrative and clinical sides of the Company, thereby maintaining the
distinctive character that the physician-led initiative of the Company will
bring to the managed care marketplace.
3
<PAGE>
As a condition to purchasing Class A Common Stock in the Offering, each
Eligible Purchaser must agree to provide medical services to Enrollees pursuant
to the terms of a Participating Physician Agreement between the investing
physician and IPA. To be an Eligible Purchaser of Class B Common Stock, the
purchaser must be a physician who owns one share of Class A Common Stock, or a
hospital or other investor (including retired physicians) approved by the
Company at its discretion. See "Terms of Offering."
For a more comprehensive description of the Company's contemplated business
operations, see "Business."
THE COMPANY'S MANAGEMENT
The Company recognizes that the operation of an HMO involves multiple
functions, including but not limited to, licensing and associated maintenance of
financial standards and other regulatory compliance, product design, day-to-day
operations, including underwriting, marketing and sales, claims adjudication,
and establishment and maintenance of a provider network. To achieve efficiencies
in management, the Company has segregated its operations into distinct operating
units as follows:
1. HMO Licensing and Regulatory Compliance and Product Design;
2. Day-to-Day Management; and
3. Development and Maintenance of the Participating Physician Network.
MEDSERV
MedServ was organized in 1995 as a joint venture of the Hartford County
Medical Association and the New Haven County Medical Association. Each of the
Associations owns 50% of the equity interests in MedServ. MedServ is a
for-profit corporation performing administrative functions for both county
medical associations and intends to operate a Central Verification Organization
("CVO") to provide credentialing services which are intended to meet National
Commission for Quality Assurance ("NCQA") credentialing standards. MedServ
currently employs twenty-four full-time employees and has offices located at
1520 Highland Avenue, Cheshire, Connecticut 06410. MedServ currently provides
management services to the following entities: New Haven County Medical
Association, Hartford County Medical Association, MedServ IPA and Medical
Delivery Services, Inc.
MedServ will develop credentialing standards to provide assurances to
Enrollees that each provider of medical services meets the minimum standards for
education, licensing, training and expertise deemed necessary by the Company to
provide the medical services requested. Under the credentialing service, MedServ
will collect information to document compliance with the credentialing
standards, will verify the accuracy of such information, and will monitor
continuing compliance with such credentialing standards.
Key members of the MedServ management team will provide management services
to the Company. The Management Agreement has a minimum term of ten years and
will be automatically renewable for additional three-year terms, unless
terminated on one year's prior notice by either party. MedServ is the sole
holder of the Company's Class C Common Stock.
Pursuant to the Management Agreement and subject to the oversight of the
Board of Directors, MedServ is responsible for the day-to-day management of the
Company, including but not limited to the following activities:
- performing all management, administrative and other services necessary to
operate the Company;
- obtaining all licenses, permits or other regulatory approvals necessary to
operate the Company as an HMO in the State of Connecticut;
4
<PAGE>
- preparing and submitting an application for the Company to become eligible
to provide healthcare services to Medicare beneficiaries;
- providing facilities for the operation of the Company;
- negotiating subscriber agreements with employer groups or individuals;
- providing or securing underwriting on appropriate insurance services;
- preparing materials necessary to inform and educate Enrollees about the
Company's administrative requirements and the terms and conditions of the
Enrollee's benefit plan;
- developing and implementing a grievance and complaint system for
Enrollees;
- developing and implementing marketing initiatives;
- conducting or managing the sale of the Company's products;
- establishing and administering accounting procedures and controls;
- conducting claims analysis and statistical reporting;
- conducting negotiation of provider contracts and credentialing of
providers;
- developing quality and utilization management standards;
- providing or arranging for the provision of a management information
system;
- preparing on-going business plans for the Company;
- maintaining the Company's books and records;
- ensuring that the Company's operations are consistent with applicable laws
and regulations.
During the start-up and initial operations stages of the Company, the
Company will pay MedServ a Management Fee equal to MedServ's actual cost of
providing the services set forth in the Management Agreement not to exceed the
amounts set forth in the Administrative Services Budget (the "Budget") approved
by the Board of Directors by a two-thirds vote and an allowance for profit and
general administrative expenses equal to five percent of such actual costs. In
the event that actual administrative and capital expenses in aggregate are
expected to exceed the Budget or if actual expenses related to any line item of
the Budget are expected to exceed the Budget for such line item by more than
twenty percent, MedServ must notify the Board of Directors of such expenses and
may make no expenditure for such expenses without the approval of the Board of
Directors.
Subject to the consent of the Board of Directors, which consent will not be
unreasonably withheld, MedServ will be permitted to contract with other third
party independent contractors to provide some or all of the services required to
be delivered under the terms of the Management Agreement.
IPA
It is anticipated that IPA will enter into a long-term agreement with
MedServ (The "IPA Agreement"), pursuant to which IPA will be the exclusive
provider of a network of Participating Physicians to provide services to
Enrollees, which exclusive status is to remain in effect unless the Board of
Directors determines in its reasonable judgment that the network furnished by
the IPA is not adequate to service the needs of Enrollees, and cause
Participating Physicians to provide such services. The IPA Agreement provides
that IPA shall, among other things: (a) ensure that Participating Physicians are
properly licensed and credentialed and have privileges at specified hospitals
and other health care facilities; (b) notify MedServ of any professional
disciplinary action or similar action against any Participating Physicians; (c)
with MedServ's assistance, develop peer group monitoring systems for
Participating Physicians; and
5
<PAGE>
(d) develop, with MedServ, mutually agreeable Utilization Management and Quality
Management Programs and adopt and implement such Programs. IPA's compensation
for its services under the IPA Agreement has not yet been determined. To the
extent that IPA is not able to deliver a network of physicians in any portion of
the State of Connecticut, the Company is free to establish its own network in
that portion of the State of Connecticut and/or to terminate the IPA Agreement
with IPA.
MedServ IPA, Inc. is a Connecticut non-profit corporation, organized in
October 1985 and formed specifically for the purpose of developing a network of
physicians to provide services to health plan enrollees. From 1985 to 1996, IPA
was known as ProCare IPA, Inc. IPA is also managed by MedServ.
ADVOCATE COUNCIL
The Board of Directors has authorized the establishment of the Physician
Advocate Council as an ad hoc committee appointed by the Board of Directors
which will advise the Board of Directors on matters of Company policy or
operations as they affect physician participation in products offered by the
Company, including product design, physician compensation, physician
credentialing criteria, the physicians' role in member services support, the
effectiveness of the Company's medical management model and the conduct of the
Company's capital campaign. The Board of Directors appoints physician members to
the Physician Advocate Council in its discretion. Participation of physicians in
the Physician Advocate Council is voluntary and no compensation will be paid by
the Company to such physicians.
STOCK TRANSFER RESTRICTIONS AND REDEMPTION
The Common Stock is subject to significant restrictions on transfer and on
the redemption thereof by the Company. See "Description of Securities."
THE OFFERING
Common Stock offered by the Company:
<TABLE>
<S> <C>
Class A..................................................... 3,000 shares
Class B..................................................... 3,000 shares
Total....................................................... 6,000 shares
</TABLE>
COMMON STOCK TO BE OUTSTANDING AFTER THE OFFERING:
<TABLE>
<S> <C>
3,000
Class A..................................................... shares(1)
3,000
Class B..................................................... shares(1)
Class C..................................................... 3 shares
Total....................................................... 6,003 shares
</TABLE>
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(1) Assumes full subscription of all Common Stock offered hereby.
6
<PAGE>
USE OF PROCEEDS
For repayment of bank loans, repayment of development stage costs advanced
by MedServ and IPA, payment of accounts payable and accrued expenses related to
development stage costs, sales and marketing activities and for working capital
and other general corporate purposes. See "Use of Proceeds."
RISK FACTORS
An investment in the Common Stock involves a high degree of risk, including,
among others, risks related to lack of operating history, anticipated losses for
several years, retention of proceeds, government approvals and regulation,
restrictions on transfer of stock and absence of a public or other market for
Common Stock, need for agreements with a sufficient number of participating
healthcare providers, and reliance on MedServ and IPA. See "Risk Factors."
SUMMARY FINANCIAL DATA
The following table sets forth certain historical financial data for the
Company as of March 31, 1997, which has been derived from the audited financial
statements of the Company included elsewhere herein, together with unaudited pro
forma data reflecting the application of proceeds of the Offering.
<TABLE>
<CAPTION>
AS ADJUSTED UPON AS ADJUSTED UPON
COMPLETION OF COMPLETION OF
MARCH 31, THE THE
BALANCE SHEET DATA: 1997 OFFERING(1) OFFERING(2)
- ----------------------------------------------------------------- ---------- ---------------- ----------------
<S> <C> <C> <C>
Working Capital (Deficit)........................................ (843,753) 5,366,839 20,006,839
Borrowings under Line of Credit.................................. 550,000 -0- -0-
Total Liabilities................................................ 907,428 -0- -0-
Total Stockholder's Equity (Deficit)............................. (843,753) 5,366,839 20,006,839
</TABLE>
(1) Assumes the receipt of the minimum net proceeds of the Offering to the
Company $6,210,592 ($8,000,000 less underwriting commissions, discounts and
expense allowances and other estimated Offering expenses of the Company).
(2) Assumes the receipt of the maximum net proceeds of the Offering to the
Company $20,850,592 ($24,000,000 less underwriting commissions, discounts
and expense allowances and other estimated Offering expenses of the
Company).
7
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS OF THE COMPANY'S INTENTIONS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED
BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AS WELL
AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.
DEVELOPMENT STAGE COMPANY; NO OPERATING HISTORY
The Company was incorporated on November 12, 1996. The Company is in its
development stage, has no operating history, and has generated no operating
revenues. As such, the Company is subject to all of the risks inherent in a new
enterprise, including, but not limited to the items discussed below. The Company
has not completed the design of its benefit plans or its financial, operational,
and administrative plans. Similarly, it has not completed the drafting of
contract documents, utilization management/quality assurance standards and
systems, or payment levels and methodologies. The application for a COA which
will enable the Company to operate as an HMO in the State of Connecticut will be
filed after commencement of this Offering, but subject to completion of the
minimum Offering.
Investors should be aware of the difficulties typically encountered by a new
enterprise. There can be no assurance that the Company's development will be
successful, that its services or products will be successfully marketed, or that
enough physicians or other healthcare providers (i.e. hospitals, ancillary
providers, etc.) will be willing to provide services to the Enrollees of the
Company to enable it to operate an HMO.
RETENTION OF PROCEEDS
The Company will retain $450 per share from the proceeds of the
subscriptions to purchase Common Stock to offset costs associated with the
Offering, even if the Offering is not consummated due to insufficient
subscriptions to satisfy the $8,000,000 minimum threshold required for
consummation. Expenses associated with the Offering, exclusive of underwriting
commissions, are estimated to be approximately $1,109,408 . The Company intends
to use such portion of the proceeds from subscriptions to pay expenses incurred
by the Company prior to the closing of this Offering. There can be no assurance
that the Company will receive sufficient subscriptions to consummate this
Offering, and, accordingly, subscribers may lose a part of their investment
without receiving any shares of Common Stock.
ANTICIPATED LOSSES FOR FIRST SEVERAL YEARS
It is anticipated that the Company will incur losses and will have a
substantial operating deficit for approximately three years following the
effective date of enrollment of Enrollees, and will have cumulative losses for
approximately five years. There can be no assurance, however, that the Company
will begin operating with a positive cash flow within the estimated time
described above, or that its actual losses or number of Enrollees will be as
estimated. It may take a significantly longer time than anticipated to achieve a
positive cash flow, if ever, and the Company's losses may be significantly
greater than estimated. The size of the deficit will depend upon, among other
factors, the health status of Enrollees, the ability of management, the accuracy
of actuarial projections, the Company's ability to reinsure against catastrophic
losses, the per capita amount of premiums collected, the ability to market the
Company's products successfully, the effectiveness of its utilization management
programs in controlling unnecessary utilization
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of health services, the avoidance of epidemic or unexpected medical
catastrophes, the length of time necessary to obtain regulatory approvals and
any conditions attached to such approvals, and other factors not subject to
precise estimation. If the Company fails to achieve positive cash flow within
approximately three years of the date on which it first enrolls Enrollees, or if
the proceeds of the Offering are otherwise inadequate to fund the Company's
operations until such time as the Company ceases to incur deficits, then
additional financing may be required to cover losses incurred, which financing
may not be available, or, if available, may not be available on terms acceptable
to the Company, in which event a statutory liquidation proceeding under the
supervision of the DOI might be instituted against the Company. The rules and
regulations of the State of Connecticut will determine how the assets of the
Company would be distributed to creditors and shareholders under such
circumstances. See "--Potential Ineligibility of HMOs for Federal Bankruptcy
Protection."
GOVERNMENT APPROVALS AS A PREREQUISITE TO OPERATIONS
The Company will file an application for a COA as an HMO with the DOI. Such
COA is essential to the operation of an HMO as proposed by the Company, and, as
a result, failure to receive approval from the DOI would have a significant
adverse effect on the Company. Further, the Company intends to file an
application to become a Competitive Medical Plan ("CMP") with the United States
Health Care Financing Administration ("HCFA") to serve Medicare beneficiaries
when the Company meets eligibility requirements for a CMP. Under current
regulations, the Company must have at least 5,000 commerical Enrollees to meet
such eligibility requirements. There can be no assurance that the Company will
be able to meet such eligibility requirements. The Company intends, under its
contract with MedServ, to expend substantial sums from the proceeds of the
Offering to obtain HCFA's approval and status as a CMP. If HCFA denies the
Company status as a CMP, the Company would be unable to offer insurance to the
state's elderly population on a competitive basis, which would have a material
adverse impact on the Company.
GOVERNMENT REGULATION
HMOs are subject to extensive state and federal governmental regulation
which may undergo substantial changes over the next several years. The areas
regulated include, among others, the scope of benefits required to be made
available to Enrollees, minimum net worth and capital reserves requirements, the
manner in which premium rates are structured, procedures for review of quality
assurance programs, enrollment disclosures and requirements, the relationship
between the Company and its healthcare providers and the financial condition of
the Company. Failure of the Company to comply with such regulations could result
in the loss of its COA to operate an HMO in Connecticut, if such authority has
been approved, or federal authority to operate a CMP, if such federal authority
is obtained. In the future, the Company will assess the advantages and
disadvantages of obtaining federal HMO qualification. In lieu of specified plans
required by state regulation to be offered, federally qualified HMOs are
permitted to offer plans approved in accordance with laws governing a federally
qualified HMO. Until and unless federal HMO qualification is obtained, the
Company will be required to offer the plans required by Connecticut law.
However, there can be no assurance that the Company will seek approval to be a
federally qualified HMO or that if such approval is sought, it will be obtained.
The State of Connecticut has begun to deregulate some aspects of hospital
rates. As a result, the Company may be limited in its ability to negotiate
favorable rates from hospitals. To the extent the State of Connecticut further
deregulates hospital rates, hospitals may have incentives to compete with one
another for business which may enhance the Company's ability to negotiate
favorable rates with participating hospitals. Increased competition may have a
negative effect upon the financial viability of certain hospitals with which the
Company contracts.
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In addition, it is impossible to predict whether regulation and/or reforms
which may be considered by the federal government and/or the State of
Connecticut will be adopted, or to forecast the effect that state and/or federal
legislation, if enacted, may have on the healthcare delivery system and the
Company's business. See "Business--Regulation."
LIMITATIONS ON PHYSICIAN OWNERSHIP OF CERTAIN HEALTHCARE ENTERPRISES
Federal law, under certain defined circumstances, prohibits referrals by a
physician to a healthcare entity in which the physician or his immediate family
has a financial interest, including ownership of an equity interest. There can
be no assurance that the limitations of federal law will not be extended to
physician ownership of an HMO.
Based upon the Company's business plan, and subject to receipt of all
necessary governmental approvals, the Company believes that neither the Company
nor its physician shareholders will be in violation of either federal or
Connecticut law as a result of the operation of, or participation in, the
Company as an HMO. To the extent that physicians refer Enrollees to other
physicians, they will receive no remuneration for such referral. Moreover, the
Company will not require nor encourage physicians to refer Enrollees to entities
in which they have a financial interest. See "Plan of Operation" and "Business--
Regulation--Federal Anti-kickback and Anti-referral Laws."
If the Company becomes a CMP, federal law requires compliance with certain
requirements and restrictions relating to risk-sharing arrangements with
physicians. These requirements and restrictions may adversely affect the
Company's ability to motivate physicians to manage medical risk effectively.
RISKS OF INADEQUATE WORKING CAPITAL AND TERMINATION OF AGREEMENTS WITH PROVIDERS
If revenues are not sufficient to cover payments to providers and other
operating expenses, the Company will operate at a loss which could have a
material adverse impact on the Company's working capital. If the Company is
unable to make payments to Participating Physicians and other healthcare
providers, such providers could terminate their Participation Agreements to
provide services to the Company's Enrollees. The termination of a significant
number of such Participation Agreements could result in any of a series of
occurrences including, but not limited to, inability to service Enrollees,
reduced Enrollee growth, insufficient working capital and the possible loss of a
COA to operate an HMO. See "-- Anticipated Losses for First Several Years" and
"Use of Proceeds."
RESTRICTIONS ON TRANSFERABILITY OF COMMON STOCK AND ABSENCE OF A PUBLIC OR OTHER
TRADING MARKET
FOR COMMON STOCK
Common Stock cannot be transferred by a shareholder to any person or entity
other than to an Eligible Purchaser. As a result, there will be no public market
for the Common Stock of the Company. The Company must redeem Common Stock under
certain circumstances, and may redeem Common Stock otherwise. See "Description
of Securities--Transfer Restrictions and Redemption Provisions." In the event
that the redemption of Common Stock would, in the judgment of the Board of
Directors, render the Company insolvent or violate any capital reserve
requirement or contract to which the Company is a party, such redemption shall
not be made at that time, and the parties requesting redemption shall receive no
other compensation for the Common Stock sought to be redeemed. In addition, the
Company may adopt limitations on the amount of funds available each year for the
redemption of Common Stock. The Board of Directors may, in its sole discretion,
determine the amount of funds available each year for the redemption of Common
Stock, as well as the priority of payments to shareholders. As a result of the
foregoing restrictions, a shareholder of the Company should be prepared to hold
his or her Common Stock indefinitely.
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NEED FOR PARTICIPATION AGREEMENTS WITH A SUFFICIENT NUMBER OF HEALTHCARE
PROVIDERS
The Company intends to contract with MedServ to arrange for the availability
of a physician network. In turn, the Company understands that MedServ intends to
subcontract its obligations to do so to IPA, which the Company believes will
arrange for the provision of a sufficient number of physicians throughout the
State of Connecticut to provide physician services to Enrollees.
The Company, in conjunction with MedServ, has begun to negotiate provider
agreements with hospitals and other healthcare providers, including, without
limitation, hospitals, pharmacies, laboratories and nursing homes, although it
has not reached a binding agreement with any such provider. There can be no
assurance that IPA will have a sufficient number of physicians or that the
Company through MedServ will contract with enough other healthcare providers to
provide adequate access to medical services for Enrollees. In such case, the
Company may not be able to sell its products or services statewide. The
inability of IPA to maintain a sufficient number of physicians in its network or
the inability of the Company through MedServ to contract with a sufficient
number of other healthcare providers might reduce the Company's ability to
compete with other HMOs in Connecticut and may have an adverse effect upon the
financial condition of the Company. If IPA's Participation Agreements are
terminated by Participating Physicians, or other healthcare providers terminate
their contracts with the Company, the Company's ability to continue to market
its products or services would be materially adversely affected.
NO ASSURANCE OF SUFFICIENT NUMBER OF PARTICIPATING PHYSICIANS
No physician can provide medical services to the Company's Enrollees unless
the physician purchases one share of Class A Common Stock. This requirement may
have the effect of encouraging physicians to provide services to enrollees of an
HMO, other than the Company, which does not condition participation therein upon
the purchase of an ownership interest. There can be no assurance that a
sufficient number of physicians will purchase one share of Class A Common Stock
such that the Company has an adequate number of Participating Physicians to
provide medical care to Enrollees. The failure of the Company through IPA to
attract a sufficient number of Participating Physicians to support an adequate
network may have a material adverse effect on the Company.
OVERABUNDANCE OF PARTICIPATING PHYSICIANS
The Company may have greater than an appropriate number of Participating
Physicians in certain specialties within certain geographic areas. To the extent
that there might be too many Participating Physicians in certain specialties
within a geographic area, the revenue realized by any individual or Group of
Participating Physicians in that specialty for services rendered to the
Company's Enrollees may not be as great as anticipated. In addition, if a large
number of physicians become Participating Physicians, each Participating
Physician may have fewer patients and may derive less income from the Company.
There is no assurance that each shareholder will provide services to Enrollees
and receive compensation therefor. See "--Method of Reimbursement for Physician
Services."
LIMITATION ON CAPITAL; ELIGIBILITY OF PURCHASERS
There are certain eligibility criteria required to be an Eligible Purchaser.
To be an Eligible Purchaser of Common Stock, an individual must: (i) be a
physician licensed in the state in which the physician practices; (ii) be a
member of his or her County and State Medical Societies, if available; (iii)
have in effect a Participation Agreement with IPA and (iv) have in effect a
Physicians Care Primary Care Attachment or a Physicians Care Specialist
Physician Attachment. The Class A Common Stock may also be held by a Group. To
be an Eligible Purchaser of Class B Common Stock, the Eligible Purchaser must be
a physician who owns one share of Class A Common Stock, or a hospital or other
investor (including retired physicians) approved by the Company, in its
discretion. Accordingly, the number of potential Eligible
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Purchasers is limited which, in turn, may restrict the potential capital that
the Company raises in this Offering, or thereafter, if the Company needs
additional capital.
CONTROL BY CURRENT SHAREHOLDER
MedServ, as the sole shareholder of the Company's Class C Common Stock, has
the right to appoint a majority of the Board of Directors. Two-thirds in
interest of the outstanding Class C Common Stock must approve certain
extraordinary actions of the Company, such as: (i) a sale or liquidation of the
Company; (ii) a merger or consolidation involving the Company; (iii) an
amendment to the Company's Certificate of Incorporation; and (iv) any matter
required by law to be submitted to the shareholders for a vote. In addition, the
Company's Bylaws provide that a two-thirds majority of the directors appointed
by MedServ is required in order to appoint management of the Company, to amend
the Company's Bylaws or to authorize the incurring of debt of $1,000,000 or
more. Accordingly, MedServ will be able to determine the outcome of all actions
of the Company requiring approval by the Board of Directors or shareholders and
will substantially control the business affairs of the Company. See "Description
of Securities."
POTENTIAL FOR UNNECESSARY UTILIZATION OF HEALTHCARE SERVICES
Initially, the Company intends to offer a modified open access product,
pursuant to which each Enrollee will select a Care Manager who will coordinate
the Enrollee's medical care to the extent consulted by the Enrollee or informed
by a Participating Physician or Plan. Although Enrollees may access any
Participating Physician at any time without a Care Manager's referral, the
Company believes it has structured its benefits design to encourage Enrollees to
utilize their Care Managers to coordinate referrals, for example, through the
use of a reduced or waived copayment if a referral is coordinated through a Care
Manager. Female Enrollees, however, may select an Obstetrician/Gynecologist to
provide certain gynecological services or care related to pregnancy without the
prior authorization of the Care Manager, and the Company intends that such
Enrollees will not have to pay higher copayments for such services. Although
this system seeks to limit unnecessary utilization of medical services without
compromising the Company's vision of providing high quality medical care and
providing Enrollees flexibility in their choice of physicians, there is still a
risk that there will be unnecessary utilization of medical services. The
inability of the Company to minimize unnecessary utilization might have a
material adverse effect on the operations of the Company. Furthermore, Enrollees
may find the incentive to obtain a Care Manager's authorization for referral to
be unsatisfactory, which may lead to Enrollee attrition.
The Company intends to employ a Fee-For-Service ("FFS") payment arrangement,
which may encourage unnecessary utilization of healthcare services, causing the
Company to incur higher than anticipated costs. Notwithstanding the use of a
Care Manager system, and the use of other efforts to control unnecessary
utilization, the Company may suffer material adverse financial consequences as a
result of unnecessary utilization of healthcare services. See "Business--Quality
Management Program" and "--Utilization Management Program."
SUBSTANTIAL COMPETITION
The Company will compete with other prepaid health plans and with
traditional indemnity insurers in its geographic area, as well as with
self-insured programs and other managed care companies offering a range of
health insurance products. Moreover, a number of indemnity insurers have begun
to aggressively market HMO or managed care products of their own. Other programs
or entities, including Physicians Health Services, Inc., Blue Cross & Blue
Shield of Connecticut, Inc., ConnectiCare, Inc., M.D. Health Plan, Inc., Oxford
Health Plans, Inc., Medspan, Inc., Cigna Corporation, and U.S. Healthcare/Aetna
Health Plans of Southern New England, Inc., among others, have greater operating
experience and are substantially better capitalized than the Company. Under
proposed changes to federal laws, groups of healthcare providers may contract
directly with employers or other purchasers of health insurance products,
thereby eliminating or reducing the need for HMOs. Furthermore, employer
purchasing coalitions may seek to bypass the Company and its competitors when
purchasing healthcare services for employees and dependents by contracting
directly with healthcare providers. The Company expects substantial competition
for its services. See "Business--Competition."
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NET WORTH AND RESERVES REQUIREMENTS
To operate as an HMO, the Company must satisfy statutory minimum net worth
requirements as required by the DOI and must maintain reserves at least equal to
all of its estimated pending claims. To comply with the those requirements, the
Company must maintain a regulatory minimum net worth of $1,500,000 with
anticipated need for no less than an estimated $4,000,000 of capital committed
to satisfying on-going net worth and reserve requirements. The DOI retains
discretionary authority to increase these amounts to protect the interests of
Enrollees. There is no assurance that the Company will generate sufficient
earnings to meet the DOI reserve and net income requirements after the Company
commences operation as an HMO. Failure to meet those requirements could result
in suspension of operation of the Company and the revocation of the Company's
COA to operate an HMO. Further, there is no assurance that required regulatory
reserves will not be increased in the future, which increases may adversely
affect the Company. See "Business--Regulation."
METHOD OF REIMBURSEMENT FOR PHYSICIAN SERVICES
The Company cannot initially predict the behavior of its Participating
Physicians with respect to their adherence to established practice guidelines
affecting utilization of resources. As a result, the profitability of the
Company in the initial years of operations cannot be assured. If, however,
profits do accrue, the Company intends to use its operating profits to increase
its capital, reduce premiums, re-invest in the Company's operations, support
information systems development by Participating Physicians, and increase
reimbursement to Participating Providers. It is currently intended that
Participating Physicians will be reimbursed the lesser of (a) their usual and
customary fees, (b) the fees set forth on a fee schedule adopted by the Company,
an extract of which is attached as Appendix C hereto, "Sample Physician Fee
Schedule", or (c) a negotiated rate (in each case, less any applicable
copayments, coinsurance, or deductibles) ("Physician Reimbursement"). For most
services, the maximum fee schedule will be based on the Resource Based Relative
Value Scale ("RBRVS") with a conversion factor determined by the Company. The
maximum fee for services which are not included in the RBRVS will be established
by the Company upon the advice of its consultants based on a similar
methodology. The Company currently intends to withhold twenty percent of
Physician Reimbursement to defray medical costs in excess of budgeted amounts.
The sums withheld from Physician Reimbursement may be returned to Participating
Physicians at the discretion of the Board of Directors. As such, Participating
Physicians may be dissatisfied with their level of reimbursement and may
terminate their Participation Agreements and may request a redemption of their
Common Stock. In addition, the Company may not be able to effectively negotiate
payment rates with other providers, leading to increased costs for the Company.
See "--Need For Participation Agreements with a Sufficient Number of Healthcare
Providers" and "Description of Securities--Restrictions on Transfer; Share
Certificate."
There can be no assurance that Physician Reimbursement will be sufficient to
cover the costs of providing such services or to cause the physician to maintain
a Participation Agreement with IPA. Benefits from participation as a
Participating Physician, if any, may not compensate for a potential loss of the
investment made in this Offering.
POTENTIAL LIMITATION ON OUT-OF-STATE SERVICES
The Company, in conjunction with IPA, intends to develop its physician
network and, in conjunction with MedServ, its customer base within the State of
Connecticut. Since many individuals residing in Connecticut commute to employers
located in New York, Massachusetts and Rhode Island, the Company may need to
establish arrangements with out-of-state providers and may, in the future, need
to become licensed as an HMO or insurance company in some or all of those states
to attract regional employer accounts. If the Company seeks to be licensed as an
HMO in other states, there can be no assurance that the Company will obtain such
licenses. Failure to be licensed to sell products or services in neighboring
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states could adversely affect the Company's ability to market its services to
multistate employers and Connecticut employers having a significant number of
employees located or residing outside the State of Connecticut. Enrollees who
commute over state lines may encounter difficulties in obtaining convenient
access to the Company's provider network. Additionally, to the extent Enrollees
require medical services outside of the area covered by the Company's network,
the Company's ability to manage effectively the costs of those services may be
greatly reduced.
CONFLICTS OF INTEREST
The Company intends to market its HMO to large employers, small businesses,
and individuals throughout Connecticut, including physicians and hospitals who
or which may be shareholders and directors of the Company. Accordingly, some of
the Enrollees may be shareholders or employees or relatives of shareholders.
Further, the Company's shareholders may have ownership interests in and/or
participate in competing organizations, such as other HMOs, hospitals, and other
providers. The Company's shareholders may also have an interest in free-standing
facilities or other providers with which the Company has contracted. In
addition, there may be a conflict between a shareholder's interest in the
profitability of the Company and the desire to maximize compensation received
for providing medical services to Enrollees. MedServ stands in a similar
position, as it will attempt to maximize the profitability of the Company and
also seek to profit from providing management services. This conflict may be
complicated by MedServ's ownership of all of the Company's Class C Common Stock,
which grants MedServ effective veto power over certain of the Company's actions
and decisions, including approval of the Management Agreement and of amounts
paid to MedServ by the Company pursuant thereto. In addition, those companies,
such as IPA, with which MedServ may subcontract may experience conflicts of
interest. See "Conflicts of Interest" and "Related Party Transactions."
REINSURANCE, INSOLVENCY, AND PROFESSIONAL LIABILITY COVERAGE
To insure against catastrophic losses, the Company, through the Management
Agreement, intends to obtain reinsurance with a qualified reinsurer with a
retention limit of $100,000 per Enrollee per year and to increase this limit
during subsequent years if the Company's financial resources allow and the
number of Enrollees increase. Reinsurance does not legally discharge the Company
from its primary liability to the insured for the full amount of the policy, but
it does make the reinsurer liable to the Company to the extent of the reinsured
portion of any loss that may be incurred.
To the extent required by Connecticut law, the Company will obtain
insolvency coverage to provide for certain payments to Participating Physicians
and other healthcare providers for healthcare services provided to its Enrollees
in the event of an inability by the Company to make such payments. The Company
may become subject to claims for which it may not be fully insured, including
claims for failure to provide medical coverage, for wrongful termination of
coverage, and for malpractice in the provision of services. Although the Company
does not directly provide medical care to Enrollees, care will be rendered to
the Enrollees in accordance with guidelines and protocols established by the
Company, the Board of Directors, its committees and/or its agents and
independent contractors including MedServ and IPA. Therefore, it is possible
that the Company may be held liable for medical malpractice claims against one
or more of its Participating Physicians. The Company intends to obtain insurance
from an A.M. Best A+ (Superior) rated carrier to protect itself from such claims
and losses, with policy limits of $1,000,000 per incident and an aggregate limit
of $10,000,000 in any policy year. Additionally, the Company currently intends
to obtain an umbrella policy with limits consistent with industry practice for a
similar sized operator of an HMO to protect itself from those and other
liability claims against the Company.
Although the Company believes it will be adequately insured against such
claims and losses, a claim or series of claims against the Company could exceed
policy limits and materially adversely affect the
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Company's financial condition. In addition, there can be no assurance that in
the future such coverages will be available to the Company at commercially
reasonable rates.
EXPERIENCE OF BOARD OF DIRECTORS; RELIANCE ON MEDSERV AND IPA
As of the date hereof, no member of the Board of Directors has substantial
experience in the creation or management of an HMO.
The Company intends to enter into a Management Agreement with MedServ to
assist the Company in developing and managing its business and operations and in
obtaining a COA to operate an HMO on a statewide basis. In addition, the Company
understands that MedServ intends to subcontract to IPA responsibility to
establish a network of physicians and to oversee the delivery of clinical
services. As a result, the Company has been and will continue to be
substantially dependent upon MedServ and IPA, under the direction of the Board
of Directors, to manage the Company's activities. Although MedServ and IPA are
staffed with employees and employ consultants who have substantial experience in
the healthcare and insurance industries, MedServ is a management firm that has
not previously been involved in HMO development projects. The loss of the
services of MedServ or the failure of MedServ and IPA to perform their
obligations under the Management Agreement and the IPA Agreement, respectively,
would have a material adverse effect on the Company.
ANTITRUST CONSIDERATIONS
Federal and state laws may limit the scope of the Company's activities.
Participating Physicians or other healthcare providers will not be required to
provide services exclusively to the Company, and it will not preclude
Participating Physicians from providing services to Enrollees of other HMOs. The
Company may seek preferred or exclusive vendor relations with some providers of
healthcare services whereby the Company will purchase services only from
designated vendors. The Company will address antitrust issues on a case-by-case
basis. Generally, whenever physicians or other healthcare providers join
together to form ventures for the delivery of healthcare services, antitrust
issues may be present. Issues to be considered primarily concern possible
conspiracies, combinations and agreements in restraint of competition, price
fixing, boycotts, exclusive dealing arrangements, and concerted refusals to
deal. The Company has attempted to minimize its antitrust risk. Nevertheless,
the law in this area is unsettled and very fact specific. There can be no
assurance that there will not be a challenge to the Company's operations on the
basis of an antitrust violation in the future. If an antitrust investigation
were to be initiated or a legal action were to be filed against the Company, the
Company would be forced to incur legal expenses which could be substantial.
Moreover, if any antitrust challenge were to be successful, the Company could
suffer additional material adverse consequences, including cease and desist
orders with respect to certain business practices and monetary damages.
POTENTIAL NEGLIGENCE CLAIMS AGAINST HMOS
There is a possibility that the Company could be held liable for medical
malpractice committed by a Participating Physician. There is also a possibility
that the Company could be found liable for damages due to a determination that
certain healthcare services are not medically necessary, the failure to refer a
patient outside of the provider network, the failure to cover certain medical
procedures, or other policies that may affect the level and/or quality of
medical services provided to Enrollees. The law in this area is undergoing
continued development at this time and it is difficult to determine the extent
of the Company's liability, if any, for any such future claims.
Although the Company intends to purchase professional liability coverage,
such policy may not cover the above described potential claims or be sufficient
in amount to satisfy specific claims, which could materially adversely affect
the financial condition of the Company. See "--Reinsurance, Insolvency and
Professional Liability Coverage."
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DETERMINATION OF THE OFFERING PRICE
The offering price per share for the Common Stock has been arbitrarily
determined by the Board of Directors, based upon estimates of the capital
necessary to begin operations of an HMO. Accordingly, the offering price does
not bear any relationship to the assets, earnings, book value or net worth or
other established criteria of value of the Company prior to the Offering or to
expected earnings of the Company.
BROAD DISCRETION FOR USE OF PROCEEDS
The proposed use of proceeds is based upon the Company's best estimate given
its knowledge of facts and circumstances existing as of the date of this
Prospectus. The Company will have broad discretion as to the application of such
proceeds. See "Use of Proceeds."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that (a) diminish the likelihood that a potential acquiror would make an offer
for the Common Stock, (b) might impede a transaction favorable in the interests
of the shareholders and (c) increase the difficulty of removing members of the
Board of Directors or management. MedServ, as the sole shareholder of the Class
C Common Stock, has the right to appoint a majority of the Board of Directors.
Furthermore, elections for members of the Board of Directors will be held on a
staggered basis limiting the shareholders' ability to change the composition of
the Board of Directors. In addition, greater than two-thirds in interest of the
Class C Common Stock must approve any of the following actions: (i) a sale or
liquidation of the Company; (ii) a merger or consolidation involving the
Company; (iii) an amendment to the Company's Certificate of Incorporation; and
(iv) any matter required by law to be submitted to the shareholders for a vote.
In addition, the Company's Bylaws provide that two-thirds of the directors
appointed by MedServ is required to appoint management of the Company, to amend
the Company's Bylaws and to authorize the incurring by the Company of $1,000,000
or more of debt. See "--Control by Current Shareholders."
DILUTION
Prospective investors should be aware that the net tangible book value of
the Common Stock immediately following completion of this Offering will be less
than the offering price. This is because various expenses in connection with the
Offering will be paid from such funds, and the Company has already incurred
significant expenses during its development stage and in connection with the
preparation of its COA application. See "Dilution."
POTENTIAL INELIGIBILITY OF HMOS FOR FEDERAL BANKRUPTCY PROTECTION
A domestic insurer is ineligible to pursue a reorganization or liquidation
under the United States Bankruptcy Code as presently enacted. The law is unclear
as to whether an HMO organized and operating in the State of Connecticut would
be classified as a domestic insurer and found ineligible to pursue a liquidation
or reorganization under Federal bankruptcy laws. In light of this uncertainty, a
prospective investor in the Common Stock should assume that a reorganization or
liquidation of the Company would be conducted under the State of Connecticut's
insurance insolvency laws. Under either the Federal bankruptcy laws or the
Connecticut insurance insolvency laws, shareholders of the Company will be
afforded the lowest priority upon liquidation, and will receive a return on
their investments only if all of the Company's providers and trade creditors
have been paid in full. Furthermore, the Class B Common Stock has a $1,500 per
share liquidation preference which must be paid before Class A Common and Class
C Common shareholders receive a return of their investment in connection with a
liquidation or other insolvency proceeding.
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LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS
The Company's Certificate of Incorporation provides that, except as
prohibited by law, officers and directors of the Company will not be personally
liable to the Company or its shareholders for monetary damages resulting from
breaches of any duty owed to the Company or its shareholders. The Company has
obtained Directors and Officers liability insurance which, under certain
conditions and circumstances, covers the types of liabilities described in this
paragraph.
CERTAIN TAX CONSIDERATIONS
For federal income tax purposes, an HMO may be treated as a tax-exempt
entity under Section 501(c)(3) of the Internal Revenue Code (the "Code"), a
taxable insurance company under Subchapter L of the Code, or a taxable
corporation under Subchapter C of the Code, among other options, depending on
the facts and method of operation. Whether an HMO will be taxed as an insurance
company under Subchapter L of Code remains uncertain at this time because of
certain positions and actions taken by the Internal Revenue Service (the "IRS").
To meet the U.S. Department of the Treasury regulatory definition of an
"insurance company," an HMO's predominant business must consist of the issuance
of insurance contracts. For an HMO contract to be considered an insurance
contract, it must involve genuine shifting and distributing of risk to the HMO.
To be considered an insurance company, the HMO must retain the insurance risk
rather than transferring it to a provider or its contracting subscribers. In a
recent nonbinding ruling, the IRS held that a particular IPA model HMO, which
contracts with outside physicians on a Fee-For-Service basis, is an insurance
company because it acts as an indemnifier and retains the ultimate insurance
risk. The Company through its agreement with MedServ intends to contract
initially with physicians on a Fee-For-Service basis, which may permit the
Company to qualify as an insurance company for income tax purposes. The Company,
however, may enter into risk sharing arrangements with Participating Providers
in the future, which arrangements may shift all or a substantial portion of the
risk of the cost of medical services to such providers. Such arrangements may
disqualify the Company from obtaining insurance company status under IRS
regulations.
The Company is currently consulting with its accounting and tax advisors to
assess the viability of various reporting positions and benefits to be derived
therefrom. There can be no assurance that the IRS will not challenge the
reporting position selected by the Company. To the extent the Company is treated
as an insurance company, it will be eligible to take reporting positions which
provide certain advantages to, and impose certain restrictions on, the Company.
Specifically, estimated reserves for future claim payments will be deductible
(on a discounted basis) in the current taxable year. Conversely, qualification
as an insurance company may limit the Company's flexibility to structure
innovative risk sharing compensation arrangements with Participating Providers,
which arrangements create incentives to manage medical risks more effectively.
At this early stage of the Company's development, it is not feasible to make a
decision regarding tax status.
In addition, prospective investors may be subject to risks regarding the tax
effect of this investment. Such risks are not, nor are they intended to be,
addressed in this Prospectus and prospective investors should consult their own
tax advisors prior to making an investment.
UNDERWRITER'S EXPERIENCE
Newbury, Piret & Co., Inc. was incorporated in 1981, and has, except for the
period from May 1991 to January 1994, been a member of the National Association
of Securities Dealers, Inc. However, this Offering is the first public offering
to be underwritten by the Underwriter. Although the Underwriter and/or its
principals have substantial experience in the securities business, including
initial public offerings, private placements, mergers and acquisitions and
equity financings, in evaluating an investment in the Company, prospective
investors in the Common Stock offered hereby should consider the Underwriter's
lack of experience. Since there will not be a publicly traded market for the
Common Stock, the Underwriter's obligations to the Company will cease upon the
successful completion of the Offering.
17
<PAGE>
USE OF PROCEEDS
In the event the Company receives the minimum $8 million in subscriptions
necessary to complete the Offering, the net proceeds of the Offering to the
Company after underwriting discounts and commissions and after deducting
expenses of the Offering payable by the Company, will be $6,210,592. In the
event the Company raises the maximum proceeds available in this Offering, the
net proceeds to the Company after underwriting discounts and commissions and
after deducting expenses of the Offering payable by the Company will be
$20,850,592. A portion of the net proceeds of this Offering will be used to
retire the outstanding balance under a Credit Facility, dated as of December 3,
1996, with Fleet National Bank, which outstanding balance of principal and
interest was approximately $575,000 as of May 31, 1997. Borrowings under this
Credit Facility must be repaid no later than November 22, 1997, with accrued
interest payable monthly at the lower of (i) Fleet National Bank's prime rate,
or (ii) the London Interbank Offered Rate ("LIBOR") plus 100 basis points. The
interest rates on borrowings under this Credit Facility ranged from 6.47% to
6.84% on May 31, 1997. The remainder of the net proceeds of this Offering will
be used to reimburse MedServ and IPA for advances used to pay development stage
costs equal to approximately $107,000, to repay accounts payable and accrued
expenses and for working capital purposes. The Company's outstanding obligations
to MedServ and IPA do not have a fixed maturity date, nor do they accrue
interest. Pending use, the Company intends to invest the net proceeds of this
Offering in short- and medium-term, interest-bearing investment grade
securities. In the event that the Offering fails to raise a minimum of
$8,000,000, the purchase price of both Class A Common Stock and Class B Common
Stock, plus interest thereon, will be refunded, minus $450 per share, which
shall be retained to offset the costs of the Offering. The proceeds of this
Offering will be placed in an Escrow Account until the Company has determined
whether the Offering has raised a minimum of $8,000,000 from the sale of Common
Stock to Eligible Purchasers.
The Company intends to contract with an investment manager to invest its
funds. The Company intends to invest only in commercial paper, repurchase
agreements, treasury bonds or bills, U.S. Government and agency securities,
certificates of deposit, and money market funds of the highest quality. All
assets and related collateral must have the highest credit ratings as assigned
by recognized rating agencies. See "Plan of Operation."
The Company believes that its existing resources, together with proceeds of
this Offering, will be adequate to satisfy its capital needs at least through
the end of the year ending December 31, 1998. However, if the Company's
operational expenses pursuant to its agreement with MedServ exceed expectations,
and the Company does not raise sufficient funds in this Offering to fund them,
it may require additional financing in order to carry out its business plans.
There can be no assurance that such funds will be available to the Company, or,
if available, will be available to the Company on acceptable terms.
DIVIDENDS
The Company has never paid any dividends and does not intend to pay
dividends for the foreseeable future. Earnings, if any, will be retained for use
in the operation and expansion of the Company's business.
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<PAGE>
CAPITALIZATION
The following chart shows the Company's actual capitalization as of March
31, 1997 and the capitalization as adjusted to give effect to the minimum and
maximum sale of the Common Stock offered by the Company hereby, after estimated
expenses related to the Offering, the repayment of borrowings under the line of
credit and the satisfaction of obligations to MedServ and IPA. This table should
be read in conjunction with the financial statements and notes thereto, included
towards the end of this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------------
<S> <C> <C> <C>
ACTUAL MINIMUM(2) MAXIMUM(3)
----------- ------------ -------------
<CAPTION>
AS ADJUSTED
<S> <C> <C> <C>
Borrowings under line of credit........................................ $ 550,000 $ -- $ --
shareholders' equity (deficit):
Class A Common Stock, no par value, 10,000 shares authorized......... -- 3,105,296 10,425,296
Class B Common Stock, no par value, 10,000 shares authorized......... -- 3,105,296 10,425,296
Class C Common Stock, no par value, 10,000 shares authorized(1)...... 12,000 12,000 12,000
Accumulated deficit.................................................. (855,753) (855,753) (855,753)
----------- ------------ -------------
Total shareholders' equity (deficit)............................. (843,753) 5,366,839 20,006,839
----------- ------------ -------------
Total Capitalization............................................. $ (293,753) $ 5,366,839 $ 20,006,839
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
- ------------------------
(1) Reflects 3 shares issued and outstanding.
(2) Reflects the sale of $8 million in Common Stock less underwriting discounts
and commissions and estimated expenses of the Company of $1,789,408.
(3) Reflects the sale of $24 million in Common Stock less underwriting discounts
and commissions and estimated expenses of the Company of $3,149,408.
DILUTION
Prospective investors should be aware that the net tangible book value of
the Company's stock immediately following completion of this Offering will be
less than the offering price. This is because various expenses in connection
with the Offering will be paid from funds raised in the Offering, and the
Company has already incurred significant expenses in connection with the
preparation of its COA application and the development of its business and
operations. The Company has a negative net worth as of March 31, 1997 of
$843,753.
The following table illustrates dilution to prospective investors upon the
completion of the minimum and maximum offering:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
----------- -----------
<S> <C> <C>
Offering price per share............................................... $ 3,000 $ 4,000
Pro-forma net tangible book value per share after the offering......... 2,010 3,333
----------- -----------
Dilution to prospective investors...................................... 990 667
----------- -----------
----------- -----------
</TABLE>
19
<PAGE>
PLAN OF OPERATION
The Company is making the Offering for the purpose of raising capital
necessary to fund its operations. The Company will offer shares of Common Stock
at a price of $4,000 per share, with Primary Care Physicians required to
purchase one share of Class A Common Stock and Specialist Physicians required to
purchase a minimum of two shares of Common Stock (consisting of one share of
Class A Common Stock and not less than one share of Class B Common Stock). Only
physicians may purchase Class A Common Stock, and no physician may purchase more
than one share of Class A Common Stock. There is no limitation on the number of
shares of Class B Common Stock offered hereby which may be purchased by
physicians or other Eligible Purchasers, except to the extent of the total
shares being offered. During the first ninety days from the date of this
Prospectus, Eligible Purchasers will be offered a "prompt subscription" price of
$3,000 per share of Common Stock.
Since its formation in November 1996, the Company, in conjunction with
MedServ and its shareholders, the Hartford County Medical Association, and the
New Haven County Medical Association, has embarked upon a program of developing
a physician-owned and directed HMO. The Company is in the development stage and
has not yet commenced its business activities. During this development stage,
which began prior to its formation and is expected to extend until the
completion of the Offering, the Company has been developing its product
offering, preparing its application to the DOI for a COA, establishing its
provider network in conjunction with MedServ and IPA and undertaking
miscellaneous other activities which will permit Physicians Care to commence its
operations as an HMO. Through this Offering, the Company is attempting to raise
the necessary capital to fund the development, start-up and initial operations
of the Company.
DEVELOPMENT STAGE ACTIVITIES
Beginning March 1996, MedServ retained a consultant to begin planning the
development of an HMO, and to prepare an application for a COA with the DOI for
such HMO. The application is being prepared and will be submitted by the Company
as soon as is practicable during its development stage and if possible, prior to
the completion of the Offering. The Company will not be permitted to solicit
business or accept Enrollees until the DOI has approved the Company's
application and issued a COA to the Company to operate an HMO in the State of
Connecticut.
Over the next year, the Company, in conjunction with MedServ and IPA, will
devote substantial efforts to developing and credentialing its healthcare
delivery network. The success of the Company will be dependent upon, among other
things, the ability of the Company to contract with physicians and other
healthcare providers at competitively favorable rates and terms. The Company
intends to contract exclusively with MedServ to arrange for the availability of
a network of physicians throughout the State of Connecticut. MedServ has
subcontracted its obligation to establish the physician network to IPA under the
terms of an IPA Agreement between MedServ and IPA, which currently has a network
of approximately 1,850 physicians. IPA's Participation Agreements with
Participating Physicians are for an initial term of one year and are
automatically renewable for successive one year terms. In the event of
termination of a Participation Agreement by IPA or by the Participating
Physician, a Participating Physician is required to continue to furnish
healthcare services to Enrollees until an orderly transfer of such Enrollees to
other Participating Physicians can be undertaken or until completion of
treatment, whichever occurs first. Initially, the Company intends to reimburse
Participating Physicians pursuant to a pre-established fee schedule, an extract
of which is attached as Appendix C hereto, "Sample Physician Fee Schedule." The
Company currently intends to withhold twenty percent of the Physician
Reimbursement from the payment to Participating Physicians to defray medical
costs in excess of budgeted amounts. The sums withheld from Physician
Reimbursements may be returned to Participating Physicians at the discretion of
the Board of Directors.
20
<PAGE>
Additionally, MedServ and the Company are currently devoting and will
continue to devote substantial efforts to contract with hospitals,
pharmaceutical providers, ancillary service providers and other providers for
the provision of healthcare services. The Company intends to contract with acute
care institutions to provide services at a negotiated rate or at a
Fee-For-Service discount. The Company anticipates that agreements with those
providers shall prohibit them from billing Enrollees for any services covered by
the HMO, except for any applicable copayments, coinsurance, or deductibles.
The Company, in conjunction with MedServ and IPA, is currently developing
comprehensive utilization management protocols and quality assurance standards
which will be used to monitor the care provided to Enrollees. Through a
combination of effective utilization management and quality assurance standards,
the Company expects to be able to sufficiently contain medical expenses and
achieve targeted medical claims cost levels that will eventually provide a
margin of operating profitability. Initially, the Company intends to offer a
modified open access product, pursuant to which each Enrollee will select a Care
Manager who will coordinate the Enrollee's medical care to the extent consulted
by the Enrollee or informed by a Participating Physician or Plan. Although
Enrollees may access any Participating Physician at any time without a Care
Manager's referral, the Company believes it has structured its benefits design
to encourage Enrollees to utilize their Care Manager to coordinate referrals,
for example, through the use of a reduced or waived copayment if a referral is
coordinated through a Care Manager. Female Enrollees, however, may select an
Obstetrician/Gynecologist to provide certain gynecological services or care
related to pregnancy without the prior authorization of their Care Manager, and
the Company intends that such Enrollees will not have to pay higher copayments
for such services. Also, the Company plans to insure itself against catastrophic
medical losses and expects to obtain reinsurance through a qualified reinsurer
with initial anticipated limits of $100,000 per Enrollee per year.
In support of development stage efforts, from inception through the period
ended March 31, 1997, the Company has incurred organization and planning
expenses related to such development in the amount of $857,082. The Company has
financed these development stage activities through multiple sources, including
advances from related companies and a revolving credit facility with Fleet Bank
in the amount of $650,000, of which the Company has borrowed $550,000 through
March 31, 1997. The Company's borrowings under this line of credit are due and
payable in full together with any accrued interest on or before November 22,
1997. The Company has paid for the balance of its organization and planning
costs through advances from MedServ and IPA, collectively totaling $106,773, and
by vendor financing. It is expected that upon the completion of the Offering,
the Company will repay its debt to Fleet Bank and satisfy its obligations to
MedServ, IPA and vendors from the net proceeds received by the Company from the
Offering. See "Use of Proceeds."
In addition to the repayment of debt and other obligations referred to
above, the proceeds from the Offering and any interest earned thereon will be
utilized for general working capital, repayment of outstanding indebtedness of
the Company, repayment of moneys advanced by MedServ and IPA for development
expenses, payment of outstanding accounts payables, establishment of the minimum
net worth and reserve requirements of the DOI, and to fund projected operating
deficits. The Company expects to spend approximately $1,900,000 in addition to
amounts spent through March 31, 1997 to complete its development stage which
includes the development of its business, the completion of the application for
a COA, the design, acquisition and installation of management information
systems and the continuation of development of its provider network. The Company
expects to spend a substantial portion of the proceeds from the Offering before
the Company has reached a level of operating profitability. See "Use of
Proceeds."
START-UP ACTIVITIES
The Company's start-up activities will begin upon the completion of the
Offering and conclude with the effective date of enrollment of its first
Enrollee. During its start-up stage, the Company expects to expend an aggregate
of up to $2,700,000 before it begins receiving revenues from monthly premiums
for
21
<PAGE>
Enrollee healthcare coverage. Its start-up activities will involve employing the
capital raised in the Offering to build the necessary business infrastructure
and operating systems to operate an HMO according to its business plan, to
conduct marketing of its products, to complete its provider network and to
commence enrollment.
The Company has developed a business plan in conjunction with its
consultants, advisors and MedServ that delineates its operations through various
phases of its development as an HMO. Following the completion of the Offering,
the Company through its Management Agreement with MedServ, will expend
substantial funds to establish its business operations, acquire or lease a
state-of-the-art management information system, and hire and train necessary
professional support personnel. The above described start-up stage is
anticipated to require a minimum of approximately $2,700,000, as detailed in the
Company's business plan. These expenses will be funded through proceeds from the
Offering. See "Use of Proceeds."
Pursuant to the terms of the Management Agreement, the Company will be
responsible for the payment to MedServ on a reimbursement basis of all costs
incurred by MedServ consistent with a Budget approved by the Board of Directors
by a two-thirds vote in establishing the Company's business prior to the
issuance of the COA and until the time when the Company has enrolled its first
Enrollee. Such costs involving the start-up of operations are estimated to
include such items, but not be limited to, the following: compensation and
benefits, professional fees, training, insurance and taxes, advertising,
utilization management guideline development, recruiting and hiring of trained
personnel, design, acquisition and installation of management information
systems, initial marketing of its insurance products and miscellaneous other
activities, the majority of such expenditures will be included in the Management
Agreement. As a start-up in a competitive market, the Company, through MedServ,
intends to hire an HMO management consulting company to provide oversight during
its first year of operation.
In addition, the Company is required by the DOI to maintain a minimum
statutory net worth at the time of issuance of a COA of not less than
$1,500,000, although the DOI has discretion to increase the amount the Company
will be required to maintain, depending upon the type, design, cost and
anticipated premiums of products offered by the Company. In addition, adequate
reserves must be maintained to satisfy estimated pending insurance claims. It is
anticipated that the Company will have a need for no less than an estimated
$4,000,000 of capital committed to satisfying ongoing net worth and reserve
requirements. Currently, the Company does not have sufficient capital to satisfy
these requirements, and the proceeds from the Offering will be used, among other
things, to meet these requirements. See "Use of Proceeds."
The Company believes that its resources on hand combined with the minimum
net proceeds after expenses from the Offering will be sufficient to cover its
obligations to MedServ pursuant to the Management Agreement, during this
start-up stage. Additionally, the Company believes that after paying its costs
related to the Management Agreement during this start-up stage, the Company will
have sufficient resources remaining from the proceeds of the minimum Offering to
meet its minimum net worth and reserve requirements of the DOI.
Following the completion of the Offering, and the approval and issuance of
the COA by the DOI, the Company intends to begin aggressively marketing its HMO
products to employers and individuals throughout the State of Connecticut with
the objective of insuring Enrollees. Additionally, the Company intends to apply
for approval to operate and market a Medicare CMP if it believes that it will
meet the required eligibility standards. See "Risk Factors--Government
Regulation" and "--Government Approvals as a Prerequisite to Operations."
Based on a review by management of regulatory filings submitted by a number
of other similar start-up HMOs to the DOI and other regulatory bodies, the
Company believes it is typical for a start-up HMO to experience substantial
operating losses for its first several years of operations. It is anticipated
that the Company will incur such losses and incur a substantial cumulative
operating deficit during its development, start-up, and initial operations
stage. Such cumulative losses are expected to occur for approximately three
years after the effective date of enrollment of the first Enrollee. Based on the
Company's business plan, it
22
<PAGE>
is expected that the Company will operate at a loss on a monthly basis until
such time as it has secured at least 23,725 commercial Enrollees from whom or on
whose behalf it is collecting a net monthly premium of approximately $130.00 per
Enrollee per month totaling approximately $3,077,000 of net monthly premium
income at an assumed medical benefit cost of approximately $110.00 per month per
Enrollee. The Company's ability to reach that level of recurring monthly net
premium income and positive net income from operations will be dependent upon
numerous factors, including but not limited to, the competitiveness of its
product offerings, its ability to secure contracts, the health status of its
Enrollees, the management of the Company, the accuracy of its actuarial
projections, the effectiveness of its utilization management programs in
controlling unnecessary services and the resultant costs, and its ability to
avoid catastrophic healthcare coverage losses. During the period following the
issuance of a COA through its first month of operating surplus, the Company
expects its medical benefit costs to range from 80% to 84% of the net premiums
collected from Enrollees. Additionally, the Company, under its Management
Agreement with MedServ, anticipates that it will be obligated to pay MedServ for
all related services necessary to operate the HMO during its initial operations
an average monthly fee of approximately $337,000 per month. During its period of
initial operations and until such time as the Company reaches a level of monthly
positive cash flow from operations, the Company could accumulate a substantial
cumulative net loss from operations of approximately $2,765,000 which amount
would be in addition to its development and start-up stage costs and its
required reserves.
LIQUIDITY AND CAPITAL RESOURCES
From the minimum proceeds of the Offering, less the related costs, it is
expected that the Company will have adequate resources to fund its start-up
costs, repay its organization costs advanced by MedServ and the IPA, repay its
bank indebtedness, fund its DOI reserve requirement and meet its obligations
under its Management Agreement with MedServ for the first twelve months of its
operations. See "Use of Proceeds."
However, to conduct its initial operations pursuant to its business plan,
the Company will need to raise at least $15,000,000, before deduction for the
related costs of securing such capital. The $15,000,000 amount would provide the
Company with adequate capital to fund its development and operations through a
projected period of approximately three years until such time as it reaches a
level of monthly positive cash flow from operations in accordance with operating
assumptions set forth in the business plan. Additionally, such an amount would
allow the Company to fund its cumulative operating deficits for approximately
five years at which time it would be expected that the Company would begin to
generate positive retained earnings.
To the extent that the Company is unable to raise more than the minimum
gross proceeds of $8,000,000 from the Offering, it may be necessary to raise
additional capital from such other sources as may be available to the Company or
alternatively to reduce its planned expenditures for development, operations,
and marketing of its products as contemplated within the Company's business
plan. Such a required reduction in its plan of operations could extend
significantly the time frame within which the Company expects to achieve monthly
positive cash flow from operations and net profitability. Additionally, if the
Company needs to raise additional capital, there can be no assurance that such
additional capital will be available or, if available, that such capital will be
available on terms acceptable to the Company.
The Company currently intends to invest cash on hand from the proceeds of
the Offering only in investment grade securities with short and mid-term
maturities. The Company intends to select an investment advisor to manage
investments and, through the advisor, intends only to invest in commercial
paper, repurchase agreements, Treasury notes and bills, U.S. Government and
agency securities, certificates of deposit, and money market funds. All
investments and collateral must have the highest credit ratings as assigned by
recognized rating agencies.
For federal income tax purposes, an HMO can be treated as a tax-exempt
entity, an insurance company or as a taxable non-insurance company, depending on
the certain specific facts and the method of operation of the entity. The tax
status of the Company cannot be ascertained at this time because the Company has
not made a final decision on all matters which could affect its tax status. See
"Risk Factors-- Certain Tax Considerations."
23
<PAGE>
THE COMPANY
Physicians Care was incorporated on November 12, 1996, as a Connecticut
corporation under the sponsorship of MedServ and private practicing physicians
to develop a statewide, physician-owned and directed insurance company licensed
as an HMO and to offer, over time, a comprehensive array of health insurance
products. The Company will be predominantly owned by physician shareholders
practicing in the State of Connecticut who are expected to participate actively
in the Company's affairs. Each physician purchasing Class A Common Stock, as a
condition to such purchase, must agree to provide medical services to Enrollees
pursuant to the terms of a Participation Agreement. The Company, through
MedServ, will prepare and file an application for a COA with the DOI to operate
as an HMO throughout the State of Connecticut and will seek such other
regulatory approvals as necessary to offer its products. The Company will not be
permitted to solicit business until the DOI has issued a COA to the Company. The
Company intends to provide coverage for comprehensive healthcare services to
Enrollees under its insured products for a fixed, prepaid enrollment fee paid by
or on behalf of the Enrollees.
The Company's principal place of business is 1520 Highland Avenue, Cheshire,
Connecticut and its telephone number is (203) 699-2400.
BUSINESS
THE MANAGED HEALTHCARE INDUSTRY
Medical services traditionally have been provided on a Fee-For-Service basis
with insurance companies assuming responsibility for paying all or a portion of
such fees. The Company believes the increase in medical costs under traditional
indemnity healthcare plans has been caused by the apparent failure of insurers
to create incentives to control costs.
In response to higher costs, employers and consumers sought an alternative
healthcare delivery system including managed care products. The HMO originally
emerged as a proposed solution to provide a more efficient and cost-effective
array of healthcare services. An HMO is a healthcare delivery system that
provides a broad range of health services to an enrolled population in return
for a premium paid in advance. HMOs actually provide or arrange for the
provision of medical, hospital, emergency and appropriate preventive care. In
particular, HMOs stress preventive healthcare so that enrollees may minimize
hospitalization and medical procedures.
Managed care requires many different types of healthcare providers to
coordinate activities and to share information so as to operate more
efficiently. Providers generally have not been organized collectively in local
markets and have operated largely as a cottage industry, and, as a result, the
Company believes providers have had limited effect in managing care. Further,
insurers have avoided promoting formation of more efficient provider
organizations because such organizations can also more effectively negotiate
payments with insurers, potentially reducing insurers' profits. In response to
this environment, insurers have developed centralized medical management
programs requiring extensive prior authorization, or pre-certification of
services, referral authorizations, or other limitations on access to care. The
industry has promoted managed access, rather than managed care, which the
Company believes is best achieved in local markets by providers acting together.
As a result of these limitations, the Company believes that there exists low
enrollee satisfaction and that enrollees of managed care plans now perceive HMOs
as primarily profit-driven versus quality of care driven, with excessive
interference by the HMO in the physician-patient relationship and with cost
control achieved by limiting enrollee access to services. Accordingly, the
Company believes legislative initiatives designed to ensure enrollee access or
to promote member rights reflect enrollee frustration.
The Company was incorporated for the purpose of developing and operating a
statewide HMO and offering other insurance products in the State of Connecticut.
The Company will be a physician-directed HMO, providing comprehensive health
insurance products to its Enrollees. The goals of the Company are
24
<PAGE>
to offer high quality medical care through a broad network of physicians and to
ensure access to appropriate care for Enrollees.
THE COMPANY'S STRATEGY
The Company intends to address concerns raised by patients and their
physicians that managed care plans unreasonably interfere with the
physician-patient relationship and control medical decisions through centrally
administered programs. The Company intends to position itself in the market as a
physician-directed company that believes that the physician-patient relationship
within the context of providing cost-effective and accessible healthcare is
critical. The Company has been founded on the ideal that physicians play an
essential role in defining the Company's products because of their direct impact
on costs, quality, and patient satisfaction, and the Company is directly
dependent upon their efforts for its success.
- VISION STATEMENT. The Company accepts the challenge to pass on to future
generations of physicians the legacy that the delivery of healthcare is a
moral enterprise and that the physician-patient relationship is a sacred
trust that shall remain inviolable. In its pursuit of these mandates the
Company will strive to define high standards for medical care in the State
of Connecticut and provide that care to its Enrollees throughout the
state. From these precepts, the Company believes that its Participating
Physicians will demonstrate a strong commitment to practice high quality,
yet cost effective medicine.
- PHYSICIAN EXPERTISE. The Company has been structured in response to
concerns that HMOs and insurers separate management from care givers. The
Company's design will link those individuals who administer healthcare
services to the core business of the HMO. Participating Physicians,
therefore, will be encouraged to participate directly in healthcare
management, delivery decisions, and the development of medical protocols.
- PHYSICIAN-ORIENTED SERVICE DELIVERY. By structuring the Company as a
physician-owned and controlled organization, and by engaging the active
participation of physicians in the medical management and product
design/development functions, the Company believes that physicians will be
committed to its success, resulting in enhanced physician productivity.
- DATA COLLECTION AND QUALITY IMPROVEMENT. The Company is committed to the
creation and effective utilization of appropriate technology to compile
and disseminate timely, meaningful information to providers that may be
utilized to promote the delivery of high quality, cost effective care. The
Company also intends to utilize collected data to promote the development
of "best practice" protocols, to identify and eliminate waste, and to
promote a high standard of care. Data will also be used to convince
purchasers to contract with the Company, resulting in higher reimbursement
to the Participating Physicians.
- ORGANIZATIONAL FLEXIBILITY. The Company is dedicated to easing the
administrative burdens placed on physicians and their staffs which are
associated with managed care plans. The Company is also committed to
organizational flexibility that will eventually permit Participating
Physicians and healthcare providers to assume risk for the delivery of
healthcare services.
- PHYSICIAN NETWORK. The Company's near-term goal is to have 2,000 to 3,000
Participating Physicians to provide services to Enrollees. The IPA
currently has contracts with approximately 1,850 physicians. The IPA
believes that those physicians will meet the Company's criteria to become
Participating Physicians. The Company's long-term goal is to have
substantially all qualified physicians in the State of Connecticut
available to provide services to Enrollees.
- ATTRACTIVENESS TO PARTICIPATING PHYSICIANS. The Company will allow
Participating Physicians to contract with it through IPA on a
non-exclusive basis. The Company believes that this approach will enable
it to attract the broadest possible range of Participating Physicians,
thereby enabling it to compete aggressively throughout the State of
Connecticut.
25
<PAGE>
- ATTRACTIVENESS TO ENROLLEES. The Company believes that its network of
Participating Physicians will be attractive to Enrollees and that
Enrollees will find the Company's benefit designs and its dedication to
administrative ease will facilitate their access to quality healthcare
services from the physician of their choice. The Company also intends to
offer educational programs to assist Enrollees in accessing appropriate
medical care. The Company further believes that the involvement of
physicians as owners, directors and Participating Physicians in marketing
and medical management and quality assurance programs likely will instill
and reinforce Enrollees' confidence in the Company.
- ATTRACTIVENESS TO EMPLOYERS. By offering a competitively priced product,
together with a statewide network of Participating Physicians, the Company
believes it will be attractive to employers with operations and workers in
more than one location.
The Company's medical management model, incorporating as its goals
competitive pricing, high quality care and Enrollee and purchaser satisfaction,
can be successfully implemented only if the Company and its Participating
Physicians work closely as partners. To achieve its goals, the Company has
identified objectives and plans to implement the following joint
physician/Company initiatives:
<TABLE>
<CAPTION>
OBJECTIVES JOINT PHYSICIAN/COMPANY INITIATIVES
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
- - Coordinated medical management in local - Cooperate with physician-directed organizations (e.g., integrated
markets medical groups PHOs, MSOs) which manage medical care delivery
- - Timely physician access to information - Facilitate development of information system infrastructure to
improve access to and dissemination of information
- - Physician-directed medical decisions - Minimize pre-certifications, referral authorizations, or other
centralized medical management techniques of questionable value
- - Accountability and quality improvement - Conduct extensive Company reporting, peer analysis, continuous
quality improvement and education
</TABLE>
The Company recognizes that its Participating Physicians are valuable
partners who will play an essential role in its ultimate success. The Company
intends to achieve its goals through innovative reimbursement arrangements with
its Participating Physicians. The Company is prepared to take an active role to
facilitate the establishment of provider organizations in local markets, to
invest in the development of physician information systems, and to engage in
extensive reporting, peer analysis, and education to achieve those goals.
Initially, the Company intends to offer a modified open access product,
pursuant to which each Enrollee will select a Care Manager who will coordinate
the Enrollee's medical care to the extent consulted by the Enrollee or informed
by a Participating Physician or Plan. Although Enrollees may access any
Participating Physician at any time without a Care Manager's referral, the
Company believes it has structured its benefits design to encourage Enrollees to
utilize the Care Manager to coordinate referrals, for example through the use of
a reduced or waived copayment if a referral is coordinated through a Care
Manager. Female Enrollees, however, may select an Obstetrician/Gynecologist to
provide certain gynecological services or care related to pregnancy without the
prior authorization of the Care Manager, and the Company intends that such
Enrollees will not have to pay higher copayments for such services.
The Company intends to enter into the Management Agreement with MedServ.
MedServ was organized in 1995 as a joint venture of the Hartford County Medical
Association and the New Haven County Medical Association. Each of the
Associations owns 50% of the equity interests in MedServ. MedServ is a
for-profit corporation performing administrative functions for both county
medical associations and intends to operate a CVO to provide credentialing
services which are intended to meet NCQA credentialing standards.
26
<PAGE>
MedServ will develop credentialing standards to provide assurances to
Enrollees that each provider of medical services meets the minimum standards for
education, licensing, training and expertise deemed necessary by the Company to
provide the medical services requested. Under the credentialing service, MedServ
will collect information to document compliance with the credentialing
standards, will verify the accuracy of such information, and will monitor
continuing compliance with such credentialing standards.
Key members of the MedServ management team will provide management services
to the Company. The Management Agreement will have a minimum term of ten years
and will be automatically renewable for additional three year terms, unless
terminated on one year's prior notice by either party. MedServ is the sole
holder of the Company's Class C Common Stock.
Pursuant to the Management Agreement and subject to the oversight of the
Board of Directors, MedServ is responsible for the day-to-day management of the
Company, including but not limited to, the following activities:
- performing all management, administrative and other services necessary to
operate the Company;
- obtaining all licenses, permits or other regulatory approvals necessary to
operate the Company as an HMO in the State of Connecticut;
- preparing and submitting an application for the Company to become a CMP
with HCFA to provide health services to Medicare beneficiaries;
- providing facilities for the operation of the Company;
- negotiating subscriber agreements with employer groups or individuals;
- providing or securing underwriting on appropriate insurance services;
- preparing materials necessary to inform and educate Enrollees about the
Company's administrative requirements and the terms and conditions of the
Enrollee's benefit plan;
- developing and implementing a grievance and complaint system for
Enrollees;
- developing and implementing marketing initiatives;
- conducting or managing the sale of the Company's products;
- establishing and administering accounting procedures and controls;
- conducting claims analysis and statistical reporting;
- conducting negotiation of provider contracts and credentialing of
providers;
- developing quality and utilization management standards;
- providing or arranging for the provision of a management information
system;
- preparing on-going business plans for the Company;
- maintaining the Company's books and records;
- ensuring that the Company's operations are consistent with applicable laws
and regulations.
During the start-up and initial operations stage, Physicians Care will pay
MedServ a Management Fee equal to MedServ's actual cost of providing the
services set forth in the Management Agreement not to exceed the amounts set
forth in the Budget approved by the Company's Board of Directors by a two-thirds
vote and an allowance for profit and general administrative expenses equal to
five percent of such actual costs. In the event that actual administrative and
capital expenses in the aggregate are expected to exceed the Budget or if actual
expenses related to any line item of such Budget are expected to exceed the
Budget
27
<PAGE>
for such line item by more than twenty percent, MedServ must notify the Board of
Directors of such expenses and may make no expenditure for such expenses without
the approval of the Board of Directors.
Subject to the consent of the Board of Directors, which consent will not be
unreasonably withheld, MedServ will be permitted to contract with other third
party independent contractors to provide some or all of the services required to
be delivered under the terms of the Management Agreement.
IPA intends to enter into a long-term agreement with MedServ (the "IPA
Agreement"), pursuant to which IPA will (a) be the exclusive provider of a
network of Participating Physicians to provide or arrange to provide services to
Enrollees which exclusive status shall remain in effect until the Board of
Directors determines, in its reasonable judgment, that the network furnished by
IPA is not adequate to service the needs of Enrollees and (b) cause
Participating Physicians to provide such services within each Participating
Physicians expertise and as credentialed. The IPA Agreement will provide that
IPA shall: (a) ensure that Participating Physicians are properly licensed and
credentialed and have privileges at specified hospitals and other health care
facilities; (b) notify MedServ of any professional disciplinary action or
similar action against any Participating Physicians; (c) with MedServ's
assistance, develop peer group monitoring systems for Participating Physicians;
and (d) develop, with MedServ, mutually agreeable Utilization Management and
Quality Management Programs and adopt and implement such Programs. IPA's
compensation for its services has not yet been determined.
MedServ IPA, Inc. is a Connecticut non-profit corporation, organized in
October 1985 and formed specifically for the purpose of developing a network of
physicians to provide services to health plan enrollees. From 1985 to 1996, IPA
was known as ProCare IPA, Inc. IPA is also managed by MedServ.
IPA may execute contracts with HMOs licensed in Connecticut to make
available its network of physicians to provide healthcare services ("Competition
Contracts"). The IPA Agreement will provide, however, that MedServ may terminate
the IPA Agreement in the event the IPA enters into a Competition Contract. The
Company believes that at the present time IPA has a Competition Contract to
provide a network in Connecticut to Multiplan.
Premium rate increases must be submitted to the DOI for acceptance, and
there can be no assurance that premium rate increases, if any, will be accepted
without objection. Renewal dates may vary among groups. The Company will utilize
an actuary-developed system of ratings adjusted by classes (with respect to
groups of fifty or more Enrollees) by age, gender and industry classification,
in the determination of its rates for various employers in the proposed service
area, all in accordance with Connecticut law. Accordingly, premium rates for a
single plan benefit design may vary among employer groups.
BENEFITS PROVIDED TO ENROLLEES
The Company is committed to offering high quality healthcare benefit plans
at competitive prices in the State of Connecticut. The range of the fixed,
prepaid enrollment fee per commercial Enrollee per month is estimated to be from
$125.00 to $160.00, depending upon the type of product and the associated
benefit design of each Enrollee's chosen plan. The Company accepts as
fundamental the critical relationship between the physician and the patient in
the delivery of healthcare services. The Company expects to reduce
administrative and transactional costs by allowing Participating Physicians to
exercise their professional judgment in concert with patients, resulting in
higher patient satisfaction and better management of medical costs.
The Company intends to develop benefit plans for large employers, small
businesses and individuals that meet the requirements of Connecticut law. Based
upon a review of other HMO plans offered in the State of Connecticut, the
Company believes that its benefit plans will be competitive with those other
plans in the marketplace and that they will be customized to the needs of
purchasers, to the extent permitted by law.
28
<PAGE>
The following are examples of the benefits the Company proposes to offer
under its HMO plans:
- physician office visits
- specialist physician visits
- hospital room and board, prescription drugs, and inpatient ancillary
services
- psychiatric inpatient and outpatient services
- diagnostic and therapeutic ambulatory services
- drug and alcohol addiction treatment services
- emergency care
- home healthcare
- skilled nursing services
- therapy services
Coverage of healthcare services listed above will be conditioned on medical
necessity and on the conditions of coverage of the Enrollee's plan as set forth
in the applicable benefit plans.
MARKETING
Although competition in the managed care industry is intense, the Company
believes an opportunity exists for a new HMO that is able to manage risk
effectively, while eliminating barriers or impediments to Enrollees' access to
medically necessary care. The Company intends to build a large physician network
that will attract Enrollees and purchasers of the Company's benefit plans
through the localized efforts of physicians. Subject to the Company's approval
by HCFA, it intends to aggressively pursue the Medicare market. See "Risk
Factors--Government Approvals as a Prerequiste to Operations."
The Company's current marketing strategy is three-tiered. The first tier
involves direct sales of the Company's plans and products to large employers and
small businesses. The second tier employs brokerage firms which receive a
commission that is expected to range from three percent to five percent of
premiums collected. The third tier of the Company's marketing campaign will
consist of general advertising through various media that targets all
prospective purchasers. In its marketing efforts, the Company plans to seek the
assistance of its Participating Physicians to effectively market its plans and
products.
PHYSICIAN AND OTHER PROVIDER ARRANGEMENTS
PHYSICIANS
The Company is founded on the principle of physician autonomy in the making
of clinical decisions. To facilitate the decision-making process, the Company
intends to provide physicians with physician-defined quality and cost of service
data and performance feedback.
The selection and credentialing of Participating Physicians is the
foundation on which the Company's Quality Management Program ("QMP") will be
built. The Company will delegate authority for credentialing and recredentialing
to the IPA's Credentialing Committee while retaining oversight. All
Participating Physicians will be subject to a review of their qualifications,
including education and training, licensure status, board certification,
hospital privileges, and malpractice history, in accordance with credentialing
requirements which are consistent with NCQA standards. Recredentialing will be
performed on a biannual basis and will include review of data from: (i) Enrollee
complaints, (ii) quality review results, (iii) utilization reviews, and (iv)
Enrollee satisfaction surveys.
29
<PAGE>
Physicians Care plans to develop performance standards with physician input.
The Company intends to require Participating Physicians to use those standards
and to report clinical decisions, utilization management and outcomes to ensure
that the Company acquires high quality data on a timely basis. The Company
anticipates that it will develop state-of-the-art information systems to permit
it to share data with Participating Physicians to improve clinical decisions and
outcomes. The Company intends to focus its efforts on continuous educational
interaction with Participating Physicians to encourage best medical practices.
PHYSICIAN PARTICIPATION AGREEMENT
The IPA's Physician Participation Agreement will impose various requirements
and standards (many of which are also mandated by applicable federal and state
law) on Participating Physicians, which may include:
1. Providing, or arranging for the provision of, healthcare services to
Enrollees in accordance with the physician's licensure and training, and
consistent with accepted standards of practice. In particular:
a. Maintaining regular office hours and ensuring after-hours and
emergency coverage for Enrollees on a seven days per week, twenty-four hours
per day basis.
b. Avoiding discrimination in the treatment of patients or in the
quality of services delivered to Enrollees.
c. Maintaining an unrestricted medical license and, if applicable,
maintaining unrestricted, active privileges in good standing at a minimum of
one acute care hospital that has contracted with the Company as a
Participating Provider.
d. Following state and federal laws and the policies and procedures
established and adopted by the Company.
e. Operating office sites in compliance with quality assurance
requirements of the Company.
f. Agreeing that all duties performed shall be consistent with the
proper practice of medicine, and in accordance with the customary rules of
ethics and conduct.
2. Maintaining a medical record for each Enrollee and furnishing such
records as may be required by state and federal law, rules, regulations or by
the Company's Utilization Management Program and/or Quality Management Program.
In addition:
a. Agreeing that medical records of Enrollees shall be maintained on a
confidential basis.
b. Providing the Company, or its designees, with reasonable access to
the physician's practice site to examine medical records of Enrollees.
3. Participating in and complying with the Utilization Management and
Quality Management Programs, policies and procedures as have been established by
the Company.
4. Limiting referrals to physicians, hospitals and ancillary healthcare
providers who participate in the Company's healthcare delivery network, except
where the Enrollees have freedom of choice of Participating Provider under the
Company's open access health benefit plans in effect at the time services are
rendered.
OTHER HEALTHCARE PROVIDERS
The Company intends to establish relationships with acute care hospitals
both in the State of Connecticut and in nearby states. It has received
approximately fifteen letters of intent from acute care hospitals located in the
State of Connecticut. Moreover, the Company intends to provide appropriate
preventive, diagnostic, and therapeutic treatment, and rehabilitation healthcare
services, to its Enrollees,
30
<PAGE>
in part, by contracting with qualified non-physician providers, and networks of
such providers, who meet the participation criteria established by the Company.
It is expected that those contracts will provide that the participating
hospitals and other providers will accept Enrollees as patients and provide all
medically necessary services that are ordered or supervised by a Participating
Physician in accordance with the Company's requirements. The services provided
by hospitals and other providers will be reviewed by the Quality Management
Committees as may be established by the Company or its designee to ensure that
the services provided meet quality standards and are medically necessary.
QUALITY MANAGEMENT PROGRAM
The Company intends to provide quality healthcare services while avoiding
inappropriate utilization of services. The Company currently is in the process
of developing a Quality Management Program, in conjunction with IPA, for the
continual improvement of the quality of healthcare services delivered.
The Company intends that its Quality Management Program will contain various
components, including, but not limited to, the following:
- adverse event review
- sentinel diagnosis review
- ambulatory medical record review
- quality measurement studies
- complaints and grievance review
- credentialing/recredentialing
- risk management
- enrollee satisfaction surveys
- provider satisfaction surveys
The Company intends to conduct annual evaluations of the Quality Management
Program to assess its overall effectiveness and to generate an annual work plan
designed to outline program goals and objectives and planned projects and
activities for the forthcoming year.
UTILIZATION MANAGEMENT PROGRAM
The Company's profitability will be influenced by its ability to manage
healthcare costs through utilization management and the negotiation of favorable
provider contracts. A Utilization Management Program ("UMP") will be designed to
educate, monitor, and evaluate the provision and cost of medical care and
services accessed through the Company and/or its affiliates. See "Risk
Factors--Potential for Unnecessary Utilization of Healthcare Services."
The Company's objective will be to efficiently utilize available healthcare
resources to ensure and provide for medically appropriate care and to monitor
the quality of medical services accessed through the health plan and/or its
affiliates. The UMP is currently being developed by the Company in conjunction
with IPA. Its essential components are expected to include:
- patient education programs (concurrent and retrospective basis)
- physician education programs (performance standards)
- inpatient review (concurrent and retrospective basis)
- outpatient review (concurrent and retrospective basis)
31
<PAGE>
- case management
- outcomes analysis
MANAGEMENT INFORMATION SYSTEMS ("MIS")
The Company is developing a comprehensive management information system, and
is soliciting information from various vendors. A Request for Proposal was
distributed to selected vendors, and the Company anticipates that final
selection will be made during the fall of 1997, with full implementation
approximately six to eight months thereafter. The Company may use subcontractors
to provide claims processing and Enrollee eligibility information system
support. The Company's management information system and data system will be
essential to the Company's operations.
INSURANCE/RISK MANAGEMENT
Physicians Care intends to implement a risk management program designed to
enhance the quality of care provided to its Enrollees. The Company's risk
management objectives are two-fold: (i) to reduce the incidence and expense of
medical malpractice claims and tort litigation against Participating Providers;
and (ii) to address and prevent conditions that could result in adverse
publicity or legal claims against the Company. A risk manager will be
responsible for the evaluation and coordination of risk management activities.
Any data generated will be presented to the Quality Management Committees for
their review and recommendations. The Quality Management Committees will also
review the data for trends and opportunities for improvement.
MARKET
MANAGED CARE GROWTH IN THE STATE OF CONNECTICUT
The Company's research indicates that the healthcare market in the State of
Connecticut is moving toward increased HMO enrollment. From 1988 to 1994, HMOs
experienced an almost 36% increase in enrollment. (Table 1)
TABLE 1
HMO MEMBERS IN CONNECTICUT
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
# of Members.............................................. 660,331 689,009 726,523 680,610 685,907 805,928
% change.................................................. 4.40% 5.40% -6.30% 0.80% 17.50%
<CAPTION>
1994
---------
<S> <C>
# of Members.............................................. 897,013
% change.................................................. 11.30%
</TABLE>
- ------------------------
Source: "GHAA's National Directory of HMOs" database, U.S. Bureau of the Census
The Connecticut managed care market is dominated by the IPA model HMO. The
Company believes that no single plan controls the managed care market in
Connecticut and that physician-driven products continue to remain popular with
Enrollees, as evidenced by the growth of MD Health Plan and Physicians Health
Services, both of which began as physician controlled HMOs. During 1996, MD
Health Plan was sold to Health Systems International, an HMO management company
headquartered in California.
32
<PAGE>
Table 2 illustrates the trend regarding the type of insurance that
purchasers of healthcare are selecting within Metropolitan Statistical Areas
(MSA) throughout Connecticut.
TABLE 2
TYPES OF INSURANCE IN CONNECTICUT
<TABLE>
<CAPTION>
% OF
COMMERCIALLY
---------------
<S> <C> <C> <C> <C> <C> <C>
% OF RESIDENTS INSURED
--------------- ---------------
<CAPTION>
HMO PPO FFS HMO PPO FFS
---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
Bridgeport-Stamford-Norwalk........................................... 25.9 2.5 60.4 60.2 3.3 66.5
Hartford-New Britain.................................................. 42.8 6.0 42.7 50.1 8.2 41.7
New Haven............................................................. 32.1 5.2 50.3 39.9 7.1 53.0
Middlesex............................................................. 27.1 5.5 59.1 32.6 7.0 60.4
</TABLE>
- ------------------------
Source: "Trends in HMO enrollment." GHAA June 1995. National Research
Corporation Survey of 132,014 Households, 1994.
COMPETITION
The managed care industry is highly competitive. The Company will compete
against other companies having substantial financial resources and experience.
The Company has numerous competitors, including for-profit and tax-exempt HMOs,
self-funded plans, preferred provider organizations (PPOs), Blue Cross/ Blue
Shield plans, traditional indemnity insurance carriers and provider networks
engaging in direct contracting with employers (PSOs), all of which have existing
enrollments and greater financial resources than the Company.
As of December 31, 1996, the Connecticut commercial HMO market consisted of
sixteen organizations. The Company's major competitors are Physicians Health
Services, Inc., Blue Cross & Blue Shield of Connecticut, Inc., ConnectiCare,
Inc., M.D. Health Plan, Inc., Oxford Health Plans, Inc., Medspan, Inc., Cigna
Corporation, and Aetna/U.S. Healthcare. Those and other entities, with which the
Company may compete, are or may be substantially better capitalized than the
Company. Additional competitors with financial resources greater than the
Company may enter the Company's markets in the future. The healthcare industry
has been subject to vigorous and intense competition on price and other bases,
which competition may become more severe. Further, the adoption of any state
and/or federal healthcare reform may significantly change the competitive
healthcare environment in the State of Connecticut. See "Risk
Factors--Substantial Competition."
33
<PAGE>
Tables 3 and 4 respectively represent HMO market share by enrollment and by
revenue:
TABLE 3
HMO MARKET SHARE IN CONNECTICUT--1994 & 1995
<TABLE>
<CAPTION>
% OF MARKET
PLAN ENROLLMENT 1994 ENROLLMENT 1995 SHARE--1995
- ----------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Physician Health Services........................................ 153,374 155,519 19.46%
Blue Cross & affiliated plans.................................... 213,507 154,920 19.38%
Aetna/U.S. Healthcare............................................ 106,870 151,412 18.94%
MD Health Plan................................................... 117,902 124,771 15.61%
ConnectiCare..................................................... 98,551 123,176 15.41%
Kaiser Foundation................................................ 43,965 47,380 5.93%
Oxford Health Plan............................................... 2,603 17,500 2.19%
CIGNA Health Care................................................ 4,980 15,829 1.98%
Prudential....................................................... 5,569 5,035 0.63%
Suburban Health Plan............................................. 2,936 3,586 0.45%
Wellcare of CT................................................... 0 137 0.02%
HealthSource Connecticut......................................... 0 0 0.00%
Total Enrollment (grew 6.5%)..................................... 750,257 799,265 100.0%
</TABLE>
- ------------------------
Source: Department of Insurance, State of Connecticut, December 1994, 1995.
TABLE 4
HMO MARKET SHARE BY REVENUE--DECEMBER 1995
<TABLE>
<CAPTION>
PLAN REVENUE % OF MARKET SHARE
- ------------------------------------------------------------------------------- ------------- ---------------------
<S> <C> <C>
Blue Cross & affiliated plans.................................................. $ 452,416,977 29.86%
Physician Health Services...................................................... 283,089,646 18.68%
Aetna/U.S. Healthcare.......................................................... 229,494,709 15.15%
ConnectiCare................................................................... 206,922,029 13.66%
MD Health Plan................................................................. 179,415,308 11.84%
Kaiser Foundation.............................................................. 84,046,973 5.55%
CIGNA Health Care.............................................................. 45,041,346 2.97%
Oxford Health Plan............................................................. 19,249,168 1.27%
Prudential..................................................................... 8,387,050 0.55%
Suburban Health Plan........................................................... 6,876,458 0.45%
Wellcare of CT................................................................. 191,703 0.01%
HealthSource Connecticut....................................................... 145,094 0.01%
Total Revenues................................................................. $1,515,276,461 100.0%
</TABLE>
- ------------------------
Source: Department of Insurance, State of Connecticut, December 1995.
THE MEDICARE MARKET
The Company's research indicates a growing trend toward an increase in
Medicare enrollment in HMOs. Throughout the country, HCFA has licensed HMOs on a
county by county basis to accept direct, fixed payment of 95% of the county's
Average Adjusted Per Capita Costs ("AAPCC") for the number of Medicare lives
enrolled in the approved health plan's products.
34
<PAGE>
The Company believes that the Medicare budget will force the federal
government to accelerate the movement of seniors into Medicare HMOs as a method
to constrain the rate of expenditures.
The Company believes that success in a Medicare HMO product line depends, in
part, on a combination of a relatively high AAPCC for a county and region, broad
physician panels, and cost effective operations. The Company has been advised
that the 1997 AAPCC weighted average for Connecticut is $483.48.
As the federal government implements options to control spending with the
Medicare population, the Company believes that an HMO which can save money and
enhance benefits is becoming generally acceptable to the elderly. The Company
intends to focus on the Medicare population for enrollment into the HMO once it
qualifies for HCFA's consideration. Table 5 illustrates the early stage of
development of the Medicare market in the State of Connecticut. As of May 1996,
no county in the State of Connecticut had more than 8% of its eligible elderly
population enrolled in a Medicare HMO plan.
TABLE 5
MEDICARE HMO ENROLLEES IN CONNECTICUT 1996
<TABLE>
<CAPTION>
NUMBER OF MEDICARE NUMBER OF ENROLLEES IN
COUNTY ELIGIBLES MEDICARE HMOS %
- --------------------------------------------------------------- ------------------- ----------------------- ---
<S> <C> <C> <C>
Fairfield...................................................... 125,243 9,529 7.61%
Hartford....................................................... 140,821 4,269 3.03%
Litchfield..................................................... 28,064 354 1.26%
Middlesex...................................................... 21,911 198 0.90%
New Haven...................................................... 133,435 2,475 1.85%
New London..................................................... 37,585 1,049 2.79%
Tolland........................................................ 13,736 391 2.85%
Windham........................................................ 15,819 428 2.71%
Total:....................................................... 516,614 18,693 3.62%
</TABLE>
- ------------------------
Source: HCFA Division of Medicare, Region 1, May, 1996
Based upon this data, the Company believes:
- The Medicare HMO market in the State of Connecticut is in its early stages
of development. If the Company is approved as a CMP by HCFA, it expects to
have a significant opportunity to expand its business operations. See
"Risk Factors--Government Approvals as a Prerequisite to Operations."
- Participating Physicians will offer a competitive advantage to the Company
in the marketing of its products to Medicare recipients arising from the
strong ties and loyalties seniors have to their physicians.
REGULATION
DOI REGULATION
The Company will apply for a COA to operate as an HMO in the State of
Connecticut. Among the areas regulated by the Connecticut DOI are the scope of
benefits required to be made available to Enrollees, continuation of benefits in
the event of insolvency or termination of arrangements with providers, reserves
required to be maintained, the manner in which Enrollees' copayments are
structured, procedures for review of quality assurance, enrollment requirements,
the relationships among the HMO, its physicians and other healthcare providers,
and the financial condition of the HMO.
35
<PAGE>
Under Connecticut law, an HMO must maintain a minimum net worth of
$1,500,000 and must maintain a reserve at least equal to all of its estimated
pending claims. It is anticipated that the Company will have a need for no less
than an estimated $4,000,000 of capital committed to satisfying ongoing net
worth and reserve requirements. If the Company becomes unable to meet the
foregoing net worth and reserve requirements, the Company's COA may be revoked
or its operations restricted. Other restrictions and requirements may be imposed
that affect HMOs generally, the products offered by the Company, underwriting
requirements, and other aspects of the Company's operations. Rates and proposed
covered benefits must be submitted to the DOI prior to their effectiveness, and
there can be no assurance that the Company's proposed rates will be accepted
without objection.
ANTITRUST
Antitrust concerns have become central issues in the managed care
environment of the healthcare industry. Whenever physicians or other healthcare
providers join together to form ventures for the delivery of healthcare
services, antitrust issues may be present. The Company has attempted to take
reasonable steps to minimize antitrust risk. Nevertheless, the law in this area
is unsettled and fact specific. Therefore, there can be no assurance that there
will not be a challenge to the Company's operations on the basis of antitrust
violations at some time in the future. If antitrust lawsuits or other challenges
were to be filed against the Company, it would be forced to incur substantial
legal expenses. Moreover, if any antitrust challenge were to be successful, the
Company could suffer additional material adverse consequences. In addition, it
is impossible to predict whether further federal and/or state antitrust
legislation will be adopted or the impact that the adoption of such legislation
may have on the healthcare delivery system and the Company. See "Risk
Factors--Antitrust Considerations."
FEDERAL ANTI-KICKBACK AND ANTI-REFERRAL LAWS
Federal laws prohibit physicians from paying or receiving any remuneration,
directly or indirectly, for the referral of a patient. In addition, federal law,
under certain defined circumstances, prohibits referral by a physician to a
healthcare entity in which the physician or his or her immediate family member
has a financial interest. The Company believes that neither the Company nor its
physician shareholders will be in violation of federal or Connecticut law as a
result of the operation of or participation in the Company's HMO. To the extent
that physicians refer patients to other physicians, they will receive no
remuneration for such referral. Moreover, the Company will not require nor
encourage physicians to refer patients to entities in which they have a
financial relationship. See "Risk Factors--Limitations on Physician Ownership of
Certain Healthcare Enterprises."
Under the Medicare and Medicaid Fraud and Abuse Law, also known as the
Anti-kickback Statute, a physician is prohibited from: (i) soliciting or
receiving any remuneration in return for referring a patient to another
healthcare provider, and (ii) offering or paying any remuneration to induce the
referral of patients to the physician.
In addition, two related federal laws, Omnibus Budget Reconciliation Act of
1990, Pub. L. No. 101-508, Title IV, Section 4207(e)(1)-(3), (k)(2) and Omnibus
Budget Reconciliation Act of 1993, Pub. L. No. 103-66, Title XIII,
SectionSection13562 and 13624, known respectively as Stark I and Stark II,
prohibit a physician from referring patients to an entity in which the
physician, or an immediate family member, has a financial relationship, for the
provision of certain designated health services. Stark I only applies to
clinical laboratory services. Stark II prohibits self-referrals to certain
additional "designated health services"; physical therapy; occupational therapy;
radiology; radiation therapy; durable medical equipment; parenteral and enteral
nutrients, equipment and supplies; prosthetics, orthotics and prosthetic
devices; home health services; inpatient prescription drugs; and inpatient and
outpatient hospital services. Stark I and II laws apply only to the referral of
patients who are covered under Medicare, Medicaid and/or other federal programs
and grants.
36
<PAGE>
The Company may, in the future, contract with federal programs, including
Medicare, to provide services to eligible patients. However, as indicated above,
the Company will neither require nor encourage physicians to refer patients to
an entity in which the physician (or his or her immediate family) holds a
financial interest. Furthermore, Stark I and II laws contain a specific
statutory exception for HMOs which meet federal requirements. Finally, with
respect to the anti-kickback statute, the federal government has promulgated
so-called "safe harbor" regulations, which insulate from liability individuals
or entities which comply with the regulatory requirements. Included in these
regulations is a safe harbor for HMOs under contract with federal or state
agencies which operate in accordance with applicable laws and regulations.
Should the Company enter into such contracts, thereby bringing it within the
purview of federal law, the Company will be required to comply with this safe
harbor and the statutory exception to Stark I and II laws. Notwithstanding, the
Company's belief is that neither the Company nor its physicians will be in
violation of either federal or Connecticut law as a result of the operation of
or participation in the Company's HMO.
LEGAL MATTERS
There is no pending or threatened legal or administrative proceeding or
arbitration to which the Company is currently a party, other than those
described in this Prospectus relating to the licensing of the Company to do
business as an HMO.
EMPLOYEES
The Company has no paid employees. The day-to-day operation of the Company
is conducted by MedServ.
FACILITIES
Since the Company intends to be an IPA Model HMO, it is contemplated that
care will be delivered solely by Participating Providers in facilities not owned
by the Company. The Company's management will be conducted at MedServ's facility
located in Cheshire, Connecticut.
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MANAGEMENT
Company policies and strategies will be developed by a Board of Directors
with the assistance of MedServ management. Day-to-day management of the Company
will be conducted by MedServ pursuant to the Management Agreement and subject to
the oversight of the Board of Directors. As a start-up in a competitive market,
MedServ intends to hire an HMO management consulting company to provide
oversight during its first year of operation. In addition to general management
functions, MedServ anticipates charging the management company with
responsibility for the recruitment and training of a permanent Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer, Vice President of
Medical Affairs, Vice President of Management Information Systems, and Vice
President of Marketing and Sales with significant HMO experience to manage the
Company's operations. Subject to input from the Board of Directors, MedServ will
pay such compensation within the budget and terms of its Management Agreement.
The following describes the directors and those individuals employed or
engaged by MedServ who will initially provide management services to the
Company, under the terms of the Management Agreement.
The Company will have a Board of Directors of not less than seventeen nor
more than twenty-one directors. Eleven directors are appointed by the Class C
Common shareholder, MedServ. Within six months after completion of the Offering:
(i) six directors will be elected by the Class A Common shareholders and must be
physicians who are not members of the Hartford County Medical Association or the
New Haven County Medical Association and of whom no more than two may be members
of any one county medical society at any given time and not less than three
shall be primary care physicians and (ii) up to four directors shall be elected
by a majority of the Class A shareholders from a list of nominees provided by
the Board of Directors.
At present, the Company has eleven directors appointed by MedServ. The Board
of Directors will be expanded to not less than seventeen directors within six
months after completion of the Offering.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR OFFICER AGE TITLE
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Craig W. Czarsty, M.D.................. 43 Chairman of the Board of Directors and President
Joseph R. Coffey....................... 53 Chief Executive Officer, Executive Vice President and Director
F.J. Montegut, M.D..................... 58 Secretary and Director
John B. Franklin, M.D.................. 59 Chief Financial Officer, Treasurer and Director
Richard Fiorentino..................... 49 Associate Executive Vice President and Associate Chief Executive
Officer
Margaret Camarco....................... 40 Vice President, Health Services
Edward J. Berns, Esq................... 47 Vice President and General Counsel
John Aversa, M.D....................... 54 Director
Joseph Balsamo, M.D.................... 38 Director
Neil H. Brooks, M.D.................... 54 Director
Ellen R. Fischbein, M.D................ 51 Director
N. Chandra Narayanan, M.D.............. 55 Director
John W. Rodgers, M.D................... 48 Vice Chairman of the Board of Directors
Earle J. Sittambalam, M.D.............. 53 Director
</TABLE>
38
<PAGE>
KEY MANAGEMENT STAFF
MedServ will provide day-to-day management of the Company pursuant to the
terms of the Management Agreement, subject to the supervision of the Board of
Directors. MedServ management includes the following individuals, who will hold
the specified positions at the Company:
CRAIG W. CZARSTY, M.D., CHAIRMAN, PRESIDENT
Dr. Czarsty incorporated the Connecticut Managed Service Organization in
1992 and has been a member since 1978 of the Connecticut Academy of Family
Physicians for which he has held a number of offices, including President and
Director. He also serves on the Board of Directors and was formerly President of
Health One Connecticut, P.C. Dr. Czarsty has earned diplomate status from the
American Board of Family Practice and the National Board of Examiners. In
addition, in 1986 Dr. Czarsty was appointed Fellow by the American Academy of
Family Physicians. A licensed physician in the State of Connecticut and the
Commonwealth of Virginia, Dr. Czarsty serves on the staff of numerous hospitals
and healthcare providers.
JOSEPH R. COFFEY, CHIEF EXECUTIVE OFFICER, EXECUTIVE VICE PRESIDENT AND DIRECTOR
Mr. Coffey is the Executive Vice President/CEO of the Hartford County
Medical Association and the New Haven County Medical Association and MedServ. He
has been active in association and health agency management since 1968. In 1984,
he joined the Hartford County Medical Association as Executive Vice
President/CEO. In 1985, he was instrumental in establishing Medical Delivery
Systems, Inc. and ProCare IPA, Inc. (now, MedServ IPA, Inc.) to help physicians
interface with commercial managed care entities. In 1994, Mr. Coffey received
the Association Executive of the Year Award from the Connecticut Society of
Association Executives.
RICHARD FIORENTINO, ASSOCIATE EXECUTIVE VICE PRESIDENT AND ASSOCIATE CHIEF
EXECUTIVE OFFICER
Mr. Fiorentino is the Associate Executive Vice President of the Hartford
County Medical Association and the Chief Operating Officer of Medical Delivery
Systems, Inc. and MedServ IPA, Inc. (formerly ProCare IPA, Inc.). He has been
active in association and health agency management since 1974 having served the
Fairfield County Medical Association and the Connecticut State Medical Society
before his employment by Hartford County Medical Association in 1985. Since that
time, Mr. Fiorentino has been at the forefront in the establishment of a
physician network for ProCare IPA, Inc. (now, MedServ IPA, Inc.)
Mr. Fiorentino has more than ten years of experience in the managed care
field representing the interests of physicians in their interactions with
commercial managed care entities. As Chief Operating Officer of MedServ IPA,
Inc., he has been responsible for management oversight in such areas as
physician recruitment and credentialing, Quality Management/Utilization Review
programs, and management information systems.
JOHN B. FRANKLIN, M.D., CHIEF FINANCIAL OFFICER, TREASURER, AND DIRECTOR
Dr. Franklin has practiced medicine for the past 29 years specializing in
Ophthalmology. In addition to his duties as a Director and Treasurer, Dr.
Franklin is the Company's Chief Financial Officer and will hold such office
until the Company, when appropriate and necessary, hires a permanent Chief
Financial Officer. Dr. Franklin received his M.D. from New Jersey College of
Medicine in 1961.
MARGARET A. CAMARCO, L.P.N., VICE PRESIDENT, HEALTH SERVICES
Mrs. Camarco received her L.P.N. degree from the A. I. Prince Technical
School Licensed Practical Nurse Program affiliated with Hartford Hospital in
1982 and served as staff nurse on the Trauma Unit at Hartford Hospital from 1982
to 1985, and as an Occupational Health Nurse for Immediate Medical Care
39
<PAGE>
Centers, Inc. from 1985 to 1987. Mrs. Camarco entered the managed care arena in
1987 serving as Coordinator of Quality Assurance and Utilization Review for an
IPA by providing assistance in the development and administration of its
Quality/Utilization Management Program. In 1989, Mrs. Camarco earned National
Certification and Diplomate status in Quality Assurance and Utilization Review
through the American Board of Directors of Quality Assurance and Utilization
Review Physicians (ABQAURP). In 1995, Mrs. Camarco obtained her certification in
Outcomes Management from the New England HealthCare Assembly (NEHA).
Mrs. Camarco serves in the capacity of Assistant Executive Vice President of
the QM/UM Programs of MedServ and has been instrumental in the establishment,
implementation, and ongoing administration of the Quality Management/Utilization
Management Programs of MedServ IPA, Inc. and Medical Delivery Systems, Inc.,
under their service arrangements with MedServ of Connecticut, Inc. and the
Hartford County Medical Association and the New Haven County Medical
Association. Mrs. Camarco is a member of the American Association of Medical
Executives, the American Board of Quality Assurance and Utilization Review
Physicians, the National Association for HealthCare Quality, the New England
HealthCare Assembly, the Connecticut Medical Group Management Association, and
the Connecticut Society of Association Executives.
EDWARD J. BERNS, ESQUIRE, VICE-PRESIDENT AND GENERAL COUNSEL
Mr. Berns is the General Counsel of the Hartford County Medical Association
and the New Haven County Medical Association and MedServ. He has practiced law
exclusively within the medical environment since 1987 with a concentration in
the field of managed care. Prior to assuming his current positions he was
engaged in the private practice of law from 1975 to 1987 in the New Haven,
Connecticut area.
Mr. Berns is a member of the Bar of the State of Connecticut and the United
States District Court for the District of Connecticut. He has served on the
adjunct faculty of the University of New Haven, Quinnipiac College, and Southern
Connecticut State University. Mr. Berns holds the appointment of Magistrate from
the State of Connecticut Judicial Department.
CURRENT DIRECTORS.
The following describes the directors whose curriculum vitae are not set
forth above:
John Aversa, M.D. has practiced medicine for the past 27 years specializing
in Orthopaedics. Dr. Aversa received his M.D. from SUNY Downstate in 1967.
Joseph Balsamo, M.D. has practiced medicine for the past 8 years
specializing in Internal Medicine. Dr. Balsamo received his M.D. from
Universidad del Noreste in 1985.
Neil H. Brooks, M.D. has practiced medicine for the past 26 years
specializing in Family Practice. Dr. Brooks received his M.D. from Hahnemann
University in 1968.
Ellen R. Fischbein, M.D. has practiced Psychiatry for the past 19 years. Dr.
Fischbein received her M.D. from the State University of New York at Buffalo in
1970.
F.J. Montegut, M.D. has practiced medicine for the past 27 years
specializing in Thoracic Surgery. Dr. Montegut received his M.D. from Meharry
Medical College in 1958.
N. Chandra Narayanan, M.D. has practiced medicine for the past 22 years
specializing in Surgical Oncology. Dr. Narayanan received his M.D. from Calcutta
National Medical College and Hospital in 1964.
John W. Rodgers, M.D. has practiced medicine for the past 18 years
specializing in Pulmonary Diseases. Dr. Rodgers received his M.D. from the
University of Connecticut in 1974.
Earle J. Sittambalam, M.D. has practiced medicine for the past 22 years
specializing in Internal Medicine. Dr. Sittambalam received his M.D. from the
University of Ceylon in 1969.
40
<PAGE>
COMPENSATION OF OFFICERS, DIRECTORS AND COMMITTEE MEMBERS
The Company intends to pay its directors a $200 stipend for attending
meetings of the Board of Directors. Officers, who are directors and are not
employed by MedServ, will receive the additional stipends of $10,000 per year
for the President and $5,000 per year for all other officers.
EXECUTIVE COMPENSATION
The following chart provides a summary of the compensation received by the
Company's Chief Executive Officer from the Company's inception through December
31, 1996. No officer or employee of the Company received compensation of greater
than $100,000 during that period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------------------------------------- ----------- ------------ -------------
<S> <C> <C> <C>
Joseph R. Coffey, Chief Executive Officer $20,730 -- --
</TABLE>
- ------------------------------
(1) Paid to Mr. Coffey by MedServ during the period from the Company's inception
through December 31, 1996 for all services rendered by him to MedServ, which
services include serving as the Company's Chief Executive Officer.
The Company has no stock option, stock incentive or long term incentive
plans.
PRINCIPAL SECURITY HOLDERS
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS OF BENEFICIAL
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ------------------------------------- ------------------------------------- ------------------- -------------------
<S> <C> <C> <C>
Class A Common....................... N/A N/A N/A
Class B Common....................... N/A N/A N/A
Class C Common....................... MedServ of Connecticut, Inc.(1) 3 Shares 100%
</TABLE>
- ------------------------
(1) The address of this Stockholder is 1520 Highland Avenue, Cheshire,
Connecticut 06410.
MedServ owns all of the outstanding Class C Common Stock of the Company.
Prior to this Offering, there is no outstanding Class A Common Stock or Class B
Common Stock of the Company. The Company anticipates that each director who is
an Eligible Purchaser will purchase at least the minimum number of shares of
Common Stock in this Offering and that no director will hold one percent or more
of the outstanding shares.
PHYSICIAN ADVOCATE COUNCIL
The Board of Directors has authorized the establishment of the Physician
Advocate Council as an ad hoc committee appointed by the Board of Directors
which will advise the Board of Directors on matters of Company policy or
operations as they affect physician participation in products offered by the
Company, including product design, physician compensation, physician
credentialing criteria, the physicians' role in member services support, the
effectiveness of the Company's medical management model and the conduct of the
Company's capital campaign. The Board of Directors appoints physician members to
the Advocate Council in its discretion. Participation of physicians in the
Physician Advocate Council is voluntary and no compensation will be paid by the
Company to such physicians.
41
<PAGE>
CONFLICTS OF INTEREST
Some of the shareholders and directors of the Company are or will be and
will continue to be physicians who have entered into Physician Participation
Agreements with IPA. The interests of the physicians, as Participating
Physicians to the Company through IPA, may differ from the interests of the
physicians, as shareholders and/or directors of the Company. As Participating
Physicians, physicians may have an interest in maximizing the amount of
reimbursement from the Company for services provided by them to the Enrollees.
On the other hand, as shareholders and/or directors of the Company, physicians
may benefit from the containment of the costs of providing services through
appreciation in share value or increased compensation. The Company's ability to
operate its business effectively will depend in part upon its resolution of this
conflict in a way that enables the Company to offer its products at competitive
rates. See "Business" and "Risk Factors--Method of Reimbursement for Physician
Services."
The Company intends to solicit employers and individuals throughout the
State of Connecticut, including physicians who are shareholders and directors of
the Company, to become Enrollees of the HMO. Physicians, as employers and/or
Enrollees, may be interested in minimizing the Company's premiums (and other
financial aspects of the Company), as well as maximizing the breadth of services
provided by the Company. On the other hand, physicians, as shareholders and/or
directors of the Company, may be interested in maximizing premiums of Enrollees,
and minimizing the breadth of services covered by the Company. Although the
Board of Directors recognizes this potential conflict of interest, its current
intention is to operate the Company in a manner that maintains market
competitive premiums and benefit designs.
Further, the Company's shareholders and/or directors may own stock in and/or
participate in competing organizations. The Company's shareholders and/or
directors may also have an interest in freestanding facilities or institutions
with which the Company may contract.
The Company intends to enter into the Management Agreement with MedServ.
Under this Management Agreement, MedServ will be responsible for all of the
day-to-day management of the Company. The terms and conditions of the Management
Agreement, as well as the amounts which will be paid to MedServ by the Company
pursuant thereto, are subject to approval by the Board of Directors by a
majority vote and a two-thirds vote, respectively. MedServ, as the sole
shareholder of the Class C Common Stock, has the right to designate a majority
of the Board of Directors. In the negotiations of the Management Agreement,
MedServ was represented by its general counsel, who also serves as general
counsel to the Company.
The Company understands that MedServ will enter into a long-term exclusive
IPA Agreement with IPA. Pursuant to the IPA Agreement, IPA shall be responsible
for the development of the physician network and for the clinical aspects of
operations. MedServ manages the affairs of IPA, and MedServ's in-house counsel
has provided legal advice to IPA with regard to certain transactions described
herein.
RELATED PARTY TRANSACTIONS
The Company will maintain the Management Agreement with MedServ for the
management of the HMO. In addition, hospitals and other purchasers which invest
in the Company may have service arrangements with the Company which may make
their interests inconsistent with the interests of the Company as its
shareholders.
Mr. Coffey, Ms. Camarco, Mr. Berns, and Mr. Fiorentino are each employed by
MedServ, which in the year ended December 31, 1996 paid them $154,420, $59,150,
$80,172, and $92,652 respectively, which included compensation for serving as
officers of the Company.
42
<PAGE>
TERMS OF OFFERING
THE OFFERING
The Company is offering two classes of Common Stock, Class A and Class B,
until all the Common Stock offered hereby is sold, for a period of up to one
hundred and eighty days after the date of this Prospectus, with one sixty day
extension at the discretion of the Board of Directors (the "Offering Period").
Class A Common Stock will be sold to both individual physicians and medical
groups at a price of $4,000 per share, subject to a "prompt subscription" price
of $3,000 per share for Eligible Purchasers who execute and deliver to the
Subscription Agent the completed Subscription Documents in a form sufficient to
establish eligibility to purchase Common Stock within ninety days of the date of
this Prospectus. Every physician who desires to provide medical services to
Enrollees must agree to purchase one share of Class A Common Stock. No physician
may hold more than one share of Class A Common Stock. In addition to purchasing
one share of Class A Common Stock, each Specialist Physician who desires to
provide medical services to Enrollees must agree to purchase not less than one
share of Class B Common Stock.
Class B Common Stock will be sold at a price of $4,000 per share to
physicians and to hospitals that have been approved by the Company, in its
discretion, subject to a prompt subscription price of $3,000 per share for
Eligible Purchasers who execute and deliver to the Subscription Agent completed
Subscription Documents in a form sufficient to establish eligibility to purchase
Common Stock within ninety days of the date of this Prospectus. Although the
Company does not anticipate limiting the number of shares of Class B Common
Stock any purchaser may purchase, a maximum of 3,000 shares of Class B Common
Stock may be sold pursuant to this Offering, and, in response to an
over-subscription, the Company may limit the number of shares of Class B Common
Stock a particular Eligible Purchaser may purchase.
Licensed hospitals that seek to purchase Class B Common Stock are required
to purchase such number of shares which, when multiplied by the price per share,
results in a purchase price of not less than $250,000; provided, however, that a
hospital which is licensed to operate fewer than 100 beds is required to
purchase such number of shares which, when multiplied by the price per share,
results in a purchase price of not less than $100,000.
Professional corporations, corporations, limited liability corporations,
business trusts, trusts, independent practice associations ("IPAs"), physician
hospital organizations ("PHOs"), and partnerships that are majority-owned and
controlled, directly or indirectly, by physicians who provide medical services
on behalf of the entity (each referred to as a "Group") are eligible to purchase
shares of Class A Common Stock and are eligible for the prompt subscription
price for Class A Common Stock and Class B Common Stock if and only if (i)
physicians practicing in the Group ("Group Physicians") meet the qualifications
of individual physician investors; (ii) the number of shares of Class A Common
Stock purchased equals the number of Group Physicians in any particular
purchasing Group, and the number of shares of Class B Common Stock purchased
shall at least equal the number of Specialist Physicians practicing in any
particular purchasing Group; and (iii) each Group Physician in a purchasing
Group executes a Participation Agreement. However, with regard to any entity
purchasing on behalf of physicians affiliated therewith who hold full time
geographic academic appointments, the number of shares to be purchased shall be
calculated based on full time equivalent physician time devoted to clinical care
based on Medicare reports completed for the most recent fiscal year of the
affiliated hospital, and if a hospital is a shareholder of such Group, Class B
Common Stock must be purchased in such amount required for a hospital purchasing
individually. No Group may purchase more than the number of shares of Class A
Common Stock than could be purchased by Group Physicians if purchased
individually.
The Offering is subject to receipt of completed Subscription Documents
during the Offering Period for purchases by Eligible Purchasers of not less than
$8,000,000 of Common Stock. Within five business days after the achievement of
the $8,000,000 threshold, there shall be an Initial Closing. The Company shall
conduct subsequent Closings upon receipt of incremental subscriptions of at
least $1,500,000, with a
43
<PAGE>
final Closing to occur 180 days following the date of this Prospectus subject to
a 60 day extension at the discretion of the Board of Directors. In the event
that the $8,000,000 threshold is not satisfied, the purchase price of the Common
Stock, plus interest thereon, shall be refunded minus $450 per share which shall
be retained by the Company in order to offset the costs associated with the
Offering. See "Risk Factors."
ELIGIBILITY REQUIREMENTS TO PURCHASE STOCK
The Common Stock offered hereby may be purchased only by Eligible
Purchasers, which includes only persons meeting each of the following
requirements:
Class A Common shareholders:
FOR INDIVIDUAL PHYSICIANS:
(i) must be a physician licensed in the state in which the physician
practices.
(ii) must have or have applied for membership in County and State Medical
Associations, in each case if available, unless such requirement is
waived by the Board of Directors in its sole discretion.
(iii) must have in effect with IPA a Physicians Care Primary Care Physician
Attachment or a Physicians Care Specialist Physician Attachment to the
Participation Agreement.
(iv) must maintain in effect with IPA a Participation Agreement.
(v) specialist Physicians must also purchase not less than one share of
Class B Common Stock.
FOR GROUPS OF PHYSICIANS:
Groups may acquire shares for such number of Group Physicians who
individually satisfy the qualifications of a Class A Common shareholder.
Class B Common shareholders:
QUALIFICATIONS
(i) at the discretion of the Board of Directors, physician groups, hospitals
and/or other investors may purchase Class B Common Stock of the Company.
(ii) all physicians who have purchased a share of Class A Common Stock may
purchase shares of Class B Common Stock.
(iii) licensed hospitals that seek to purchase Class B Common Stock are
required to purchase such number of shares which, when multiplied by the
price per share, results in a purchase price of not less than $250,000;
provided, however, that if a hospital has less than 100 licensed beds,
then such investor is required to purchase such number of shares which,
when multiplied by the price per share, results in a purchase price of
not less than $100,000.
OFFERING PERIOD
The Offering will remain open for one hundred and eighty days from the date
of this Prospectus, subject to a sixty day extension at the discretion of the
Board of Directors.
44
<PAGE>
ESCROW ARRANGEMENTS
All amounts received from subscribers whose subscriptions are not rejected
will be promptly forwarded by the Subscription Agent to the Escrow Agent (State
Street Bank & Trust Company, 777 Main Street, Hartford, Connecticut 06115),
shall be cashed by the Escrow Agent, and the Purchase Price less $450 per
subscribed share (the "Subscription Fee") shall be deposited into the Escrow
Account, until the first to occur of (i) a Closing applicable to the applicable
subscription, or (ii) the termination of the Offering. The first closing of the
Offering will occur five days after receipt of accepted subscriptions in the
amount of $8,000,000 of Class A Common Stock and Class B Common Stock with a
subsequent closing occurring five days after the receipt thereafter by the
Company of subscriptions in incremental amounts of $1,500,000. All Subscription
Fees shall be deposited by the Escrow Agent into the account of the Company.
During the period of escrow, subscribers will have no right to demand return
of their subscriptions.
Upon a Closing, investors whose subscriptions have been accepted by the
Company will not be entitled to any interest. No interest will be paid on funds
held in escrow unless the Offering is terminated by the Company without a
Closing. If the Offering is terminated, the Escrow Agent will promptly remit to
each prospective subscriber an amount equal to the Purchase Price per share plus
his or her pro rata amount of the interest accrued on all the funds held in
escrow less the sum of $450 per share.
SUBSCRIPTION AGENT
Newbury, Piret & Co., Inc. has been engaged by the Company to assist it in
effecting the Offering by serving as Subscription Agent. The Subscription Agent
will cause copies of this Prospectus and subscription materials to be forwarded
to prospective subscribers upon request. Following receipt of completed
Subscription Documents from prospective subscribers, the Subscription Agent will
(i) transmit the submitted checks and money orders to the Escrow Agent, (ii)
verify that the Subscription Agreement has been fully and properly completed and
signed, and (iii) forward, if received, the IPA Participation Agreement, the
Physicians Care Primary Care Physician or Physicians Care Specialist Physician
Attachment and the accompanying checks or money orders for IPA membership to
MedServ. All subscriptions which the Subscription Agent is not able to verify
will be rejected and returned to the prospective subscriber.
Upon the closing of the Offering, the Subscription Agent will cause stock
certificates to be sent to those subscribers whose subscriptions have been
accepted by the Company. Each of the foregoing will be sent by the Subscription
Agent via first class mail promptly following the closing of the Offering. See
"How to Subscribe in this Offering."
45
<PAGE>
DESCRIPTION OF SECURITIES
CLASS A COMMON STOCK
The Class A Common Stock shall be issuable only to physicians or entities
who can demonstrate the following qualifications:
FOR INDIVIDUAL PHYSICIANS:
(i) Must be a physician licensed in the state in which the physician
practices.
(ii) Must have or have applied for membership in the County (if a County
Medical Association exists in such county) and State Medical Association for
the location in which the physician practices, if available or the
equivalent, unless such requirement is waived by the Board of Directors in
its sole discretion.
(iii) Must have in effect a Participation Agreement with IPA.
(iv) Must have in effect a Physicians Care Primary Care Physician
Attachment or a Physicians Care Specialist Physician Attachment to the
Participation Agreement with IPA.
FOR GROUPS OF PHYSICIANS:
Class A Common Stock may be held by a corporation, professional corporation,
business trust, trust, partnership, limited liability corporation or other legal
entity in which physicians who provide medical services on behalf of the
corporation, professional corporation, business trust, trust, partnership,
limited liability corporation or other legal entity have not less than fifty
percent (50%) ownership interest or control (referred to as a "Group"), provided
that each of the physicians satisfy qualifications (i), (ii), (iii) and (iv)
enumerated above, unless waived by the Board of Directors in its sole
discretion.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class A Common Stock shall entitle the holder
of such share to one vote on all matters which are properly before the
shareholders. Class A shareholders shall be entitled to elect only certain
Directors to the Board of Directors as specified in the Bylaws and the
Certificate of Incorporation.
- DIVIDEND RIGHTS. Class A shareholders shall be entitled to receive
dividend distributions when, as and if declared by the Board of Directors,
in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
- OWNERSHIP INTEREST. No physician may hold more than one share of Class A
Common Stock.
CLASS B COMMON STOCK
QUALIFICATIONS:
At the discretion of the Board of Directors, physicians, hospitals and/or
other investors may be issued Class B Common Stock.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class B Common Stock shall entitle the holder
of such share to one vote on all matters which require a vote in
accordance with law, except that Class B shareholders shall not be
entitled to elect representatives to the Board of Directors, to vote on
amendments to the Bylaws or to vote on such other matters reserved to the
holders of Class A Common Stock.
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<PAGE>
- DIVIDEND RIGHTS. Class B shareholders shall be entitled to receive
dividend distributions, when, as and if declared by the Board of
Directors, in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
CLASS C COMMON STOCK
QUALIFICATIONS
The Class C Common Stock shall only be issuable to MedServ.
RIGHTS AND PREFERENCES
- VOTING RIGHTS. Each share of Class C Common Stock shall entitle the holder
of such stock to one vote on all matters properly before the shareholders.
The Class C shareholder shall have certain special voting rights as set
forth in "--Governance," below. The Class C shareholder shall be entitled
to elect certain Directors to the Board of Directors as specified in the
Bylaws and in the Certificate of Incorporation.
- DIVIDEND RIGHTS. The Class C shareholder shall be entitled to receive
dividend distributions, when, as and if declared by the Board of
Directors, in its sole discretion.
- LIQUIDATION RIGHTS. After the liabilities of the Company have been
discharged, Class B shareholders shall be entitled to a liquidation
preference equal to $1,500 per share of Class B Common Stock. After the
Class B shareholders' liquidation preference is satisfied, all
shareholders will share any remaining liquidating distributions pro rata.
GOVERNANCE
BOARD OF DIRECTORS. The number of directors shall be not less than seventeen
nor more than twenty-one; provided, however, that prior to issuance of Class A
Common Stock and Class B Common Stock there shall be eleven directors.
Six of the directors shall be elected by the Class A shareholders with the
first election occurring not more than one hundred and eighty days after the
completion of this Offering. Each of these directors (the "Class A Directors")
must be a physician and a member of a county medical society other than the
Hartford County Medical Association or the New Haven County Medical Association.
No more than two of the Class A Directors may be members of any one county
medical society at any given time; and at all times, not less than three of the
Class A Directors shall be "Primary Care Physicians", as said term is defined by
policy adopted by the Board of Directors from time to time.
Eleven of the directors shall be appointed and subject to removal by the
Class C shareholder (the "MedServ Directors"). Six of the MedServ Directors
shall be Primary Care Physicians.
Up to four directors (such number to be determined in the discretion of the
Board of Directors) shall be representatives of area employers, hospitals,
investors in the corporation or individuals representing the interests of the
Company's subscribers. These directors will be elected by a majority of the
Class A shareholders at the annual meeting of the shareholders from a list of
nominees developed by the Board of Directors.
VOTING REQUIREMENTS. The following actions shall require a vote of the
shareholders:
47
<PAGE>
CLASSES A COMMON STOCK AND B COMMON STOCK:
- These actions which require shareholder action as a matter of law;
provided that nothing contained herein shall have the effect of expanding
the voting rights of the shares of Class B Common Stock described herein.
CLASS C COMMON STOCK:
At least two-thirds in interest of the Class C Common Stock must approve the
following actions:
- the sale or liquidation of the Company;
- the merger or consolidation of the Company;
- the amendment of the Certificate of Incorporation; and
- all other matters required by law to be submitted to the shareholders for
a vote.
RESTRICTIONS ON TRANSFER; SHARE CERTIFICATE
RESTRICTIONS ON TRANSFER. At any time a Class A or Class B shareholder
receives a bona fide offer to transfer shares of the Company's stock to an
individual or entity who/which satisfies the requirements for stock ownership
set forth in the Certificate of Incorporation, the shareholder must offer to the
Company in writing (the "Transfer Notice") a right of first opportunity to
purchase such shares at an amount equal to that contained in the bona fide offer
("Purchase Price"). The Company shall notify the shareholder in writing (the
"Election Notice") of its election to purchase such shares within thirty days of
receipt of the Transfer Notice (the "Election Period"). If the Company elects to
purchase such shares, the Company may, at its election, pay the Purchase Price
in cash or deliver a promissory note to the selling shareholder stating that the
Company will pay the Purchase Price for the shares over a two year period with
interest at the prime rate as reported in the Money Rates section of the Wall
Street Journal on the first day of the month preceding the notice of sale or
transfer. The transfer shall occur within sixty days of the Election Notice at
the offices of the Company on the date and at the time set forth in the Election
Notice. The promissory note shall obligate the Company to pay the selling
shareholder the principal amount due with interest thereon in equal quarterly
installments over the two year repayment term. If the Company does not elect to
purchase such shares, the shareholder may sell such shares to the individual or
entity identified in the Transfer Notice, for the Purchase Price specified in
the Transfer Notice; provided that the closing of such sale occurs within sixty
days following the expiration of the Election Period. If a shareholder otherwise
wishes to sell his or her Common Stock back to the Company, the Company, in its
sole discretion, may redeem such shareholder's Common Stock (optional
redemption) for book value or for such other amount and on such other terms
agreeable to the Company and the shareholder.
MANDATORY REDEMPTION. At any time after the fifth anniversary of the
issuance date of a Class A shareholder's shares Common Stock, but not before,
the Company shall redeem all shares of Common Stock (including Class A Common or
Class B Common shares) of the Class A shareholder wishing to sell or transfer
his/her shares upon the occurrence of one of the following events (termed an
"Involuntary Transfer"):
- the death or permanent disability of the Class A shareholder; or
- the Class A shareholder's discontinuation as a provider of medical
services in Connecticut (I.E., retirement or relocation), provided, that
physicians who acquire shares of Common Stock through the initial offering
of the Company's Common Stock and are 55 years of age or older on the date
of receipt of an executed Subscription Agreement shall be eligible to
redeem their Common Stock at any time after the third anniversary of the
issuance date of such Common Stock.
The Company shall redeem such shares of Common Stock at the greater of the
then current net book value of such shares determined pursuant to Generally
Accepted Accounting Principles ("GAAP") as of the most recently completed fiscal
quarter of the Company, or the original issue price of such shares to the
48
<PAGE>
shareholder ("Redemption Price"). At the election of the Company, the Company
may make payment in cash or deliver a promissory note to the selling shareholder
stating that the Company may pay the Redemption Price for the shares over a five
year period with interest at the prime rate as reported in the Money Rates
section of the Wall Street Journal on the first day of the month preceding the
notice of sale or transfer. The promissory note shall obligate the Company to
pay the selling shareholder the principal amount due and accrued interest
thereon in equal quarterly installments over the five year repayment term.
CONVERSION OF SHARES FROM CLASS A COMMON STOCK TO CLASS B COMMON STOCK.
In the event that a Class A shareholder no longer satisfies the
qualifications for Class A shareholder status or transfers the shares to a party
which does not satisfy the qualifications for Class A shareholder status, the
Class A shareholder shall immediately surrender his/her Class A Common Stock,
and the Company will cancel such shares and will issue an equal number of Class
B shares to such shareholder.
LIMITATIONS ON THE COMPANY'S PURCHASE OF SHARES.
Notwithstanding anything to the contrary contained herein, the Company shall
not redeem a shareholder's Common Stock if the Company is insolvent or, by
reason of such redemption, is rendered insolvent, or violates any contract to
which the Company is a party or if the Board of Directors shall determine that
the Company is otherwise not obligated to redeem such Common Stock. The
determination to be made by the Board of Directors from time to time as to
whether the Company is obligated to redeem shares will depend upon a number of
variable factors, including but not limited to (i) the amount of net proceeds
received from this Offering or subsequent financing, if any; (ii) the income
from operations earned and anticipated to be earned in connection with the
Company's business; (iii) the amount of prior redemptions of Common Stock by the
Company; and (iv) the amount needed to meet statutory reserve requirements.
The Board of Directors may adopt annually by resolution a limitation on the
amount of funds available each fiscal year for the redemption of shares, which
resolution shall set forth the priority of payments to shareholders, and/or the
proportionate amount of Common Stock to be redeemed from shareholders, in the
event the aggregate Redemption Price of shares for which redemption is otherwise
required exceeds the limitation duly adopted.
MISCELLANEOUS.
(i) Any or all of the foregoing restrictions may be waived by the Board
of Directors. The certificate of the Treasurer or Secretary of such waiver,
or of the compliance of a shareholder with the above requirements shall be
conclusive evidence thereof.
(ii) No transfer of Common Stock shall be binding on the Company unless
made and recorded on its stock transfer books. The Company shall have the
right to refuse to transfer any shares of Common Stock that are not effected
in compliance with this section.
(iii) A reference to the restrictions on transfer described herein shall
be printed upon each certificate representing shares of Common Stock issued
by the Company, and those provisions shall be binding upon every person now
or hereafter becoming a shareholder, all of whom shall take such Common
Stock subject to the provisions hereof. Each certificate representing shares
of Common Stock issued by the Company shall contain the following
restrictive legend:
Notice is hereby given that the shares of stock
represented by this certificate is subject to the
provisions and restrictions on transfer and redemption
included in the Certificate of Incorporation of the
Company, a copy of which is on file at the office of the
Company, and that any transfer of the shares of stock
represented by this Certificate shall be void unless said
transfer is in compliance with said Certificate.
TRANSFER AGENT
The Company currently intends to engage Boston EquiServe to act as transfer
agent and registrar for shares of its Common Stock.
49
<PAGE>
UNDERWRITING
Effective the date of the Prospectus, the Company will have entered into an
Underwriting Agreement ("Agreement") with Newbury, Piret & Co., Inc. (the
"Underwriter"). Pursuant to the terms of the Agreement, the Underwriter has
agreed to sell on a minimum "best efforts, all or none," basis an aggregate of
$8,000,000 of Common Stock, the Common Stock offered by this Prospectus, within
a period of 180 days after the date hereof (the "Offering Period"), which period
may be extended for an additional sixty days at the discretion of the Board of
Directors, to Eligible Purchasers at the offering prices set forth on the cover
page of this Prospectus. The Underwriting Agreement and Offering may be
terminated by the Underwriter by notice to the Company at any time prior to a
Closing if, in the sole judgment of the Underwriter, the sale, payment for or
delivery of the Common Stock is rendered impractical or inadvisable for any
reason.
If the Underwriter is unable to sell the minimum required Common Stock to
reach $8,000,000 of aggregate subscriptions within the Offering Period, then the
Offering will terminate, and all subscriptions tendered with interest thereon
less $450 per share of Common Stock will be returned to the subscribers, and
without additional deduction for commissions or other expenses relating to the
Offering. All funds received by the Underwriter shall be transmitted promptly to
the Escrow Agent, pursuant to the terms of the Escrow Agreement. During the
period of escrow, subscribers will have no right to demand return of their
subscriptions. See "Escrow Arrangements."
Subject to the sale of $8,000,000 of Common Stock prior to the termination
of this Offering, the Company has agreed to pay the Underwriter a sales
commission of 7% of the offering price. The Company also has agreed to pay to
the Underwriter a non-accountable expense allowance computed on the basis of one
and one-half percent of the gross proceeds from the sale of Common Stock and an
additional expense allowance on an accountable basis for certain of the
Underwriter's expenses. Of such expense allowances, $50,000 has already been
paid. The Underwriter's expenses in excess of the stated expense allowance will
be borne by the Underwriter. To the extent that the actual expenses of the
Underwriter are less than the stated expense allowance, the difference shall be
deemed to be compensation to the Underwriter in addition to the stated sales
commission.
Prior to the Offering, there has been no public market for the Common Stock.
Common Stock cannot be transferred to any person or entity other than an
Eligible Purchaser. As a result, there will be no public market for the Common
Stock. The initial public offering price of the Common Stock has been determined
by consultations between the Company and the Underwriter. The offering price of
the Common Stock is not necessarily related to the Company's asset value, net
worth or any other established criteria of value. Factors considered in
determining the offering price of the Common Stock include estimates of business
potential, historical earnings, future prospects, gross proceeds to be raised,
the type of business in which the Company engages, and an assessment of the
Company's management. See "Risk Factors--Restrictions on Transferability of
Common Stock" and "--Absence of a Public or Other Trading Market for Common
Stock."
The Company and the Underwriter have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The foregoing does not purport to be a complete statement of the terms and
conditions of the Agreement. A copy of the Agreement will be filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
The Underwriter has been in business since 1981, and has, except for the
period from May 1991 until January 1994, been a member of the National
Association of Securities Dealers, Inc. since its founding; however, this is the
first public offering to be underwritten by the Underwriter. The Underwriter
and/or its principals have substantial experience in the securities business,
including initial public offerings, private placements of securities, mergers
and acquisitions, and equity financings but no assurance can be given
50
<PAGE>
that the Underwriter will successfully complete the Offering. See "Risk
Factors--Underwriter's Experience."
EXPERTS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by the law firm of Fabiani & Kone, P.C., 714 State Street,
New Haven, Connecticut 06511. Certain legal matters relating to the Offering
will be passed upon for the Underwriter by Sullivan & Worcester LLP, Boston,
Massachusetts.
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
51
<PAGE>
ADDITIONAL INFORMATION
GLOSSARY
"AAPCC"--average adjusted per capita costs.
"Agreement"--the Underwriting Agreement between the Company and Newbury,
Piret & Co., Inc., effective the date of the Prospectus.
"Board of Directors"--The Board of Directors of Physicians Care of
Connecticut, Inc.
"Budget"--The Administrative Services Budget approved by the Board of
Directors.
"Care Manager"--The Primary Care Physician selected by each Enrollee as
required by the Company who may deliver or coordinate the delivery of medical
services for the Enrollee. Psychiatrists may serve as Care Managers for mental
health benefits.
"Certificate of Authority" (COA)--a certificate of license issued by the DOI
that must be obtained to operate an HMO in the State of Connecticut.
"Closing"--the consummation of the formal purchase and sale of Common Stock
at which money received from Eligible Purchasers relating to subscriptions shall
be transferred from the Escrow Account to the Company and corresponding
certificates representing shares of Common Stock shall be issued to Eligible
Purchasers.
"Class A Common Stock"--Class A Common Stock, without par value, of the
Company.
"Class B Common Stock"--Class B Common Stock, without par value, of the
Company.
"Class C Common Stock"--Class C Common Stock, without par value, of the
Company, the sole shareholder of which is MedServ.
"Common Stock"--the Class A Common Stock and Class B Common Stock.
"Commission"--the United States Securities and Exchange Commission.
"Company"--Physicians Care for Connecticut, Inc.
"Competitive Medical Plan" (CMP)--
"CVO"--Central Verification Organization operated by MedServ to provide
credentialing services intended to meet NCQA standards.
"Division of Insurance" (DOI)--the State of Connecticut's Division of
Insurance.
"Eligible Purchasers"--persons or entities that meet the following
requirements:
- Class A Shareholders:
FOR INDIVIDUAL PHYSICIANS: (i) must be a physician licensed in the state
in which the physician practices; (ii) must have or have applied for
membership in County (if a County Medical Association exists in such county)
and State Medical Associations, if available, unless such requirement is
waived by the Company's Board of Directors in its sole discretion; (iii)
must have in effect a Participation Agreement with IPA in effect. (iv) must
have a Physicians Care Primary Care Physician Attachment or a Physicians
Care Specialist Physician Attachment to the Participation Agreement with IPA
in effect.
FOR MEDICAL GROUPS: Class A Common Stock may be held by a professional
corporation, corporation, limited liability corporation, business trust,
trust, independent practice association, physician hospital organization or
partnership, in which physicians who provide medical services on behalf of
such entity have not less than fifty percent (50%) ownership interest or
control, provided that each of
52
<PAGE>
the physicians in the Group meet the qualifications for physicians as if
purchasing individually, unless otherwise waived by the Company's Board of
Directors in its sole discretion.
- Class B Shareholders:
At the discretion of the Board of Directors, physicians, groups,
hospitals and/or other investors may be issued Class B Common Stock of the
Company. Every Specialist Physician seeking to provide medical services to
the Company's Enrollees must agree to purchase not less than one share of
Class B shares. Licensed hospitals that seek to purchase Class B Common
Stock are required to purchase such number of shares which, when multiplied
by the price per share, results in a purchase price of not less than
$250,000; provided, however, that if a hospital has less than 100 licensed
beds, then such an investor is required to purchase such number of shares
which, when multiplied by the price per share, results in a purchase price
of not less than $100,000.
"Code"--Internal Revenue Code.
"Election Notice"--notice in writing by the Corporation to the shareholder
of its intent to purchase shares pursuant to its right of first opportunity set
forth in Description of Securities, Section E.
"Election Period"--the 30 day period following receipt of Notice of Transfer
within which the Corporation may decide to purchase shares.
"Eligible Purchasers"--individuals or entities meeting the requirements set
forth in "Terms of Offering--Eligibility Requirements to Purchase Stock."
"Enrollee"--any person for whom the Company provides, arranges, and/or
finances managed healthcare or administrative services.
"Escrow Agent"--State Street Bank and Trust Company.
"FFS"--Fee for service payment arrangement.
"GAAP"--Generally Accepted Accounting Principles.
"Group"--professional corporation, partnership, limited liability
corporation, business trust, trust, IPA, PHO or other entity owned and
controlled by a majority of physicians who provide physician services on behalf
of the entity, provided that the physicians meet the Class A Common shareholder
eligibility requirements.
"Group Physicians"--Physicians practicing in a Group as defined herein.
"HCFA"--Health Care Financing Administration.
"Health Maintenance Organization" (HMO)--a healthcare delivery system that
provides a broad range of healthcare services to individuals directly or through
programs sponsored by employers in return for a prepaid premium.
"Initial Closing"--the Closing which will occur as soon as is practicable
after the receipt by the Company of subscriptions totalling at least $8 million.
"Involuntary Redemption Price"--the greater of the then current net book
value of Common Stock determined pursuant to GAAP as of the most recently
completed fiscal quarter of the Company, or the original issuance price of the
Common Stock.
"IPA"--MedServ IPA, Inc.
"IPA Agreement"--a long-term agreement to be executed between IPA and
MedServ pursuant to which IPA will develop a network of physicians to provide
services to Enrollees and oversee certain clinical
"LIBOR"--London Interbank Offered Rate.
53
<PAGE>
"Management Agreement"--the long-term contract to be executed between the
Company and MedServ to provide certain management and administrative services
described herein.
"Management Fee"--the Fee paid to MedServ under the Management Agreement.
"MedServ"--MedServ of Connecticut, Inc.
"MSO"--Medical Service Organization.
"NCQA"--National Commission for Quality Assurance.
"Offering"--the current offering of the Company's Common Stock, as set forth
in this Prospectus.
"Offering Period"--one hundred and eighty days from the date of this
Prospectus with one sixty day extension at the discretion of the Board of
Directors.
"Participating Physician"--a physician who has executed a Physician Care
Primary Care Attachment or Specialist Physician Attachment and otherwise meets
all conditions of participation in Physicians Care.
"Participating Provider"--a health care provider who or which has executed a
Participation Agreement and otherwise meets all conditions of participation in
Physicians Care.
"Participation Agreement"--The agreement executed by a Participating
Provider which sets forth the terms and conditions under which the Participating
Provider participates as a provider of covered services to Enrollees.
"Physicians Care"--Physicians Care for Connecticut, Inc.
"Physicians Care Primary Care Attachment"--is the document executed by a
Primary Care Physician pursuant to which such Primary Care Physician agrees to
provide services to Enrollees.
"Physicians Care Specialist Attachment"--is the document executed by a
Specialist Physician pursuant to which such Specialist Physician agrees to
provide services to Enrollees.
"Physician Reimbursement"--compensation for Participating Physicians for the
provision of healthcare services to Enrollees in an amount equal to the lesser
of (a) their usual and customary fees, (b) the fees set forth on a fee schedule
adopted by the Company, a sample of which is set forth on Appendix C hereto, or
(c) a negotiated rate (in each case, less any applicable copayments, coinsurance
or deductibles).
"Participating Provider"--
"PHO"--Physician Hospital Organization.
"PPO"--Preferred Provider Organization.
"Primary Care Physician"--a person licensed to practice medicine by the
applicable state licensing board who (a) is board eligible or board certified in
Internal Medicine, Family Medicine, General Practice, or Pediatrics, or meets
such other standards as determined by the Board of Directors from time to time,
and (b) devotes significant practice time to providing primary care services or
managing the delivery of other medical services with a capability to make
preliminary diagnoses or to provide treatment of medical and healthcare needs,
without limitation by problem origin, organ system or gender, to arrange for
delivery of all necessary care and to satisfy other requirements as established
in Board of Directors policy recording relating to qualifications of Primary
Care Physicians. For the limited purpose of determining which physicians qualify
to purchase Common Stock as a Primary Care Physician, psychiatrists shall be
considered Primary Care Physicians. Psychiatrists may serve as Care Managers for
mental health benefits.
"Prompt Subscription"--
"Purchase Price"--the price at which the Company may purchase shares when
exercising a right of first opportunity pursuant to the Transfer Notice
provision, equal to the amount contained in the Offer.
54
<PAGE>
"PSO"--Provider Sponsored Organization"--an organization of healthcare
providers engaging in direct contracting with employers.
"QMP"--Quality Management Program. A program to provide physicians with
physician-defined quality and cost of services data and performance feedback and
perform credentialing functions.
"Resource Based Relative Value Scale" (RBRVS)--a fee schedule payment
methodology that determines relative amounts to be paid to physicians according
to overhead costs, skill, intensity of effort and time associated with specific
physician services.
"Specialist Physician"--a licensed physician who (i) executes the Physicians
Care Specialist Physician Attachment to the IPA Participation Agreement and (ii)
is listed as a Specialist Physician in the Company's provider directory, and
(iii) provides medical services to Enrollees upon referral from a Care Manager,
as applicable, and submits a claim for payment therefor, and (iv) is board
eligible or board certified in a medical specialty other than Internal Medicine,
Family Medicine, General Practice, Pediatrics or Psychiatry.
"Subscription Agent"--Newbury, Piret & Co., Inc. The Subscription Agent also
serves as Underwriter hereunder.
"Subscription Documents"--(i) a check or money order made payable to State
Street Bank & Trust Company in the amount of the Purchase Price, (ii) a
Subscription Agreement, properly completed and signed, and (iii) the executed
IPA Participation Agreement, including, a separate check made payable to MedServ
IPA, Inc. to cover the $200 administration fee relating thereto (unless the
subscriber if already a member of IPA), and (iv) the Physicians Care Primary
Care Physician or Physicians Care Specialist Physician Attachment, as
applicable.
"Transfer Notice"--notice, in writing, to the Company of a bona fide offer
to transfer shares of the Corporation's Common Stock to an individual or entity
who/which satisfies the requirements for stock ownership set forth in the
Certificate of Incorporation, providing a right of first opportunity to purchase
the shares of the Company.
"UMP"--Utilization Management Program.
"Underwriter"--Newbury, Piret & Co., Inc. The Underwriter also serves as
Subscription Agent hereunder.
"Underwriter's Discount"--an amount equal to seven percent (7%) of the price
to the public.
"Underwriter's Expenses"--non-accountable expense allowance of 1.5% of the
price to the public plus direct compensation for certain specified expenses
associated with the Offering.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheet as of March 31, 1997......................................................................... F-3
Statement of Operations for the period from inception (November 12, 1996) through March 31, 1997........... F-4
Statement of Stockholder's Equity (Deficit) for the period from inception (November 12, 1996) through March
31, 1997................................................................................................. F-5
Statement of Cash Flows for the period from inception (November 12, 1996) through March 31, 1997........... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Physicians Care for Connecticut, Inc.:
We have audited the accompanying balance sheet of Physicians Care for
Connecticut, Inc. (a development stage, Connecticut corporation) (the Company)
as of March 31, 1997 and the related statements of operations, shareholder's
equity (deficit) and cash flows for the period from inception (November 12,
1996) to March 31, 1997. These financial statements are the responsibility of
the Company's and MedServ of Connecticut, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The Company is in the development stage as of March 31, 1997. As discussed
in Note 1 to the financial statements, successful completion of the Company's
development program and ultimately the attainment of profitable operations is
dependent upon future events, including obtaining adequate capital to fulfill
its development activities, obtaining regulatory approval and achieving a level
of revenues adequate to support the Company's cost structure.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Physicians Care for
Connecticut, Inc. as of March 31, 1997, and the results of its operations and
its cash flows for the period from inception (November 12, 1996) to March 31,
1997 in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Hartford, Connecticut
April 14, 1997
F-2
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents...................................................... $ 63,675
---------
Total assets............................................................. $ 63,675
---------
---------
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
<S> <C>
CURRENT LIABILITIES:
Borrowings under line of credit................................................ $ 550,000
Accounts payable............................................................... 208,158
Related party payable, net..................................................... 106,773
Accrued expenses............................................................... 42,497
---------
Total current liabilities................................................ 907,428
---------
SHAREHOLDER'S EQUITY (DEFICIT):
Common stock--
Class A, no par value, 10,000 shares authorized, no shares issued and
outstanding................................................................ --
Class B, no par value, 10,000 shares authorized, no shares issued and
outstanding................................................................ --
Class C, no par value, 100 shares authorized, 3 shares issued and
outstanding................................................................ 12,000
Accumulated deficit............................................................ (855,753)
---------
Total shareholder's equity (deficit)..................................... (843,753)
---------
Total liabilities and shareholder's equity (deficit)..................... $ 63,675
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO MARCH 31, 1997
<TABLE>
<S> <C>
INTEREST INCOME.................................................................. $ 1,329
---------
EXPENSES:
Consultants.................................................................. 370,829
Legal........................................................................ 293,577
Actuarial.................................................................... 83,209
Accounting................................................................... 82,300
Other........................................................................ 27,167
---------
857,082
---------
NET LOSS................................................................... $(855,753)
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO MARCH 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------
CLASS A CLASS B CLASS C
-------------------- -------------------- ---------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
--------- --------- --------- --------- ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
November 12, 1996........... -- $-- -- $-- -- $ -- $ -- $ --
Issuance of 3 shares of
Class C common stock........ -- -- -- -- 3 12,000 -- 12,000
Net loss...................... -- -- -- -- -- -- (855,753) (855,753)
--------- --------- --------- --------- --- --------- ------------ -----------
BALANCE,
March 31, 1997.............. -- $-- -- $-- 3 $ 12,000 $ (855,753) $ (843,753)
--------- --------- --------- --------- --- --------- ------------ -----------
--------- --------- --------- --------- --- --------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 12, 1996) TO MARCH 31, 1997
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<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $(855,753)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in liabilities--
Accounts payable........................................................... 208,158
Related party payable, net................................................. 106,773
Accrued expenses........................................................... 42,497
---------
Net cash used in operating activities.................................... (498,325)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit................................................ 550,000
Issuance of common stock....................................................... 12,000
---------
Net cash provided by financing activities................................ 562,000
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 63,675
CASH AND CASH EQUIVALENTS, November 12, 1996..................................... --
---------
CASH AND CASH EQUIVALENTS, March 31, 1997........................................ $ 63,675
---------
---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest....................................... $ 6,652
---------
---------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
1. ORGANIZATION:
Physicians Care for Connecticut, Inc. (the Company), a wholly owned
subsidiary of MedServ of Connecticut, Inc. (MedServ), was formed as a
Connecticut corporation on November 12, 1996 under the sponsorship of private
practicing physicians to develop a physician-owned and directed insurance
company licensed as a Health Maintenance Organization (HMO) and offer a
comprehensive array of health insurance products throughout the State of
Connecticut. The Company intends to provide coverage for comprehensive
healthcare services to members under its insured products for a fixed, prepaid
enrollment fee paid by or on behalf of the members.
The Company is in the development stage and has not yet commenced its
business activities. The Company has no operating history and has generated no
operating revenues. As such, the Company is subject to all of the risks inherent
in a new enterprise. The Company will prepare and file an application for a
Certificate of Authority with the Connecticut Department of Insurance to operate
as an HMO throughout the state of Connecticut and will also seek such other
regulatory approvals as necessary to offer its products. MedServ of Connecticut,
Inc. (MedServ) is committed to support the development stage operations and cash
flow requirements of the Company through March 31, 1998.
MedServ owns all of the outstanding shares of common stock as of March 31,
1997. The Company plans to offer Class A Common Stock and Class B Common Stock
to certain eligible purchasers. The net proceeds from the offering, if
successful, will be used to repay borrowings and for other working capital
purposes.
There can be no assurance that the Company's development will be successful
or that its services or that its services or products will be successfully
marketed, or that the Company will ever achieve profitable operations.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH EQUIVALENTS--
The Company considers all short-term investments in highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
INCOME TAXES--
The Company has not as yet determined its tax reporting position for federal
and state income tax purposes. There will be temporary differences in reporting
certain expenses for financial statement and income tax purposes. A principal
difference relates to accounting for organization costs. A deferred income tax
benefit has not been recorded as its realization is not considered more likely
than not. The Company has a tax net operating loss carryforward which
approximates the loss for financial reporting purposes for the period from
inception (November 12, 1996) to March 31, 1997, which may be used to offset
taxable income in future years. Such carry forward expires by 2011.
F-7
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS:
The Company intends to enter into a Management Agreement (the Management
Agreement) with MedServ. MedServ was organized in 1995 as a joint venture
between the Hartford County Medical Association and the New Haven County Medical
Association. MedServ is a for-profit entity performing administrative functions
for both county medical associations and operates as a Central Verification
Organization to provide credentialing services which are intended to meet
National Commission for Quality Assurance credentialing standards. MedServ and
the Company's management will conduct the day-to-day operations of the Company.
Under the Management Agreement, MedServ will exclusively provide management and
administrative services in connection with the development, licensing, marketing
and operations of the Company. MedServ will be permitted to contract with
third-party independent contractors to provide services to health plan
enrollees.
The Company understands that MedServ intends to enter into a Provider
Network Service Agreement with MedServ IPA (IPA) under which IPA will arrange
for the availability of a network of qualified physicians throughout the State
of Connecticut to provide medical services to the Company's Enrollees. IPA
(formerly known as ProCare IPA, Inc.) is a Connecticut corporation formed
specifically for the purpose of developing a network of physicians to provide
services to health plan enrollees.
4. FINANCING ARRANGEMENTS:
The Company has a $650,000 revolving credit facility with a bank. The credit
facility, when used, bears interest at the prime rate or the London interbank
borrowing rate plus 100 basis points at the Company's election (rates ranging
from 6.5% to 6.6% at March 31, 1997), and matures on November 22, 1997.
5. COMMON STOCK:
Holders of Class A and Class B common stock are entitled to one vote on all
matters presented to the Shareholders for vote or consent, except that Class B
Shareholders will not be entitled to elect representatives to the Board of
Directors. There is no cumulative voting for the election of directors, nor do
any Shareholders have preemptive rights. Dividend rights will be available to
Shareholders of both classes of stock when, as and if declared by the Company's
Board of Directors, at the Board of Directors's discretion, out of funds legally
available therefore. Receipt of dividends by one class of stock does not
necessitate receipt by another. Upon liquidation, after the liabilities of the
Company have been discharged, Class B Shareholders will have a liquidation
preference of up to $1,500 per share of Class B Common Stock. After the Class B
Shareholders' liquidation preference is satisfied, all Shareholders will share
any remaining liquidating distributions pro rata. Outstanding shares are not
subject to and do not benefit from any
F-8
<PAGE>
PHYSICIANS CARE FOR CONNECTICUT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
5. COMMON STOCK: (CONTINUED)
sinking fund provisions. As of March 31, 1997, there were no shares of Class A
and Class B common stock outstanding.
The Company also has Class C common stock which has been issued to MedServ.
MedServ is the only eligible holder of Class C common stock in the Company. With
its Class C stock investment, MedServ has the right to appoint eleven out of not
more than twenty-one of the Directors to the Company's Board of Directors. In
addition, the Company must have a vote of two-thirds of the MedServ appointed
Directors to approve the sale or liquidation of the Company, the appointment of
management, the merger or consolidation of the Company, the decision to incur
debt over $1,000,000, the amendment of the Certificate of Incorporation or
By-laws of the Company and all other decisions required by law.
F-9
<PAGE>
APPENDIX A
PHYSICIANS CARE FOR CONNECTICUT, INC.
Questions and Answers
The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the more detailed information
appearing in this Prospectus.
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1. Question: What is Physicians Care For Connecticut ("Physicians Care")?
ANSWER: PHYSICIANS CARE IS A CONNECTICUT CORPORATION ORGANIZED TO ESTABLISH AND
OPERATE A CONNECTICUT HEALTH MAINTENANCE ORGANIZATION WHICH IS PREDOMINANTLY
PHYSICIAN-OWNED, CONTROLLED AND DIRECTED. THE PRINCIPAL GOAL OF PHYSICIANS
CARE IS TO BECOME THE INSURER PREFERRED BY EMPLOYERS AND INDIVIDUALS TO
PROVIDE HEALTH INSURANCE PRODUCTS IN THE STATE OF CONNECTICUT. THE COMPANY
ACCEPTS THE CHALLENGE TO PASS ON TO FUTURE GENERATIONS OF PHYSICIANS THE
LEGACY THAT THE DELIVERY OF HEALTHCARE IS A MORAL ENTERPRISE AND THAT THE
PHYSICIAN-PATIENT RELATIONSHIP IS A SACRED TRUST THAT SHALL REMAIN INVIOLABLE.
IN ITS PURSUIT OF THESE MANDATES THE COMPANY WILL STRIVE TO DEFINE HIGH
STANDARDS FOR MEDICAL CARE IN THE STATE OF CONNECTICUT AND PROVIDE THAT CARE
TO ITS ENROLLEES THROUGHOUT THE STATE. FROM THESE PRECEPTS, THE COMPANY
BELIEVES THAT ITS PARTICIPATING PHYSICIANS WILL DEMONSTRATE A STRONG
COMMITMENT TO PRACTICE HIGH QUALITY, YET COST EFFECTIVE MEDICINE.
2. Question: Who will manage Physicians Care?
ANSWER: PHYSICIANS CARE INTENDS TO ENTER INTO A LONG-TERM MANAGEMENT AGREEMENT WITH
MEDSERV OF CONNECTICUT, INC., A JOINT VENTURE BETWEEN THE HARTFORD COUNTY
MEDICAL ASSOCIATION AND THE NEW HAVEN COUNTY MEDICAL ASSOCIATION, TO PROVIDE
COMPREHENSIVE MANAGEMENT SERVICES TO PHYSICIANS CARE.
3. Question: What products will Physicians Care offer?
ANSWER: INITIALLY, THE COMPANY INTENDS TO OFFER A MODIFIED OPEN ACCESS PRODUCT,
PURSUANT TO WHICH EACH ENROLLEE WILL SELECT A CARE MANAGER WHO WILL COORDINATE
THE ENROLLEE'S MEDICAL CARE TO THE EXTENT CONSULTED BY THE ENROLLEE OR
INFORMED BY A PARTICIPATING PHYSICIAN OR PLAN. ALTHOUGH ENROLLEES MAY ACCESS
ANY PARTICIPATING PHYSICIAN AT ANY TIME WITHOUT A CARE MANAGER'S REFERRAL, THE
COMPANY BELIEVES IT HAS STRUCTURED ITS BENEFITS DESIGN TO ENCOURAGE ENROLLEES
TO UTILIZE THEIR CARE MANAGERS TO COORDINATE REFERRALS, FOR EXAMPLE, THROUGH
THE USE OF A REDUCED OR WAIVED COPAYMENT IF A REFERRAL IS COORDINATED THROUGH
A CARE MANAGER.
4. Question: What is Physicians Care's philosophy concerning clinical decision-making?
ANSWER: PHYSICIANS CARE INTENDS TO SUPPORT PHYSICIANS' CLINICAL DECISION-MAKING BY
PROMOTING INCREASED PHYSICIAN AUTONOMY OVER CLINICAL DECISIONS, AND BY
DEVELOPING STANDARDS FOR BEST CLINICAL PRACTICES AND CUSTOMER SERVICE, AND
PROVIDING EXTENSIVE EDUCATION TO PROMOTE USE OF SUCH STANDARDS.
5. Question: Who serves on the Board of Directors of Physicians Care?
ANSWER: THE NUMBER OF DIRECTORS SHALL BE NOT LESS THAN SEVENTEEN NOR MORE THAN TWENTY
ONE DIRECTORS.
ELEVEN OF THE DIRECTORS MUST BE APPOINTED AND REMOVED BY MEDSERV, SIX OF WHOM
MUST BE PRIMARY CARE PHYSICIANS.
</TABLE>
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SIX OF THE DIRECTORS WILL BE ELECTED BY THE CLASS A SHAREHOLDERS, EACH OF WHOM
MUST BE A PHYSICIAN AND A MEMBER OF A COUNTY MEDICAL SOCIETY OTHER THAN THE
HARTFORD COUNTY MEDICAL ASSOCIATION OR THE NEW HAVEN COUNTY MEDICAL
ASSOCIATION. NO MORE THAN TWO OF THESE CLASS A DIRECTORS MAY BE MEMBERS OF ANY
ONE COUNTY MEDICAL SOCIETY AT ANY GIVEN TIME; AND AT ALL TIMES, THREE OF THE
CLASS A DIRECTORS SHALL BE PRIMARY CARE PHYSICIANS.
UP TO FOUR DIRECTORS (SUCH NUMBER TO BE DETERMINED IN THE DISCRETION OF THE
BOARD OF DIRECTORS) SHALL BE REPRESENTATIVES OF AREA EMPLOYERS, HOSPITALS,
ETC. THESE DIRECTORS WILL BE ELECTED BY A MAJORITY OF THE CLASS A SHAREHOLDERS
AT THE ANNUAL MEETING OF THE BOARD OF DIRECTORS FROM A LIST OF NOMINEES
DEVELOPED BY THE BOARD OF DIRECTORS.
6. Question: Will Physicians Care seek to limit the number of physicians who will provide
medical services to its Enrollees?
ANSWER: UNLIKE OTHER HMOS WHICH SEEK TO SIGNIFICANTLY RESTRICT ACCESS TO HEALTHCARE
PROVIDERS, PHYSICIANS CARE THROUGH ITS MANAGEMENT AGREEMENT WITH MEDSERV WILL
OFFER PARTICIPATION TO ALL QUALIFIED PHYSICIANS WHO ARE ELIGIBLE PURCHASERS.
7. Question: How will Physicians Care compensate physicians for services rendered?
ANSWER: PHYSICIANS CARE CURRENTLY INTENDS TO REIMBURSE PARTICIPATING PHYSICIANS THE
LESSER OF (A) THEIR USUAL AND CUSTOMARY FEES, (B) THE FEE SET FORTH ON A FEE
SCHEDULE ADOPTED BY THE COMPANY, AN EXTRACT OF WHICH IS SET FORTH ON APPENDIX
C HERETO, OR (C) A NEGOTIATED RATE (IN EACH CASE, LESS ANY APPLICABLE
COPAYMENT; COINSURANCE, OR DEDUCTIBLES). THE COMPANY CURRENTLY INTENDS TO
WITHHOLD TWENTY PERCENT OF THE PHYSICIAN REIMBURSEMENT AMOUNT FROM THE PAYMENT
TO PARTICIPATING PHYSICIANS TO DEFRAY COSTS THAT MAY BE INCURRED. THE TWENTY
PERCENT WITHHELD FROM PHYSICIAN REIMBURSEMENT MAY BE RETURNED TO PARTICIPATING
PHYSICIANS AT THE DISCRETION OF THE BOARD OF DIRECTORS. EVENTUALLY, AS ITS
ENROLLEE MEMBERSHIP GROWS, PHYSICIANS CARE INTENDS TO EXPERIMENT WITH
INNOVATIVE REIMBURSEMENT METHODOLOGIES.
8. Question: If I want to provide medical services to Enrollees of Physicians Care, must I
purchase stock in Physicians Care?
ANSWER: YES, EVERY PHYSICIAN WHO WISHES TO PROVIDE MEDICAL SERVICES TO PHYSICIANS
CARE'S ENROLLEES MUST EXECUTE AN IPA PARTICIPATION AGREEMENT AND IF A PRIMARY
CARE PHYSICIAN MUST AGREE TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK, AND
IF A SPECIALIST, MUST AGREE TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK AND
ONE SHARE OF CLASS B COMMON STOCK.
9. Question: What is the purpose of the Offering?
ANSWER: THE PURPOSE OF THE OFFERING IS TO RAISE A MINIMUM OF $8 MILLION OF GROSS
PROCEEDS TO ENABLE PHYSICIANS CARE TO ORGANIZE AND OPERATE ON A STATEWIDE
BASIS AS A HEALTH MAINTENANCE ORGANIZATION.
10. Who may purchase shares of stock in Physicians Care?
Question:
ANSWER: THE FOLLOWING PARTIES MAY PURCHASE STOCK IN PHYSICIANS CARE:
PHYSICIANS SATISFYING THE FOLLOWING REQUIREMENTS MAY PURCHASE STOCK IN
PHYSICIANS CARE:
- BE A PHYSICIAN LICENSED IN THE STATE IN WHICH THE PHYSICIAN PRACTICES
- HAVE OR HAVE APPLIED FOR A MEMBERSHIP IN THE COUNTY (IF A COUNTY MEDICAL
ASSOCIATION EXISTS IN SUCH COUNTY) AND STATE MEDICAL ASSOCIATION, IF
AVAILABLE, UNLESS SUCH REQUIREMENT IS WAIVED BY PHYSICIANS CARE'S BOARD
OF DIRECTORS IN ITS SOLE DISCRETION
</TABLE>
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- HAVE IN EFFECT A PARTICIPATION AGREEMENT WITH IPA
- MUST HAVE IN EFFECT A PHYSICIANS CARE PRIMARY CARE PHYSICIAN ATTACHMENT
OR A PHYSICIANS CARE SPECIALIST PHYSICIAN ATTACHMENT TO THE PARTICIPATING
AGREEMENT WITH IPA
HOSPITALS SATISFYING THE FOLLOWING REQUIREMENTS MAY PURCHASE CLASS B STOCK IN
PHYSICIANS CARE:
- BE A LICENSED ACUTE CARE HOSPITAL IN CONNECTICUT
11. If I am a member of a physician group practice, may the group practice
Question: purchase the shares of stock on my behalf?
ANSWER: PROFESSIONAL CORPORATIONS, CORPORATIONS, BUSINESS TRUSTS, TRUSTS, PARTNERSHIPS
OR LIMITED LIABILITY CORPORATIONS, WHICH ARE OWNED AND CONTROLLED, DIRECTLY OR
INDIRECTLY, BY A MAJORITY OF PHYSICIANS WHO PROVIDE MEDICAL SERVICES ON BEHALF
OF THE ENTITY (COLLECTIVELY "GROUP") MAY PURCHASE CLASS A COMMON STOCK OR
CLASS B COMMON STOCK, AS APPLICABLE, ON BEHALF OF THEIR PHYSICIANS, PROVIDED
THAT THE PHYSICIAN AFFILIATED WITH THE GROUP INDIVIDUALLY MEETS THE
QUALIFICATIONS OF STOCK OWNERSHIP. THE GROUP MUST PURCHASE NOT LESS THAN THE
NUMBER OF SHARES REQUIRED TO BE PURCHASED BY PHYSICIANS AS IF EACH PHYSICIAN
IN THE GROUP PARTICIPATED IN PHYSICIANS CARE AND PURCHASED STOCK INDIVIDUALLY.
IF A HOSPITAL IS A SHAREHOLDER IN THE GROUP, THE GROUP MUST ALSO PURCHASE
CLASS B COMMON STOCK IN SUCH AMOUNT AS IF THE HOSPITAL WERE PURCHASING THE
SHARES SEPARATELY.
12. How much does a share of stock cost?
Question:
ANSWER: PHYSICIANS MAY PURCHASE CLASS A COMMON STOCK AND CLASS B COMMON STOCK IN
PHYSICIANS CARE FOR $4,000 PER SHARE. HOWEVER, IF AN ELIGIBLE PURCHASER'S
PAYMENT AND, COMPLETED SUBSCRIPTION DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH
ELIGIBILITY ARE RECEIVED BY THE SUBSCRIPTION AGENT WITHIN NINETY DAYS OF THE
DATE OF THIS PROSPECTUS, THE PHYSICIAN WILL PAY A PROMPT SUBSCRIPTION PRICE OF
$3,000 PER SHARE.
HOSPITALS WISHING TO PURCHASE CLASS B COMMON STOCK MUST PURCHASE SUCH NUMBER
OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS IN A PURCHASE
PRICE OF $250,000; PROVIDED, HOWEVER, THAT IF A LICENSED HOSPITAL HAS LESS
THAN 100 BEDS, THEN THE HOSPITAL IS REQUIRED TO PURCHASE SUCH NUMBER OF SHARES
WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS IN A PURCHASE OF NOT
LESS THAN $100,000. HOWEVER, IF A HOSPITAL'S PAYMENT AND COMPLETED
SUBSCRIPTION DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH ELIGIBILITY ARE
RECEIVED BY THE SUBSCRIPTION AGENT WITHIN NINETY DAYS OF THE DATE OF THIS
PROSPECTUS, THE HOSPITAL WILL PAY A PROMPT SUBSCRIPTION PRICE OF $3,000 PER
SHARE.
13. If I am a Primary Care Physician, how many shares of stock must I purchase?
Question:
ANSWER: PRIMARY CARE PHYSICIANS MUST PURCHASE ONE SHARE OF CLASS A COMMON STOCK.
PRIMARY CARE PHYSICIANS MAY, AT THEIR ELECTION, PURCHASE SHARES OF CLASS B
COMMON STOCK. NO PHYSICIAN MAY HOLD MORE THAN ONE SHARE OF CLASS A COMMON
STOCK.
14. If I am a Specialist, how many shares of stock must I purchase?
Question:
ANSWER: SPECIALISTS MUST PURCHASE ONE SHARE OF CLASS A COMMON STOCK AND AT LEAST ONE
SHARE OF CLASS B COMMON STOCK. SPECIALISTS MAY, AT THEIR ELECTION, PURCHASE
ADDITIONAL SHARES OF CLASS B COMMON STOCK. NO PHYSICIAN MAY HOLD MORE THAN ONE
SHARE OF CLASS A COMMON STOCK.
</TABLE>
A-3
<PAGE>
<TABLE>
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15. What is the difference between Class A Common Stock and Class B Common Stock?
Question:
ANSWER: CLASS A SHAREHOLDERS ARE ENTITLED TO ELECT SIX OF THE DIRECTORS OF PHYSICIANS
CARE. CLASS B SHAREHOLDERS ARE NOT ENTITLED TO ELECT DIRECTORS TO THE BOARD OF
PHYSICIANS CARE. HOWEVER, CLASS B SHAREHOLDERS HAVE A PREFERENCE UPON
LIQUIDATION OF PHYSICIANS CARE. THIS MEANS THAT IF THERE IS A LIQUIDATION OF
PHYSICIANS CARE, AFTER THE LIABILITIES OF PHYSICIANS CARE HAVE BEEN
DISCHARGED, CLASS B SHAREHOLDERS WILL HAVE A LIQUIDATION PREFERENCE EQUAL TO
$1,500 PER SHARE OF CLASS B COMMON STOCK. AFTER THE CLASS B SHAREHOLDERS'
LIQUIDATION PREFERENCE IS SATISFIED, ALL SHAREHOLDERS WILL SHARE ANY REMAINING
DISTRIBUTIONS FROM PHYSICIANS CARE ON A PRO RATA BASIS.
16. May a hospital purchase shares of stock?
Question:
ANSWER: YES, A HOSPITAL MAY PURCHASE CLASS B COMMON STOCK. HOSPITALS MUST PURCHASE NOT
LESS THAN SUCH NUMBER OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE,
RESULTS IN A PURCHASE PRICE OF $250,000; PROVIDED, HOWEVER, THAT IF A LICENSED
HOSPITAL HAS LESS THAN 100 BEDS, THEN SUCH HOSPITAL IS REQUIRED TO PURCHASE
SUCH NUMBER OF SHARES WHICH, WHEN MULTIPLIED BY THE PRICE PER SHARE, RESULTS
IN A PURCHASE OF NOT LESS THAN $100,000.
17. Are there any other classes of Common Stock of Physicians Care?
Question:
ANSWER: YES, THERE IS CLASS C COMMON STOCK WHICH MAY BE HELD ONLY BY MEDSERV.
PRESENTLY, MEDSERV OWNS ALL OF THE ISSUED AND OUTSTANDING CLASS C SHARES.
CLASS C COMMON STOCK PROVIDES MEDSERV WITH THE RIGHT TO ELECT ELEVEN DIRECTORS
TO THE BOARD OF DIRECTORS. IN ADDITION, PHYSICIANS CARE MUST HAVE A VOTE OF
TWO-THIRDS IN INTEREST OF THE CLASS C SHARES TO APPROVE ANY OF THE FOLLOWING
ACTIONS OF PHYSICIANS CARE:
- THE SALE OR LIQUIDATION OF THE COMPANY;
- THE MERGER OR CONSOLIDATION OF THE COMPANY;
- THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY;
- ALL OTHER MATTERS REQUIRED BY LAW TO BE SUBMITTED TO THE SHAREHOLDERS
FOR A VOTE.
18. What if Physicians Care does not raise enough money from the Offering to start
Question: the HMO?
ANSWER: THIS OFFERING IS SUBJECT TO THE REQUIREMENT THAT PHYSICIANS CARE MUST RECEIVE
SUBSCRIPTIONS TO PURCHASE $8 MILLION OF COMMON STOCK. IF PHYSICIANS CARE DOES
NOT RAISE $8 MILLION IN GROSS PROCEEDS FROM THE OFFERING, THE PURCHASE PRICE
OF ALL SHARES WILL BE REFUNDED, PLUS INTEREST THEREON, MINUS $450 DOLLARS PER
SHARE, WHICH WILL BE RETAINED BY PHYSICIANS CARE TO OFFSET THE COSTS
ASSOCIATED WITH THE OFFERING.
19. What happens if I no longer meet the qualifications for Class A Common Stock?
Question:
ANSWER: IF YOU NO LONGER MEET THE QUALIFICATIONS NECESSARY FOR CLASS A SHAREHOLDER
STATUS OR IF YOU TRANSFER YOUR STOCK TO AN INDIVIDUAL WHO DOES NOT MEET THE
QUALIFICATIONS FOR CLASS A SHAREHOLDER STATUS, YOU MUST IMMEDIATELY SURRENDER
YOUR CLASS A COMMON STOCK AND PHYSICIANS CARE WILL CANCEL THE SHARES AND ISSUE
AN EQUAL NUMBER OF CLASS B COMMON STOCK.
</TABLE>
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<TABLE>
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20. Can I sell my stock to other interested investors?
Question:
ANSWER: IF YOU RECEIVE A BONA FIDE OFFER TO PURCHASE YOUR SHARES, YOU MUST FIRST OFFER
PHYSICIANS CARE A RIGHT OF FIRST OPPORTUNITY TO PURCHASE YOUR SHARES AT AN
AMOUNT EQUAL TO THE BONA FIDE OFFER. IF PHYSICIANS CARE DECLINES AND/OR FAILS
TO PURCHASE THE SHARES WITHIN THIRTY DAYS, YOU MAY SELL THE SHARES TO THE
INTERESTED INVESTOR.
21. If I die, become disabled or retire, what happens to my stock?
Question:
ANSWER: AT ANY TIME AFTER THE FIFTH ANNIVERSARY OF THE ISSUANCE DATE OF A CLASS A
STOCKHOLDER'S SHARES OF STOCK, PHYSICIANS CARE AGREES TO REDEEM ALL SHARES OF
STOCK (INCLUDING CLASS A AND CLASS B SHARES) OF A CLASS A STOCKHOLDER WISHING
TO SELL OR TRANSFER HIS/HER SHARES UPON THE OCCURRENCE OF ONE OF THE FOLLOWING
EVENTS: (I) THE DEATH OR PERMANENT DISABILITY OF THE PHYSICIAN; OR (II) THE
CESSATION OF THE PHYSICIAN'S PROVISION OF MEDICAL SERVICES IN CONNECTICUT
(I.E., RETIREMENT OR RELOCATION); PROVIDED THAT PHYSICIANS WHO ACQUIRE SHARES
OF STOCK THROUGH THE INITIAL OFFERING OF PHYSICIAN CARE'S STOCK AND ARE 55
YEARS OR OLDER ON THE DATE OF RECEIPT OF AN EXECUTED SUBSCRIPTION AGREEMENT
SHALL BE ELIGIBLE TO REDEEM THEIR STOCK AT ANY TIME AFTER THE THIRD
ANNIVERSARY OF THE ISSUANCE OF THE STOCK. THE COMPANY SHALL PURCHASE SUCH
SHARES OF STOCK AT THE GREATER OF (I) THE THEN CURRENT NET BOOK VALUE OF SUCH
SHARES DETERMINED PURSUANT TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP") AS OF THE MOST RECENTLY COMPLETED FISCAL QUARTER OF PHYSICIANS CARE,
OR (II) THE ORIGINAL ISSUANCE PRICE OF SUCH SHARES.
22. What will Physicians Care do with its profits?
Question:
ANSWER: WHILE PHYSICIANS CARE REQUIRES PROFITS TO MAINTAIN A VIABLE BUSINESS,
PHYSICIANS CARE INTENDS TO REINVEST ITS PROFITS IN THE COMPANY.
23. Will this stock generate dividends?
Question:
ANSWER: PHYSICIANS CARE DOES NOT ANTICIPATE PAYING DIVIDENDS TO SHAREHOLDERS FOR THE
FORESEEABLE FUTURE. IT IS ANTICIPATED THAT PROFITS FROM OPERATIONS WILL BE
REINVESTED IN THE COMPANY TO PROVIDE BETTER BENEFITS FOR PATIENTS, MORE
COMPETITIVE PRICING, IMPROVED REIMBURSEMENT LEVELS FOR PROVIDERS AND FOR OTHER
CORPORATE PURPOSES.
24. How will stock be allocated in the event of an oversubscription?
Question:
ANSWER: PHYSICIANS CARE REGISTERED 3,000 SHARES OF CLASS A COMMON STOCK AND 3,000
SHARES OF CLASS B COMMON STOCK WHICH CAN BE ISSUED IN THIS OFFERING. BECAUSE
APPROXIMATELY 9,000 PHYSICIANS ARE CURRENTLY LICENSED TO PRACTICE MEDICINE IN
THE STATE OF CONNECTICUT, THE POTENTIAL FOR A TOTAL SUBSCRIPTION IN EXCESS OF
THESE AMOUNTS EXISTS. IF ORDERS FOR MORE THAN 3,000 SHARES OF CLASS A COMMON
STOCK AND 3,000 SHARES OF CLASS B COMMON STOCK ARE RECEIVED, THE ORDERS WILL
BE FILLED ON A FIRST-COME, FIRST-SERVED BASIS.
25. Will interest be paid on my subscription during the time the funds are held in
Question: escrow?
ANSWER: IN THE EVENT THE SUM OF $8 MILLION IN SUBSCRIPTIONS IS NOT GENERATED FROM THE
OFFERING, THE PURCHASE PRICE OF BOTH CLASS A AND CLASS B SHARES, PLUS INTEREST
THEREON, SHALL BE REFUNDED, MINUS $450 DOLLARS PER SHARE, WHICH SHALL BE
RETAINED BY THE COMPANY TO OFFSET THE COSTS ASSOCIATED WITH THE OFFERING. IN
THE EVENT $8 MILLION OR MORE IN SUBSCRIPTIONS ARE GENERATED AND A CLOSING
OCCURS, ANY INTEREST ON ESCROWED FUNDS WILL BE DISTRIBUTED TO THE COMPANY.
</TABLE>
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26. What do I need to do to purchase shares of Common Stock in Physicians Care?
Question:
ANSWER: IN ORDER TO PURCHASE COMMON STOCK IN PHYSICIANS CARE, YOU MUST RETURN THE
FOLLOWING DOCUMENTS TO THE SUBSCRIPTION AGENT:
- A SIGNED SUBSCRIPTION AGREEMENT
- IF YOU HAVE NOT ALREADY DONE SO, A COMPLETED AND EXECUTED IPA
PARTICIPATION AGREEMENT WITH A SEPARATE CHECK IN THE AMOUNT OF $200 MADE
PAYABLE TO MEDSERV IPA;
- PHYSICIANS CARE PRIMARY CARE PHYSICIAN OR PHYSICIANS CARE SPECIALIST
PHYSICIAN ATTACHMENT
- A CHECK OR MONEY ORDER MADE PAYABLE TO STATE STREET BANK & TRUST COMPANY
AS ESCROW AGENT EQUALING THE PURCHASE PRICE OF THE SHARES YOU WOULD LIKE
TO PURCHASE.
</TABLE>
<TABLE>
<C> <S>
THESE DOCUMENTS SHOULD BE RETURNED TO THE SUBSCRIPTION AGENT AT THE FOLLOWING
ADDRESS:
NEWBURY PIRET & CO., INC.
ONE BOSTON PLACE
26TH FLOOR
BOSTON, MA 02108
ATTN: PHYSICIANS CARE STOCK SUBSCRIPTION
27. How long do I have to purchase stock in Physicians Care?
Question:
ANSWER: YOU WILL HAVE ONE HUNDRED AND EIGHTY DAYS FROM THE DATE OF THIS PROSPECTUS TO
PURCHASE SHARES OF STOCK IN PHYSICIANS CARE. THE BOARD OF DIRECTORS MAY, IN
ITS DISCRETION, EXTEND THE OFFERING FOR AN ADDITIONAL SIXTY DAYS. HOWEVER, IF
YOU WOULD LIKE TO TAKE ADVANTAGE OF THE PROMPT PAYMENT DISCOUNT DESCRIBED IN
THE PROSPECTUS, YOU MUST RETURN YOUR PAYMENT AND COMPLETED SUBSCRIPTION
DOCUMENTS IN FORM SUFFICIENT TO ESTABLISH ELIGIBILITY TO THE SUBSCRIPTION
AGENT WITHIN NINETY DAYS OF THE DATE OF THIS PROSPECTUS.
28. Can I purchase shares with a check drawn on Individual Retirement Accounts
Question: ("IRAs"), Keough accounts, mutual fund accounts, cash management accounts or
other types of retirement or investment accounts?
ANSWER: YES.
29. How can I pay for my Common Stock?
Question:
ANSWER: ONLY CHECKS AND MONEY ORDERS WILL BE ACCEPTED AS PAYMENT. CASH, CREDIT CARD
NUMBERS AND OTHER FORMS OF PAYMENT SHOULD NOT BE SENT AND WILL NOT BE
ACCEPTED. THE CHECK OR MONEY ORDER MUST BE PAYABLE IN U.S. DOLLARS AND DRAWN
ON A BANK IN THE UNITED STATES. THE CHECK MUST BE HONORED UPON INITIAL
DEPOSIT; NO ATTEMPT WILL BE MADE TO REDEPOSIT ANY DISHONORED CHECK.
</TABLE>
A-6
<PAGE>
APPENDIX B
HOW TO SUBSCRIBE IN THIS OFFERING
GENERAL
Accompanying this Prospectus are the following documents:
(1) A Subscription Agreement;
(2) A IPA Participation Agreement and the Physicians Care Primary Care
Physician or Physicians Care Specialist Physician Attachment;
(3) An envelope for returning completed subscriptions through the U.S.
Postal Service.
To be eligible to subscribe for a share of Class A Common Stock and Class B
Common Stock in the Offering, the subscriber should return the enclosed postage
paid envelope with (i) a check or money order payable to State Street Bank &
Trust Company, as Escrow Agent in the amount of the Purchase Price, (ii) a
Subscription Agreement, properly completed and signed, (iii) the executed IPA
Participation Agreement, including a check made payable to MedServ IPA, Inc. to
cover the $200 administration fee relating thereto, and (iv) the Physicians Care
Primary Care Physician or Physicians Care Specialist Physician Attachment, as
applicable. The checks or money orders, the executed Subscription Agreement, the
executed IPA Participation Agreement and Physicians Care Primary Care Physician
or Physicians Care Specialist Physician Attachment are referred to as the
"Subscription Documents." Subscriptions may be limited and will be accepted on a
first come first served basis. Subscription Documents must be received by the
Subscription Agent or postmarked no later than the last day of the Offering
Period (the "Expiration Time").
COMPLETION AND MAILING OF SUBSCRIPTION AGREEMENTS
A subscription will be rejected by the Subscription Agent unless the
Subscription Documents are (i) fully and properly completed, signed and received
by the Company's Subscription Agent, and (ii) the Subscription Agent has
received a check or money order for good funds in the amount of the Purchase
Price payable to "State Street Bank & Trust Company, as Escrow Agent" and, if
applicable, a separate check or money order for good funds in the amount of $200
made payable to "MedServ IPA, Inc." prior to the Expiration Time at:
c/o Newbury Piret & Co., Inc.
One Boston Place
26th Floor, Attn: Physician's Care
Boston, MA 02108
The Subscription Agent will promptly forward all checks and money orders
made payable to "State Street Bank & Trust Company, as Escrow Agent" for
subscriptions that have not been rejected to the Escrow Agent for deposit into
an escrow account (the "Escrow Account") maintained with the Escrow Agent. See
"Escrow Arrangements."
Subscriptions will be rejected by the Subscription Agent and returned to the
subscriber if (i) the Subscription Agreement is improperly completed or
unsigned, (ii) the Subscription Agreement is sent without accompanying check or
money order in good funds in the amount of the Purchase Price, (iii) the
Subscription Agreement accompanied by a check or money order for the Purchase
Price in good funds is not received by the Subscription Agent by the Expiration
Time, (iv) the proposed subscriber does not complete and execute the IPA
Participation Agreement and the Physicians Care Primary Care Physicians or
Physicians Care Specialist Physician Attachment and, if applicable, included a
check or money order for good funds in the amount of $200 made payable to
"MedServ IPA," (v) the proposed subscriber does not meet the qualification of an
Eligible Purchaser, (vi) all shares of Class A Common Stock offered in the
B-1
<PAGE>
Offering have been fully subscribed, or (vii) the Offering has been terminated
as described below under-- "Termination of Offering."
METHOD OF PAYMENT
Only checks and money orders will be accepted as payment. Cash, credit card
numbers and other forms of payment should not be sent and will not be accepted.
The check or money order must be payable in U.S. dollars and drawn on a bank in
the United States. The check must be honored upon initial deposit; no attempt
will be made to redeposit any dishonored check.
ACCEPTED SUBSCRIPTIONS
Unless the Offering is terminated, subscriptions meeting the subscription
requirements discussed above which are received by the Subscription Agent will
be accepted by the Company, subject to qualification of the Subscriber as an
Eligible Purchaser. The Company will cause the Subscription Agent to forward to
each subscriber whose subscription has been accepted promptly following the
closing of the Offering a certificate representing the number of shares of Class
A Common Stock and, if applicable, Class B Common Stock subscribed and for which
payment has been made.
No Subscription Agreement will be formally accepted by the Company until the
Purchase Price of all subscribed Class A Common Stock and Class B Common Stock
totals $8 million. Therefore, subscribers will not be notified that their
Subscription Agreements have been accepted, and should not expect to receive
certificates representing their shares of Class A Common Stock or Class B Common
Stock, until sometime after the Expiration Time. Pending the Initial Closing of
the Offering, all monies, less $450 per subscribed share, will be held in the
Escrow Account maintained with the Escrow Agent. See "Escrow Arrangements"
below. Thereafter, subscriptions will be accepted by the Company and additional
Closings will occur upon receipt by the Company of subscriptions in increments
of $1,500,000, with a final Closing to occur 180 days after the date of this
Prospectus, subject to a sixty day extension at the discretion of the Board of
Directors.
TERMINATION OF OFFERING
The Offering may be terminated by the Company at any time in its absolute
discretion. If the Offering is terminated, all amounts received from subscribers
whose subscriptions were not rejected by the Subscription Agent and whose funds
were deposited into the Escrow Account will be promptly refunded with interest
less $450 per subscribed share no later than thirty days after the later of the
date of termination of the Offering or the Expiration Time. Interest on such
funds will be paid as described below under "Escrow Arrangements."
RETURNED SUBSCRIPTIONS
If a subscription is rejected by the Subscription Agent because (i) the
Subscription Agreement was improperly completed or unsigned, (ii) the
Subscription Agreement was sent without an accompanying check or money order in
good funds in the amount of the Purchase Price, (iii) the Subscription Agreement
accompanied by a separate check or money order in good funds in the amount of
the Purchase Price was not received by the Subscription Agent by the Expiration
Time, (iv) the proposed Subscriber does not complete and execute the IPA
Participation Agreement and the Physicians Care Primary Care Physician or
Physicians Care Specialist Physician Attachment and, if applicable, included a
check or money order for good funds in the amount of $200 made payable to
"MedServ IPA, Inc." (v) the proposed purchaser does not meet the qualifications
of an Eligible Purchaser, or (vi) the Offering has been fully subscribed, then
the Escrow Agent will promptly return to each subscriber the accompanying check
or money order. No interest will be paid on checks or money orders that have not
been deposited into the Escrow Account or that have been deposited, but are not
in good funds.
B-2
<PAGE>
APPENDIX C
SAMPLE PHYSICIAN FEE SCHEDULE
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
ALLERGY & IMMUNOLOGY
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
70486 CAT MAXILLOFACIAL AREA; WO
CONTRAST $ 398.41
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85031 BLD CT; HG MANUAL COMPLT CBC $ 12.85
88161 CYTOPATH SMEARS OTHR SOURCE;
PREP/SCREEN/INTERPT $ 56.30
89190 NASAL SMEAR EOSINOPHILS $ 10.40
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
92567 TYMPANOMETRY $ 34.27
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94060 BRONCHOSPSM EVAL: SPIROM PRE &
POST BRONCHODILAT $ 102.20
95004 PERQ W/ALLERG EXTRACT-IMMED
REACT-SPEC # TEST $ 6.12
95015 INTRACUT SEQUENT/INCREM-IMMED
REACT-SPEC # TESTS $ 16.52
95024 INTRACUT W/ALLERG EXTRCT-IMMED
REACT-SPEC # TEST $ 9.18
95070 INHALA BRONCHIAL CHALLENGE;
W/HISTAMINE-COMPOUND $ 134.03
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
95145 PRO SERV SUPERVS/PROVIS-IMMUNOTX;
1 VENM-MX VIAL $ 26.32
ANESTHESIA
(Fees are for base units, time units will be an
additional $56.10 per unit)
120 EXT, MID, & INNER EAR INCL BX; NOS $ 280.50
126 EXT, MID, & INNER EAR INCL BX;
TYMPANOTOMY $ 224.40
140 EYE; NOS $ 280.50
160 NOSE & ACCES SINUSES; NOS $ 280.50
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
170 INTRAORAL PROC, INCL BX; NOS $ 280.50
320 PROC ESOPHAG/THYROID/
LARYNX/TRACH; NOS $ 336.60
400 ANT INTEG SYST CHEST, INCL SUBQ
TISS; NOS $ 168.30
540 THORACOTOMY INVOLV LUNGS; NOS $ 729.30
562 HEART/GREAT VESSELS; W/ PUMP
OXYGENATOR $1,122.00
630 PROC LUMBAR REGION; NOS $ 448.80
790 INTRAPERITONEAL UPPER ABD W/LAP;
NOS $ 392.70
806 LAP PROC $ 280.50
830 HERNIA REPR LOWER ABD; NOS $ 224.40
840 INTRAPERITONEAL LOWER ABD W/LAP;
NOS $ 336.60
850 INTRAPERITONEAL LO ABD W/ LAP;
C-SECT $ 392.70
860 EXTRAPERITONEAL INCL URINARY
TRACT; NOS $ 336.60
902 PERINEAL INTEG SYST; ANORECTAL
PROC $ 224.40
910 TRANSURETHRAL PROC; NOS $ 168.30
940 VAG PROC; NOS $ 168.30
944 VAG PROC; VAG HYST $ 336.60
946 VAG PROC; VAG DELIV $ 280.50
1214 OP INVOLV HIP JT; TOT HIP
REPLAC/REVIS $ 561.00
1382 ARTHROSCOPIC PROC KNEE JT $ 168.30
1480 OP PROC BONES LOWER LEG, ANK, &
FT; NOS $ 168.30
1810 ALL NERV/MUSCL/BURSAE
FOREARM/WRIST/HAND $ 168.30
CARDIOVASCULAR & THORACIC SURGERY
32480 REMOV LUNG OTHER THAN TOT
PNEUMONECTOMY; 1 LOBE $2,657.51
32500 REMOV LUNG NOT TOT PNEUMONECT;
WEDGE RESECT 1/MX $2,079.88
33120 EXC INTRACARDIAC TUMOR RESECT W/CP
BYPASS $4,043.38
33246 IMPLNT/REPLAC CARDIOVERT-DEFIB;
W/INSRT PULS GEN $3,088.76
33405 REPLAC AORTIC VALV W/CP BYPASS;
W/PROSTH VALV $4,589.59
33430 REPLAC MITRAL VALV W/
CARDIOPULMONARY BYPASS $5,025.13
33510 CORON ART BYPASS-VEIN ONLY; 1
CORON VENOUS GFT $4,144.06
33511 CORON ART BYPASS-VEIN ONLY; 2
CORON VENOUS GFT $4,549.61
33512 CORON ART BYPASS-VEIN ONLY; 3
CORON VENOUS GFT $4,954.45
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
33513 CORON ART BYPASS-VEIN ONLY; 4
CORON VENOUS GFT $5,359.28
33514 CORON ART BYPASS-VEIN ONLY; 5
CORON VENOUS GFT $5,762.69
33516 CORON ART BYPASS-VEIN ONLY; 6/MORE
VENOUS GFT $6,166.82
33533 CORONARY ART BYPASS W/ART GFT; 1
ART GFT $4,270.43
33670 REPR COMPLT ATRIOVENT CANAL W/WO
PROSTH VALV $5,521.36
33681 CLO VENTRICULAR SEPTAL DEFECT W/WO
PATCH $4,823.78
33750 SHUNT; SUBCLAVIAN PULM ART $3,322.96
33851 EXC COARCTAT AORTA; REPR W/LT
SUBCLAV/PROSTH MAT $4,059.09
33935 HEART-LUNG TRANSPL W/ RECIPIENT
CARDIECT-PNEUMONE $10,567.20
35301 THROMBOENDARTERECT;
CAROTID/SUBCLAV BY NECK INCS $2,503.28
35646 BYPASS GFT W/OTHER THAN VEIN;
AORTOFEM/BIFEM $3,749.21
35656 BYPASS GFT W/OTHER THAN VEIN;
FEMORAL-POP $2,838.15
35820 EXPLOR POSTOP HEMORR
THROMBOSIS/INFEC; CHEST $1,498.69
36200 INTRO CATH AORTA $ 430.54
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
CARDIOVASCULAR DISEASES
33208 INSRT/REPLAC PERM PACEMAKER;
ATRIAL & VENTRICULR $1,308.05
36200 INTRO CATH AORTA $ 430.54
36215 SELECT CATH PLCMT ART SYST; EA 1ST
ORDER THORAC $ 549.07
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
78461 MYOCARDIAL PERFUS IMAG; MX STUDIES
REST/STRESS $ 406.37
78464 MYOCARDIAL PERFUS IMAG;
TOMOGRAPHIC SNGL STUDY $ 539.17
78465 MYOCARDIAL PERFUS IMAG;
TOMOGRAPHIC MX STUDIES $ 865.98
78473 CARDIAC BLD POOL IMAG GATED
EQUILIB; MX STUDIES $ 647.50
78483 CARDIAC BLD POOL IMAG 1ST PASS;
MX-REST & STRESS $ 623.63
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80061 LIPID PANEL $ 26.93
83718 LIPOPROTEIN DIRECT MEASUR; HIGH
DENSITY CHOL $ 20.81
92960 CARDIOVERSION ELECT ELEC
CONVERSION ARRHY EXT $ 262.55
92982 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; 1 VESSEL $1,606.50
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
92984 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; EA ADD $ 441.25
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93010 ECG-ROUTINE W/12 LEADS; INTERPT &
REPORT ONLY $ 20.81
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
93018 CV STRESS TEST W/TREADMILL;
INTERPT & REPRT ONLY $ 43.45
93224 ECG-24 HR W/SUPERIMPOSIT SCAN;
REPRT-REVW-INTRPT $ 291.31
93227 ECG-24 HR W/SUPERIMPOSIT SCAN; MD
REVIEW & REPRT $ 76.50
93307 ECHO REAL-TIME W/DOCUMEN W/WO
M-MODE; COMPLT $ 364.75
93320 DOPPLER ECHO WAVE W/ SPECTRAL
DISPLY; COMPLT $ 163.40
93325 DOPPLER COLOR FLOW VELOCITY
MAPPING $ 190.94
93350 ECHO DURING REST & CV STRESS
INTERPT & REPORT $ 284.58
93503 INSRT & PLCMT FLO DIREC
CATH-MONITOR PURPOSES $ 345.17
93505 ENDOMYOCARDIAL BX $ 597.31
93545 INJ PROC-CARDIAC CATH; SELECT
CORONARY ANGIO $ 102.20
COLON AND RECTAL SURGERY
44120 ENTERECTOMY RESECT SM INTESTINE;
W/ANASTOMOSIS $1,758.58
44140 COLECTOMY PART; W/ANASTOM $2,194.84
44141 COLECTOMY PART; W/SKIN LEVEL
CECOSTOMY/ COLOSTOMY $2,268.38
44145 COLECTOMY PART; W/ COLOPROCTOSTOMY $2,664.65
44150 COLECTOMY-TOT ABD-WO PROCTECTOMY;
W/ILEOSTOMY $2,645.37
44620 CLO ENTEROSTOMY LG/SM INTEST $1,205.23
45110 PROCTECTOMY; COMPLT W/ COLOSTOMY 1
OR 2 STAGES $2,958.10
45300 PROCTOSIGMOIDOSCOPY RIGID; DX W/WO
COLLEC SPECMN $ 94.25
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45383 COLONOSCOPY FLEX; W/ABLAT LES NOT
AMENABLE-SNARE $ 877.51
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
45505 PROCTOPLASTY; PROLAPSE MUCOS
MEMBRN $ 932.48
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
46060 I&D ISCHIORECTAL/ INTRAMURAL
ABSCESS W/ FISTULECT $ 821.10
46200 FISSURECTOMY W/WO SPHINCTEROTOMY $ 497.66
46221 HEMORRHOIDECTOMY BY SIMPL LIG $ 155.65
46255 HEMORRHOIDECTOMY INT & EXT SIMPL $ 751.13
46260 HEMORRHOIDECTOMY INT & EXT
COMPLX/EXTEN $1,001.03
46261 HEMORRHOIDECTOMY COMPLX/EXTEN; W/
FISSURECTOMY $1,112.41
46262 HEMORRHOIDECTOMY COMPLX/EXTEN; W/
FISTULECTOMY $1,150.97
46600 ANOSCOPY; DX W/WO COLLEC SPECMN
(SEPART PROC) $ 57.83
46700 ANOPLASTY PLASTIC OR STRICT; ADULT $ 983.89
52281 CYSTOURETHROSCOPY W/ CALIBRAT &/OR
DILAT URETHRAL $ 381.28
DERMATOLOGY
10040 ACNE SURG $ 122.40
11100 BX SKIN/SUBQ TISS/MUCOUS MEMB (SEP
PRO); 1 LES $ 110.98
11101 BX SKIN/SUBQ TISS/MUCOUS MEMB (SEP
PRO); EA ADD $ 58.75
11200 REMOV SKIN TAGS ANY AREA; TO &
INCL 15 LES $ 94.66
11400 EXC BEN LES TRUNK/ARMS/ LEGS; 0.5
CM/LESS $ 117.50
11401 EXC BEN LES TRUNK/ARMS/ LEGS; 0.6
TO 1.0 CM $ 163.20
11402 EXC BEN LES TRUNK/ARMS/ LEGS; 1.1
TO 2.0 CM $ 207.26
11420 EXC BEN LES SCALP/HANDS/FT/ GENIT;
0.5 CM/LESS $ 128.93
11421 EXC BEN LES SCALP/HANDS/FT/ GENIT;
0.6 TO 1.0 CM $ 184.42
11440 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.5 CM/LESS $ 150.96
11441 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.6 TO 1.0 CM $ 203.18
11602 EXC MALIG LES TRUNK/ARMS/ LEGS;
1.1 TO 2.0 CM $ 328.03
11641 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 0.6 TO 1.0 CM $ 380.26
11642 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 1.1 TO 2.0 CM $ 463.49
11900 INJ INTRALES; UP TO & INCL 7 LES $ 64.46
17000 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 1 LES $ 82.42
17001 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 2ND & 3RD $ 32.64
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
17002 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; >3 EA ADD $ 24.48
17100 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 1 LES $ 75.89
17101 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 2ND LES $ 25.30
17102 DESTRCT-ANY METHD-LES NOT FACE
W/ANES; > 2 TO 15 $ 16.32
17104 DESTRCT-ANY METHD-LES NOT FACE
W/ANES; 15/MORE $ 170.54
17110 DESTRCT WARTS/MOLLUSCUM
CONTAG/MILIA TO 15 LES $ 79.97
17304 CHEMOSURG (MOH'S TECH); 1ST STAGE
UP TO 5 SPECMN $ 973.49
87101 CULTURE FUNGI ISOLATION; SKIN $ 22.03
87220 TISS EXAM FUNGI $ 12.85
88304 LEVEL III-SURG PATH GROSS/ MICRO
EXAM $ 53.24
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
88307 LEVEL V-SURG PATH GROSS/ MICRO
EXAM $ 197.68
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
96545 PROVISION CHEMOTX AGENT $ 46.51
96900 ACTINOTHERAPY $ 25.09
96910 PHOTOCHEMOTX; TAR & UV B/
PETROLATUM & UV B $ 36.11
96912 PHOTOCHEMOTHERAPY; PSORALENS &
ULTRAVIOLET A $ 41.62
EMERGENCY MEDICINE
10120 INCS & REMOV F B SUBQ TISS; SIMPL $ 138.72
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
12001 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.5/LESS $ 185.23
12002 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.6-7.5CM $ 217.87
12011 SIMPL REPR FACE/EARS/NOSE/ MUCOUS
MEMB; 2.5/LESS $ 204.82
12013 SIMPL REPR FACE/EARS/NOSE/ MUCOUS
MEMB; 2.6-5.0 $ 248.88
12032 LAYER CLO SCLP/AX/TRUNK/ EXTREM;
2.6 TO 7.5 CM $ 291.31
12051 LAYER CLO FACE/EARS/NOSE/ LIPS;
2.5 CM/LESS $ 288.05
12052 LAYER CLO FACE/EARS/NOSE/ LIPS;
2.6 TO 5.0 CM $ 353.33
13300 REPR UNUSUAL COMPLIC OVER 7.5 CM
ANY AREA $ 953.09
25600 CLO TX DIST RAD FX W/WO FX ULNA
STYLOID; WO MANI $ 468.38
31500 INTUBATION ENDOTRACHEAL ER PROC $ 294.58
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
62270 SPINAL PUNCT LUMBAR DX $ 155.04
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
64450 INJ ANES AGENT; OTHER PERIPHERAL
NERV/BRANCH $ 150.96
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94760 NONINVASIVE EAR/PULSE OXIMETRY-O2
SAT; 1 DETERM $ 16.52
94770 CO2 EXPIRED GAS DETERM-INFRARED
ANALY $ 40.39
ENDOCRINOLOGY
78006 THYROID IMAGING W/UPTAKE; SNGL
DETERM $ 193.39
78010 THYROID IMAGING; ONLY $ 148.72
78018 THYROID CARCINOMA METASTASES
IMAGING; WHOLE BODY $ 424.73
78990 PROVISION DX RADIONUCLIDE $ 44.68
79000 RADIONUCLIDE THERAP HYPERTHYROID;
INIT W/EVAL PT $ 330.48
82947 GLU; QUAN $ 11.63
83036 HGB; GLYCATED $ 16.52
84436 THYROXINE; TOT $ 15.30
84443 THYROID STIM HORMONE $ 33.66
84479 TRIIODOTHYRONINE; RESIN UPTAKE $ 16.52
91000 ESOPH INTUBATION &
COLLECT-CYTOLOGY W/PREP (SEP) $ 88.74
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94664 AEROSOL/VAPOR INHALA; INIT DEMO &/
EVAL $ 33.05
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
96530 REFILLING & MAINTENANCE IMPLNT
PUMP/RESERVOIR $ 66.10
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
99050 SERV REQUEST AFTR OFFIC HRS ADD TO
BASIC SERV $ 26.93
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
EVALUATION AND MANAGEMENT
99202 OFFIC/OUTPT VISIT E&M NEW LOW-MOD
SEVERITY 20MIN $ 88.68
99203 OFFIC/OUTPT VISIT E&M NEW MODERAT
SEVERITY 3OMIN $ 123.38
99204 OFFIC/OUTPT VISIT E&M NEW MOD-HI
SEVERITY 45 MIN $ 183.78
99212 OFFIC/OUTPT VISIT E&M EST
SELF-LIMIT/MINOR 10MIN $ 48.20
99213 OFFIC/OUTPT VISIT E&M EST LOW-MOD
SEVERITY 15MIN $ 69.40
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
99214 OFFIC/OUTPT VISIT E&M EST MOD-HI
SEVERITY 25 MIN $ 105.39
99215 OFFIC/OUTPT VISIT E&M ESTAB MOD-HI
SEVRTY 40 MIN $ 167.08
99222 INIT HOSP CARE-DA E&M MODERATE
SEVERITY 50 MIN $ 210.13
99223 INIT HOSP CARE-DA E&M HIGH
SEVERITY 70 MIN $ 269.89
99231 SUBSQT HOSP CARE-DA E&M
STABLE/RECOVER 15 MIN $ 67.47
99232 SUBSQT HOSP CARE-DA E&M MINOR
COMPLIC 25 MIN $ 99.60
99233 SUBSQT HOSP CARE-DA E&M SIGNIFIC
COMPLIC 35 MIN $ 138.80
99242 OFFIC CONS NEW/ESTAB LOW SEVERITY
30 MIN $ 138.16
99243 OFFIC CONS NEW/ESTAB MODERATE
SEVERITY 40 MIN $ 179.29
99244 OFFIC CONS NEW/ESTAB MOD-HIGH
SEVERITY 60 MIN $ 251.90
99245 OFFIC CONS NEW/ESTAB MOD-HIGH
SEVERITY 80 MIN $ 339.29
99281 ER DEPT VISIT E&M SELF
LIMITED/MINOR $ 39.84
99282 ER DEPT VISIT E&M LOW-MODERATE
SEVERITY $ 61.69
99283 ER DEPT VISIT E&M MODERATE
SEVERITY $ 113.74
99284 ER DEPT VISIT E&M HIGH SEVERITY
URGENT EVAL $ 174.14
99285 ER DEPT VISIT E&M HIGH SEVER IMMED
SIGNIF THREAT $ 274.39
FAMILY PRACTICE
10060 I&D ABSCESS; SIMPL/SNGL $ 130.56
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
12001 SIMPL REPR SCLP/AX/GENIT/
TRUNK/EXTREM; 2.5/LESS $ 185.23
17100 DESTRCT-ANY METHD- LES NOT FACE
W/ANES; 1 LES $ 75.89
17340 CRYOTHERAPY-ACNE $ 84.05
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
59410 VAG DELIV ONLY; INCL PP CARE $1,962.07
59515 CAESAREAN DELIV ONLY; INCL PP CARE $2,279.09
69210 REMOV IMPACTED CERUMEN (SEP PRO)
1/BOTH EARS $ 70.18
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
76091 MAMMO; BILAT $ 135.86
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80050 GENERAL HEALTH PANEL $ 63.04
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
90701 IMMUNIZ ACTIVE; DIPHTHERIA/
TETANUS/PERTUSSIS $ 55.08
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90712 IMMUNIZ ACTIVE; POLIOVIRUS VACCINE
LIVE ORAL $ 44.06
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90737 IMMUNIZ ACTIVE; HEMOPHILUS
INFLUENZA B $ 42.84
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93005 ECG-ROUTINE ECG W/12 LEADS;
TRACING ONLY $ 28.15
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
GASTROENTEROLOGY
43220 ESOPHAGOSCOPY RIGID/FLEX;
W/BALLOON DILAT $ 360.57
43235 UGI ENDO; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP) $ 410.55
43239 UGI ENDO; W/BX 1/MX $ 461.24
43243 UGI ENDO; W/INJ SCLEROSIS-
ESOPH/GASTRIC VARICES $ 756.13
43245 UGI ENDO; W/DILAT OUTLET-OBSTRUC
ANY METHD $ 580.48
43246 UGI ENDO; W/DIRECTED PLCMT PERQ
GASTROSTOMY TUBE $ 741.85
43247 UGI ENDO; W/REMOV F B $ 579.05
43255 UGI ENDO; W/CONTRL BLEEDING ANY
METHD $ 743.27
43260 ERCP; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP PRO) $ 880.36
43262 ERCP; W/SPHINCTEROTOMY/
PAPILLOTOMY $1,211.66
43264 ERCP; W/ENDO RETRO REMOV
STONE-BILI/PANCREAT DUC $1,315.90
43450 DILAT ESOPH-UNGUIDED
SOUND/BOUGIE-1/MX PASSES $ 150.65
43453 DILAT ESOPH OVER GUIDE WIRE $ 223.48
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45331 SIGMOIDOSCOPY FLEX; W/BX 1/MX $ 215.63
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45382 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/CONTRL BLEED $ 857.51
45383 COLONOSCOPY FLEX; W/ABLAT LES NOT
AMENABLE-SNARE $ 877.51
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
47000 BX LIVER; PERCUT NEEDLE $ 244.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
74245 RAD EXAM GI TRACT UPPER; W/SM
BOWEL W/MX SERIAL $ 232.56
74249 RAD EXAM GI TRACT UPPER-AIR
CONTRAST; W/SM BOWEL $ 244.19
74280 RAD EXAM COLON; AIR CONTRAST W/HI
DENSITY BARIUM $ 231.34
76700 ECHO ABD B-SCAN W/IMAGE DOCUMEN;
COMPLT $ 197.68
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82150 AMYLASE $ 17.75
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85730 THROMBOPLASTIN TIME PART;
PLASMA/WHOLE BLD $ 11.63
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
91010 ESOPH MOTILITY STUDY $ 226.44
91033 ESOPH ACID REFLUX TEST; PROLONGED
RECORDING $ 276.62
91055 GASTRIC INTUBAT WASH & PREP SLIDES
(SEPART PROC) $ 110.16
91065 BREATH HYDROGEN TEST $ 66.10
GENERAL PRACTICE
10060 I&D ABSCESS; SIMPL/SNGL $ 130.56
11750 EXC NAIL/MATRIX PART/ COMPLT PERM
REMOV $ 322.32
17000 DESTRCT-ANY METHD-BEN FACE LES
W/ANES; 1 LES $ 82.42
33877 REPR THORACOABD AORTIC ANEURY
W/GFT W/WO BYPASS $6,624.49
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
69210 REMOV IMPACTED CERUMEN (SEP PRO)
1/BOTH EARS $ 70.18
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
76092 SCREENING MAMMO BILAT $ 109.55
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
83718 LIPOPROTEIN DIRECT MEASUR; HIGH
DENSITY CHOL $ 20.81
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90853 GRP MED PSYCHOTHERAP & DRUG MGMT
WHEN INDICATED $ 53.86
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97014 PHYS MEDS TX-1 AREA; ELEC STIM $ 24.48
97032 ELECTRICAL STIMULATION; 15 MINUTES $ 24.48
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
GENERAL SURGERY
19120 EXC CYST/BEN-MALIG TISS/ DUCT/LES
MALE/FE 1/MORE $ 722.16
19162 MASTEC PART; W/AXILRY
LYMPHADENECTOMY $1,970.64
19240 MASTEC MOD RAD W/AX NODES EXCL PEC
MAJOR MUSCL $2,133.02
36533 INSRT IMPLNT VENOUS ACCES PORT
W/WO RESERVOIR $ 724.00
44005 ENTEROLYSIS (SEPART PROC) $1,610.07
44120 ENTERECTOMY RESECT SM INTESTINE;
W/ANASTOMOSIS $1,758.58
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
44140 COLECTOMY PART; W/ANASTOM $2,194.84
44145 COLECTOMY PART; W/ COLOPROCTOSTOMY $2,664.65
44153 COLECTOMY WO PROCTECT; W/ CREAT
ILEAL RESERVOIR $3,403.64
44950 APPY $1,010.31
44960 APPY; RUPT APPY W/ABSCESS/ GEN
PERITONITIS $1,207.37
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
46260 HEMORRHOIDECTOMY INT & EXT
COMPLX/EXTEN $1,001.03
47600 CHOLEY $1,413.01
47605 CHOLEY; W/ CHOLANGIOGRAPHY $1,529.39
49500 REPR INIT ING HERNIA 6 MO-/ 5 YR;
REDUCIBLE $ 738.28
49505 REPR INIT ING HERNIA 5 YR/ MORE;
REDUCIBLE $ 829.67
49520 REPR RECURRENT ING HERNIA ANY AGE;
REDUCIBLE $1,013.88
49560 REPR INIT INCS HERNIA; REDUCIBLE
(SEPART PROC) $1,165.25
50360 RENAL HOMOTRANSPL; EXCLD DONOR &
RECIP NEPHRECT $3,979.84
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
88170 FINE NEEDL ASPIRAT W/WO PREP
SMEARS; SUPERF TISS $ 143.82
88304 LEVEL III-SURG PATH GROSS/ MICRO
EXAM $ 53.24
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
HEMATOLOGY/ONCOLOGY
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
36430 TRANSFUSION BLD/BLD COMPONENTS $ 73.54
38230 BONE MARROW HARVESTING TRANSPL $ 514.79
38241 BONE MARROW TRANSPL; AUTOLOGOUS $ 314.87
74160 CAT ABD; W/CONTRAST $ 541.62
77336 CONT MED RADIAT PHYSICS CONS W/QA
REPORT WK-THER $ 184.82
77413 RADIATION TX DELIV-3/MORE TX
AREAS; 6-10 MEV $ 145.04
77414 RADIATION TX DELIV-3/MORE TX
AREAS; 11-19 MEV $ 145.04
77430 WK RAD THERAP MGMT; COMPLX $ 332.93
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90781 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; EA HR TO 8HR $ 34.88
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
96408 CHEMOTX ADMIN IV; PUSH TECH $ 59.98
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
96412 CHEMOTX ADMIN IV; INFUSION TECH
1-8 HR EA ADD HR $ 72.22
96414 CHEMOTX ADMIN IV; INFUSION
TECH-PROLONGED W/PUMP $ 83.23
96520 REFILLING & MAINTENANCE PORTABLE
PUMP $ 55.69
96530 REFILLING & MAINTENANCE IMPLNT
PUMP/RESERVOIR $ 66.10
96545 PROVISION CHEMOTX AGENT $ 46.51
INFECTIOUS DISEASES
96414 CHEMOTX ADMIN IV; INFUSION
TECH-PROLONGED W/PUMP $ 83.23
96520 REFILLING & MAINTENANCE PORTABLE
PUMP $ 55.69
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
99025 INIT VISIT WHEN (*) SURG PROC =
MAJ SERV @ VISIT $ 26.93
99052 SERV REQUEST BETWEEN 10 PM & 8 AM
ADD TO BASIC $ 53.24
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
INTERNAL MEDICINE
31622 BRONCHOSCOPY; DX W/WO CELL
WASHING/BRUSHING $ 547.54
43235 UGI ENDO; DX W/WO COLLEC
SPECMN-BRUSH/WASH (SEP) $ 410.55
43239 UGI ENDO; W/BX 1/MX $ 461.24
45330 SIGMOIDOSCOPY FLEX; DX W/ WO
COLLEC SPECMN $ 164.93
45378 COLONOSCOPY FLEX-PROX SPLEN FLEX;
DX (SEP PRO) $ 586.91
45380 COLONOSCOPY FLEX-PROX SPLEN FLEX;
W/BX 1/MX $ 656.88
45385 COLONOSCOPY FLEX; W/REMOV
TUMOR/LES BY SNARE $ 895.36
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
76091 MAMMO; BILAT $ 135.86
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
80061 LIPID PANEL $ 26.93
84443 THYROID STIM HORMONE $ 33.66
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90724 IMMUNIZ ACTIVE; INFLUENZA VIRUS
VACCINE $ 35.50
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
92982 PERQ TRNSLUMNL CORON BALOON
ANGIOPLSTY; 1 VESSEL $1,606.50
93000 ECG-ROUTINE W/12 LEADS; W/ INTERPT
& REPORT $ 48.96
93005 ECG-ROUTINE ECG W/12 LEADS;
TRACING ONLY $ 28.15
93010 ECG-ROUTINE W/12 LEADS; INTERPT &
REPORT ONLY $ 20.81
93015 CV STRESS TEST W/TREADMILL-PHARM;
INTRPT & REPRT $ 201.96
93018 CV STRESS TEST W/TREADMILL;
INTERPT & REPRT ONLY $ 43.45
93224 ECG-24 HR W/SUPERIMPOSIT SCAN;
REPRT-REVW-INTRPT $ 291.31
93307 ECHO REAL-TIME W/DOCUMEN W/WO
M-MODE; COMPLT $ 364.75
93320 DOPPLER ECHO WAVE W/ SPECTRAL
DISPLY; COMPLT $ 163.40
93325 DOPPLER COLOR FLOW VELOCITY
MAPPING $ 190.94
95115 PROF SERV ALLERG IMMUNOTX NOT INCL
EXTRCT; 1 INJ $ 23.87
96410 CHEMOTX ADMIN IV; INFUSION TECH
UP-1 HR $ 95.47
NEONATOLOGY
31500 INTUBATION ENDOTRACHEAL ER PROC $ 294.58
31520 LARYNGOSCOPY DIRECT W/WO
TRACHEOSCOPY; DX NB $ 357.41
33960 PROLONG EXTRACORPOR CIRCUL CP
INSUFF; INIT 24 HR $1,949.93
36000 INTRO NEEDLE/ INTRACATHETER VEIN $ 32.84
36430 TRANSFUSION BLD/BLD COMPONENTS $ 73.54
36440 PUSH TRANSFUSION BLD 2 YR/ UNDER $ 145.66
36450 EXCHG TRANSFUSION BLD; NB $ 306.31
36510 CATH UMBILICAL VEIN DX/ THERAP NB $ 103.53
36600 ART PUNCT WITHDRAWAL BLD DX $ 44.27
36620 ART CATH/CANNULAT-SAMPL MONITOR
(SEP PRO); PERQ $ 139.23
36660 CATH UMBILICAL-ART-NB-DX/ THERAP $ 137.80
61070 PUNCT SHUNT TUBING/
RESERVOIR-ASPIRAT/INJ PROC $ 115.06
62230 REPLAC/REVIS CSF SHUNT/ OBSTRUC
VALV/DISTAL CATH $1,742.98
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
62270 SPINAL PUNCT LUMBAR DX $ 155.04
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94657 VENTILATION ASSIST & MGMT; SUBSQT
DA $ 91.80
94660 CONT POS AIRWAY PRESS VENTILATION
INIT & MGMT $ 93.64
94761 NONINVASIVE EAR/PULSE OXIMETRY O2
SAT; MX DETERM $ 42.84
NEPHROLOGY
36489 PLCMT CENTRAL VENOUS CATH; PERCUT
OVER AGE 2 $ 179.21
36520 THERAP APHERESIS $ 269.89
36800 INSRT CANNULA HEMODIALYSIS/OTHER;
VEIN-VEIN $ 352.00
50200 RENAL BX; PERCUT BY TROCAR/NEEDLE $ 389.84
50590 LITH EXTRACORPOREAL SHOCK WAVE $1,418.72
76700 ECHO ABD B-SCAN W/IMAGE DOCUMEN;
COMPLT $ 197.68
76775 ECHO RETROPERITON B-SCAN W/IMAGE
DOCUMEN; LTD $ 142.60
76778 ECHO TRANSPL KIDNEY B-SCAN W/IMAGE
DOCUMEN $ 191.56
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82565 CREATININE; BLD $ 14.08
83970 PARATHORMONE $ 99.14
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
86287 HEPATITIS B SURFACE ANTIG $ 30.60
90784 THERAP/DX INJ; IV $ 29.99
90935 HEMODIALYSIS PROC W/SNGL PHYS EVAL $ 171.97
90937 HEMODIALYSIS PROC W/ REPEAT EVAL
W/WO REVIS DIALY $ 302.33
90945 DIALYSIS PROC OTHER THAN
HEMODIALYSIS W/1 EVAL $ 160.96
90947 DIALYSIS OTHER THAN HEMODIALYSIS
W/REPEAT EVAL $ 268.67
90989 DIALYSIS TRAIN-PT-INCL HELPR WHERE
APPLIC-COMPLT $ 317.02
90997 HEMOPERFUSION $ 266.22
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
92002 OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT
22554 ARTHRODESIS-ANT INTERBOD; CERV
BELOW C2 W/GFT $3,310.51
22842 POST INSTRUM; SEGMT FIXA $1,677.70
61313 CRANIECTOMY-HEMATOMA-SUPRATENT;
INTRACEREBRAL $4,155.07
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
61510 CRANIECTOMY; EXC BRAIN
TUMOR-SUPRATENTORIAL $4,790.74
61512 CRANIECTOMY; EXC
MENINGOMA-SUPRATENTORIAL $5,533.30
61518 CRANIECTOMY-EXC TUMOR-POST FOSSA;
EX MENINGIOMA $5,799.31
61520 CRANIECTOMY-POST FOSSA;
CEREBELLOPONTINE ANGLE $7,565.95
61548 HYPOPHYSECTOMY-TRANSNASAL
NONSTEREOTACTIC $3,995.14
61700 SURG ANEURY INTRACRAN APPROACH;
CAROTID CIRCULAT $6,989.86
61751 STEREOTACTIC BX/ASPIRAT/EXC
INTRACRAN LES; W/CAT $3,307.25
62121 CRANIOTOMY REPR ENCEPHALOCELE
SKULL BASE $3,359.47
62223 CREAT SHUNT; VENTRICULO-
PERITONEAL/-PLEURAL $2,560.61
62230 REPLAC/REVIS CSF SHUNT/ OBSTRUC
VALV/DISTAL CATH $1,742.98
63005 LAMINECT W/EXPLOR 1-2 VERTEB;
LUMBAR EX SPONDYLO $2,798.88
63020 LAMINOTOMY W/DECOMP NERV ROOT; 1
INTERSPACE CERV $2,708.30
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
63042 LAMINOTOMY W/DECOMP NERV ROOT
RE-EXPLOR; LUMBAR $3,512.06
63045 LAMINECTOMY SNGL VERTEBRAL SEGMT;
CERV $3,205.25
63047 LAMINECTOMY SNGL VERTEBRAL SEGMT;
LUMBAR $2,805.41
63075 DISKECTOMY ANT W/DECOMP; CERV SNGL
INTERSPACE $3,205.25
63081 VERTEBRAL CORPECTOMY-ANT W/DECOMP;
CERV 1 SEGMT $4,311.74
63200 LAMINECTOMY W/RELEASE TETHERED
CORD LUMBAR $2,609.57
64721 NEUROPLASTY &/OR TRANSPO; MEDIAN @
CARPAL TUNNEL $ 793.15
95869 NEEDLE EMG LTD STUDY SPEC MUSCL $ 58.14
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
95920 INTRAOPERATIVE NEUROPHYSIOLOGY
TESTING PER HOUR $ 304.78
95925 SOMATOSENSORY TESTING 1/MORE NERV $ 132.80
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
NEUROLOGY
22554 ARTHRODESIS-ANT INTERBOD; CERV
BELOW C2 W/GFT $3,310.51
36216 SELECT CATH PLCMT ART SYST; INIT
2ND ORDER THORA $ 631.18
62223 CREAT SHUNT; VENTRICULO-
PERITONEAL/-PLEURAL $2,560.61
62270 SPINAL PUNCT LUMBAR DX $ 155.04
70470 CAT HEAD/BRAIN; WO CONTRAST
FOLLOWED BY CONTRAST $ 556.31
70551 MRI BRAIN; WO CONTRAST $ 831.71
70553 MRI BRAIN; WO CONTRAST FOLLOWED BY
CONTRAST $1,762.56
72141 MRI SPINAL CANAL & CONTENTS CERV;
WO CONTRAST $ 843.34
72148 MRI SPINAL CANAL & CONTENTS
LUMBAR; WO CONTRAST $ 908.21
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
84443 THYROID STIM HORMONE $ 33.66
84450 TRANSFERASE; ASPARTATE AMINO $ 11.63
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
90830 PSYCH TEST W/INTERPT & REPRT PER
HR $ 80.78
92280 VISUALLY EVOKED POTENTIAL STUDY
W/MED DX EVAL $ 25.09
92585 BRAINSTEM EVOKED RESPONSE
RECORDING $ 248.47
95819 EEG INCL AWAKE & ASLEEP;
STAND/PORT SAME FACILIT $ 184.82
95860 NEEDLE EMG; 1 EXTREM & RELATED
PARASPINAL AREAS $ 130.97
95861 NEEDLE EMG; 2 EXTREM & RELATED
PARASPINAL AREAS $ 224.60
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
95925 SOMATOSENSORY TESTING 1/MORE NERV $ 132.80
95935 'H/'F' REFLEX STUDY BY ELEC-DX
TESTING $ 13.46
OBSTETRICS & GYNOCOLOGY
56304 LAP SURG; W/LYSIS ADHESIONS $ 911.47
57452 COLPOSCOPY; (SEPART PROC) $ 145.25
57454 COLPOSCOPY; W/BX-CERV &/OR
ENDOCERV CURET $ 223.58
57520 CONIZATION CERV W/WO FULG W/WO D&C
W/WO REPR $ 664.22
58100 ENDOMETRIAL &/OR ENDOCERV SAMPL
(SEPART PROC) $ 123.22
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
58120 DILAT & CURET DX &/OR THERAP (NON
OB) $ 503.47
58150 TOT ABD HYST W/WO REMOV
TUBE(S)--OVARY(S) $2,117.52
58260 VAG HYST $1,864.56
58605 LIG/TRANSECT FALLOPIAN TUBE-SAME
HOSP (SEP PRO) $ 694.42
58720 SALPINGO-OOPHORECTOMY COMPLT/PART
(SEPART PROC) $1,616.50
58740 LYSIS ADHESIONS $1,135.87
59025 FETAL NON-STRESS TEST $ 89.96
59400 ROUTINE OB CARE INCL ANTEPARTUM
CARE-VAG DEL-PP $2,964.53
59410 VAG DELIV ONLY; INCL PP CARE $1,962.07
59510 ROUTINE OB CARE INCL ANTEPARTUM
CARE-C SECT-PP $3,358.66
59515 CAESAREAN DELIV ONLY; INCL PP CARE $2,279.09
59820 TX MISSED AB COMPLT SURGICALLY;
FIRST TRIMESTER $ 589.05
59840 INDUCED AB BY DILAT & CURET $ 486.95
76091 MAMMO; BILAT $ 135.86
76805 ECHO PG UTERUS B-SCAN W/ IMAGE
DOCUMEN; COMPLT $ 222.77
76830 ECHO TRANSVAGINAL $ 159.73
76856 ECHO PELVIC B-SCAN W/IMAGE
DOCUMEN; COMPLT $ 159.73
76946 ULTRASONIC GUIDANCE
AMNIOCENTESIS-RAD S & I $ 130.36
80055 OB PANEL $ 69.77
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
84703 GONADOTROPIN CHORIONIC; QUAL $ 41.00
88150 CYTPTH SMEARS CERV/VAG 1-3; SCRN
TECH PHYS SUPER $ 10.40
88305 LEVEL IV-SURG PATH GROSS/ MICRO
EXAM $ 113.83
90730 IMMUNIZ ACTIVE; HEPATITIS A
VACCINE $ 80.78
90742 IMMUNIZ PASSIVE; SPEC HYPERIMMUNE
SERUM GLOBULIN $ 58.75
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
OPHTHALMOLOGY
65855 TRABECULOPLASTY-LASER SURG 1/MORE
SESSIONS $ 871.49
66761 IRIDOTOMY/IRIDECTOMY BY LASER SURG $ 762.14
66821 DISCISSION SECNDRY MEMBRN
CATARACT; LASER SURG $ 516.53
66984 EXTRACAPSULAR CATARACT REMOV
W/INSRT IOL PROSTH $1,916.78
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
67036 VITRECTOMY MECH PARS PLANA
APPROACH $2,324.78
67038 VITRECTOMY MECH; W/ EPIRETINAL
MEMBRN STRIPPING $3,904.56
67107 REPR RETINAL DETACHMENT; SCLERAL
BUCKLING $2,692.80
67108 REPR RETINAL DETACHMENT;
W/VITRECTOMY ANY METHD $3,845.81
67145 PROPHYLAXIS RETINAL DETACH;
PHOTOCOAGULATION $ 984.10
67210 DESTRCT LOCALIZ LES RETINA;
PHOTOCOAGULATION $1,547.95
67228 DESTRCT PROGRESSIVE RETINOPATHY;
PHOTOCOAGULAT $1,816.42
67311 STRABISMUS SURG; 1 HORIZONTAL
MUSCL $1,210.13
67312 STRABISMUS SURG; 2 HORIZONTAL
MUSCL $1,499.81
67420 ORBITOTOMY W/BONE FLAP/ WINDOW;
W/REMOV LES $3,010.22
76511 OPHTH ULTRASOUND ECHO DX; A-SCAN
ONLY $ 153.00
76512 OPHTH ULTRASOUND ECHO DX; CONTACT
B-SCAN $ 156.67
OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT $ 85.07
92004 OPHTH SERV: MED EXAM; COMP NEW PT
1/MORE VISITS $ 138.31
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92014 OPHTH SERV: MED EXAM & EVAL; COMP
ESTAB PT $ 101.59
92015 DETERM REFRACTIVE STATE $ 44.06
92020 GONIOSCOPY W/MED DX EVAL (SEPART
PROC) $ 41.00
92082 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; INTERMED $ 58.14
92083 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; EXTEN $ 83.84
92225 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; INIT $ 52.02
92235 FLUORESCEIN ANGIOGRAPHY W/MED DX
EVAL $ 151.78
92250 FUNDUS PHOTOGRAPHY W/ MED DX EVAL $ 53.86
OPTOMETRY
92002 OPHTH SERV: MED EXAM & EVAL;
INTERMED NEW PT $ 85.07
92004 OPHTH SERV: MED EXAM; COMP NEW PT
1/MORE VISITS $ 138.31
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92014 OPHTH SERV: MED EXAM & EVAL; COMP
ESTAB PT $ 101.59
92015 DETERM REFRACTIVE STATE $ 44.06
92020 GONIOSCOPY W/MED DX EVAL (SEPART
PROC) $ 41.00
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
92065 ORTHOPTIC &/OR PLEOPTIC TRAIN
W/MED DIRECT $ 45.29
92081 VISUAL FIELD EXAM UNILAT/ BILAT
W/DX EVAL; LTD $ 42.23
92082 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; INTERMED $ 58.14
92083 VISUAL FIELD EXAM UNILAT/ BILAT
W/EVAL; EXTEN $ 83.84
92100 SERIAL TONOMETRY (SEP PRO) W/DX
EVAL SAME DA $ 72.22
92225 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; INIT $ 52.02
92226 OPHTH EXTEN W/RETINAL DRAW W/MED
DX EVAL; SUBSQT $ 45.90
92250 FUNDUS PHOTOGRAPHY W/ MED DX EVAL $ 53.86
92285 EXT OCULAR PHOTOGRAPHY
W/EVAL-DOCUMN MED PROGRES $ 30.60
92310 SCRIPT & FIT CONTACT LENS; CORNEAL
EX APHAKIA $ 152.39
92325 MODIFICAT LENS (SEP PRO) W/ MED
SUPERVS ADAPTAT $ 23.87
92326 REPLAC CONTACT LENS $ 99.14
ORTHOPEDIC SURGERY
20680 REMOV IMPLNT; DEEP $ 578.54
22842 POST INSTRUM; SEGMT FIXA $1,677.70
23130 ACROMIOPLASTY/ ACROMIONECTOMY PART $1,247.66
23420 REPR COMPLT SHOULDER CUFF AVULSION
CHRONIC $2,416.99
25605 CLOSED RED FX-DIST RAD OR EPIPH
SEP $ 809.47
27130 ARTHROPLASTY ACETABULAR & PROX FEM
PROSTH REPLAC $3,849.07
27134 REVIS TOT HIP ARTHROPLASTY; BOTH
COMPON W/WO GFT $5,252.59
27425 LAT RETINACULAR RELEASE $1,026.53
27447 ARTHROPLASTY KNEE CONDYLE &
PLATEAU; MED & LAT $4,066.94
27814 OP TX BIMALLEOLAR ANK FX W/WO
INT/EXT FIXA $1,751.95
28285 HAMMERTOE OR; 1 TOE $ 748.27
28296 HALLUX VALGUS CORRECT; W/
METATARSAL OSTEOTOMY $1,507.97
29075 CAST SHORT ARM $ 120.77
29425 CAST SHORT LEG AMBULATORY TYPE $ 172.99
29826 ARTHROSCOPY SHOULDER SURG; DECOMP
SUBACROM SPACE $1,807.44
29870 ARTHROSCOPY KNEE DX W/WO SYNOVIAL
BX (SEP PRO) $ 783.36
29875 ARTHROSCOPY KNEE SURG; SYNOVECTOMY
LTD (SEP PRO) $1,277.04
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
29876 ARTHROSCOPY KNEE SURG; SYNOVECTOMY
MAJOR $1,556.11
29877 ARTHROSCOPY KNEE SURG; DEBRID/SHAV
ARTIC CARTIL $1,459.82
29879 ARTHROSCOPY KNEE SURG; ABRASION
ARTHROPLASTY $1,597.73
29880 ARTHROSCOPY KNEE SURG; W/
MENISECTMY (MED & LAT) $1,685.86
29881 ARTHROSCOPY KNEE SURG; W/
MENISECTMY (MEDIAL/LAT) $1,535.71
29888 ARTHROSCOPICALLY AIDED ACL
REPAIR/AUGMENT/RECON $2,730.34
63030 LAMINOT W/DECOMP NERV ROOT; 1
INTERSPACE LUMBAR $2,399.86
64721 NEUROPLASTY &/OR TRANSPO; MEDIAN @
CARPAL TUNNEL $ 793.15
72100 RAD EXAM SPINE LUMBOSACRAL; AP &
LAT $ 61.81
73100 RAD EXAM WRIST; ANTEROPOSTERIOR &
LAT VIEWS $ 45.29
73560 RAD EXAM KNEE; ANTEROPOSTERIOR &
LAT VIEWS $ 47.74
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
73630 RAD EXAM FT; COMPLT MINI 3 VIEWS $ 48.96
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97012 PHYS MEDS TX-1 AREA; TRACTION MECH $ 28.15
97110 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; EXERCISE $ 36.72
97530 KINETIC ACTIVITIES 1 AREA; 1ST 30
MIN EA VISIT $ 38.56
97700 OFFIC VISIT W/'CHECK-OUT'
TEST/MEASUR; 1ST 30MIN $ 80.17
97750 PHYSICAL PERFORMANCE TEST; 15 MIN. $ 44.06
OTOLARYNGOLOGY
21147 RECON MIDFACE LEFORT I; 3/MORE
PIECES REQ GFT $3,060.82
21196 RECON MANDIB RAMUS SAGITTAL SPLIT;
W/INT FIXA $2,703.41
21240 ARTHROPLASTY TEMPOROMANDIBULAR JT
W/ WO AUTOGFT $2,607.94
30140 SUBMUCOUS RESECT TURBINATE
PART/COMPLT $ 543.46
30420 RHINOPLASTY PRIMARY; INCL MAJOR
SEPTAL REPR $2,888.64
30520 SEPTOPLASTY/SMR W/WO CARTIL
SCORING/REPLAC W/ GFT $1,110.58
30620 SEPTAL/OTHER INTRANASAL
DERMATOPLASTY $1,122.00
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
31090 SINUSOTOMY COMBO 3/MORE SINUSES $1,802.54
31575 LARYNGOSCOPY FLEXIBLE FIBEROPTIC;
DX $ 230.93
42820 TONSILLECTOMY & ADENOIDECTOMY;
UNDER AGE 12 $ 576.10
42821 TONSILLECTOMY & ADENOIDECTOMY; AGE
12/OVER $ 692.78
42826 TONSILLECTOMY PRIM/ SECNDRY; AGE
12/OVER $ 610.37
42830 ADENOIDECTOMY PRIM; UNDER AGE 12 $ 376.99
69436 TYMPANOSTOMY GEN ANES $ 348.43
69631 TYMPANOPLASTY WO MASTOIDEC; WO
OSSICULAR CHAIN $1,907.81
69641 TYMPANOPLASTY W/ MASTOIDEC; WO
OSSICULAR CHAIN $2,439.02
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
70460 CAT HEAD/BRAIN; W/CONTRAST MAT $ 455.94
70480 CAT ORBIT/SELLA/OUTER-MID-INNER
EAR; WO CONTRAST $ 411.88
70486 CAT MAXILLOFACIAL AREA; WO
CONTRAST $ 398.41
82785 GG; IGE $ 34.88
87060 CULTURE BACTERIAL DEFINITIVE;
THROAT/NOSE $ 14.08
87070 CULTURE BACTERIAL DEFINITIVE; ANY
OTHER SOURCE $ 15.30
87184 SENSITIVITY ANTIBIOTIC; DISK METHD
PER PLATE $ 14.08
88170 FINE NEEDL ASPIRAT W/WO PREP
SMEARS; SUPERF TISS $ 143.82
92506 MED EVAL SPEECH/LANGUAGE &/OR
HEARING PROBLEMS $ 87.52
92507 SPEECH/LANG/HEAR THERAP W/MED
SUPERVS; INDIVI $ 53.86
92552 PURE TONE AUDIOMETRY; AIR ONLY $ 28.15
92553 PURE TONE AUDIOMETRY; AIR & BONE $ 42.84
92557 BASIC COMP AUDIOMETRY (92553 &
92556 COMBO) $ 77.11
92567 TYMPANOMETRY $ 34.27
92585 BRAINSTEM EVOKED RESPONSE
RECORDING $ 248.47
PATHOLOGY
80019 19 BLOOD/URINE TESTS $ 19.58
80050 GENERAL HEALTH PANEL $ 63.04
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
80061 LIPID PANEL $ 26.93
80091 THYROID PANEL $ 26.93
81000 URINALYSIS/ NONAUTO/ W/ SCOPE $ 7.96
82270 TEST FECES FOR BLOOD $ 6.12
82785 ASSAY/ GAMMAGLOBULIN IGE $ 34.88
82947 ASSAY QUANTITATIVE/ GLUCOSE $ 11.63
83718 BLOOD LIPOPROTEIN ASSAY $ 20.81
84443 ASSAY THYROID STIM HORMONE $ 33.66
84702 CHORIONIC GONADOTROPIN TEST $ 43.45
84703 CHORIONIC GONADOTROPIN ASSAY $ 41.00
85021 AUTOMATED HEMOGRAM $ 11.63
85022 AUTOMATED HEMOGRAM $ 16.52
85023 AUTOMATED HEMOGRAM $ 24.48
85024 AUTOMATED HEMOGRAM $ 23.26
85025 AUTOMATED HEMOGRAM $ 23.26
85027 AUTOMATED HEMOGRAM $ 20.81
86316 IMMUNOASSAY/ TUMOR ANTIGEN $ 39.78
86317 IMMUNOASSAY/ INFECTIOUS $ 32.44
86403 PARTICLE AGGLUTINATION TEST $ 22.03
86585 TB TINE TEST $ 12.24
87060 NOSE/THROAT CULTURE/ $ 14.08
87086 URINE CULTURE/ COLONY COUNT $ 15.30
88150 CYTOPATHOLOGY/ PAP SMEAR $ 10.40
88304 TISSUE EXAM BY PATHOLOGIST $ 53.24
88305 TISSUE EXAM BY PATHOLOGIST $ 113.83
88307 TISSUE EXAM BY PATHOLOGIST $ 197.68
PEDIATRICS
54150 CIRCUMCISION USING CLAMP/ OTHER
DEVICE; NB $ 169.22
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
71010 RAD EXAM CHEST; SNGL VIEW FRONTAL $ 45.90
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
74241 RAD EXAM GI TRACT UPPER; W/WO
DELAY FILM W/KUB $ 157.28
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
86317 IMMUNOASSAY INFEC AGENT ANTIB QUAN
NES $ 32.44
86403 PARTICLE AGGLUTINATION ANTIB EA $ 22.03
86585 SKIN TEST; TUBERCULOSIS TINE TEST $ 12.24
87060 CULTURE BACTERIAL DEFINITIVE;
THROAT/NOSE $ 14.08
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
90701 IMMUNIZ ACTIVE; DIPHTHERIA/
TETANUS/PERTUSSIS $ 55.08
90707 IMMUNIZ ACTIVE; MEASLES/
MUMPS/RUBELLA VIRUS LIVE $ 66.10
90712 IMMUNIZ ACTIVE; POLIOVIRUS VACCINE
LIVE ORAL $ 44.06
90731 IMMUNIZ ACTIVE; HEPATITIS B
VACCINE $ 80.78
90737 IMMUNIZ ACTIVE; HEMOPHILUS
INFLUENZA B $ 42.84
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90788 IM INJ ANTIBIOTIC $ 7.34
92012 OPHTH SERV: MED EXAM & EVAL;
INITERMED ESTAB PT $ 69.16
92081 VISUAL FIELD EXAM UNILAT/ BILAT
W/DX EVAL; LTD $ 42.23
92551 SCREENING TEST PURE TONE AIR ONLY $ 25.70
92552 PURE TONE AUDIOMETRY; AIR ONLY $ 28.15
92567 TYMPANOMETRY $ 34.27
95117 PROF SERV ALLERG IMMUNOTX WO
EXTRACT; MX INJ $ 30.60
95125 PROF SERV ALLERG IMMUNOTX INCL
EXTRACT; MX INJ $ 28.76
99050 SERV REQUEST AFTR OFFIC HRS ADD TO
BASIC SERV $ 26.93
99054 SERV REQUESTED SUN & HOLIDAYS ADD
BASIC SERV $ 53.24
99391 PERIODIC RE-E&M HEALTHY INDIVI
ESTAB PT; INFANT $ 138.16
99392 PERIODIC RE-E&M HEALTHY EST PT;
EARLY CHILDHOOD $ 160.65
99431 HX/EXAM NORM NB INIT DX/ TX/PREP
HOSP RECORDS $ 158.08
99433 SUBSQT HOSPITAL CARE NORMAL
NEWBORN $ 83.54
99435 HISTORY AND EXAMINATION $ 202.42
PHYSICAL MEDICINE & REHABILITATION
72040 RAD EXAM SPINE CERV;
ANTEROPOSTERIOR & LAT $ 57.53
72050 RAD EXAM SPINE CERV; MINI 4 VIEWS $ 84.46
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
72125 CAT CERV SPINE; WO CONTRAST $ 473.69
92507 SPEECH/LANG/HEAR THERAP W/MED
SUPERVS; INDIVI $ 53.86
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
97010 PHYS MEDS TX-1 AREA; HOT/ COLD
PACKS $ 17.75
97012 PHYS MEDS TX-1 AREA; TRACTION MECH $ 28.15
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
97014 PHYS MEDS TX-1 AREA; ELEC STIM $ 24.48
97022 PHYS MEDS TX-1 AREA; WHIRLPOOL $ 23.26
97032 ELECTRICAL STIMULATION; 15 MINUTES $ 24.48
97033 IONTOPHORESIS; 15 MINUTES $ 25.70
97035 ULTRASOUND TREATMENT; 15 MINUTES $ 20.20
97036 HUBBARD TANK; 15 MINUTES $ 31.21
97110 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; EXERCISE $ 36.72
97112 PHYS MEDS-1 AREA 1ST 30 MIN;
NEUROMUSCL REEDUCAT $ 36.11
97122 PHYS MEDS-1 AREA 1ST 30 MIN/
VISIT; TRACT MANUAL $ 33.05
97124 PHYS MEDS-1 AREA 1ST 30 MIN EA
VISIT; MASSAGE $ 28.76
97260 MANIP (SEPART PROC) PERFORMED BY
PHYS; 1 AREA $ 25.09
97530 KINETIC ACTIVITIES 1 AREA; 1ST 30
MIN EA VISIT $ 38.56
97700 OFFIC VISIT W/'CHECK-OUT'
TEST/MEASUR; 1ST 30MIN $ 80.17
97750 PHYSICAL PERFORMANCE TEST; 15 MIN. $ 44.06
PLASTIC SURGERY
11440 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.5 CM/LESS $ 150.96
11441 EXC BEN LES FACE/EARS/NOSE/ LIPS;
0.6 TO 1.0 CM $ 203.18
11442 EXC BEN LES FACE/EARS/NOSE/ LIPS;
1.1 TO 2.0 CM $ 248.88
11641 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 0.6 TO 1.0 CM $ 380.26
11642 EXC MALIG LES FACE/EARS/
NOSE/LIPS; 1.1 TO 2.0 CM $ 463.49
13131 REPR COMPLX FOREHEAD/
CHIN/AX/GENIT/FT; 1.1-2.5 $ 485.52
13132 REPR COMPLX FOREHEAD/
CHIN/AX/GENIT/FT; 2.6-7.5 $ 878.02
13152 REPR COMPLX LIDS/NOSE/EARS/ LIPS;
2.6 TO 7.5 CM $ 986.54
13300 REPR UNUSUAL COMPLIC OVER 7.5 CM
ANY AREA $ 953.09
14040 ADJACENT TRANSF CHIN/NECK/ AX/FT;
10 SQ CM/LESS $1,191.36
14060 ADJACENT TRANSF LIDS/NOSE/ LIPS;
10 SQ CM/LESS $1,374.14
14300 ADJACENT TRANSF MORE THAN 30.0 SQ
CM COMPLIC $1,951.06
15100 SPLIT GFT TRUNK; 100 SQ CM/
LESS-EA 1% BODY CHILD $1,099.97
15734 MUSCL MYOCUT/FASCIOCUT FLAP; TRUNK $3,163.63
15755 FREE FLAP $5,202.00
15831 EXC EXCESSIVE SKIN & SUBQ TISS;
ABD $1,918.42
19318 REDUCTION MAMMAPLASTY $2,644.66
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
19350 NIPPLE/AREOLA RECON $1,385.57
19357 BREAST RECON IMMED/DELAY W/EXPANDR
W/SUBSQT EXPA $2,549.18
19369 BREAST RECON WITH TRANSVERSE FLAP $4,299.50
19371 PERIPROSTHETIC CAPSULECTOMY BREAST $1,492.46
30420 RHINOPLASTY PRIMARY; INCL MAJOR
SEPTAL REPR $2,888.64
30520 SEPTOPLASTY/SMR W/WO CARTIL
SCORING/REPLAC W/ GFT $1,110.58
35207 REPR BLD VESSEL DIRECT;
HAND-FINGER $1,555.81
PSYCHIATRY/PSYCHOLOGY
90801 PSYCH DX INTERVIEW W/HX-
MENTAL-STATUS-DISPOSIT $ 217.87
90825 PSYCH EVAL HOSP RECORDS/ OTHER
DATA MED DX PURPOS $ 80.78
90830 PSYCH TEST W/INTERPT & REPRT PER
HR $ 80.78
90841 INDIVI MED PSYCHOTHERAP-PHYS; TIME
UNSPEC $ 123.01
90843 INDIVI MED PSYCHOTHERAP-PHYS;
APPROX 20-30 MIN $ 114.44
90844 INDIVI MED PSYCHOTHERAP-PHYS;
APPROX 45-50 MIN $ 160.34
90847 FAMILY MED PSYCHOTHERAP & DRUG
MGMT WHEN INDICAT $ 175.64
90849 MX-FAMILY GRP MED PSYCHOTHERAP &
DRUG MGMT $ 53.86
90853 GRP MED PSYCHOTHERAP & DRUG MGMT
WHEN INDICATED $ 53.86
90855 INTERACTIVE INDIVI MED
PSYCHOTHERAP $ 173.20
90862 PHARM MGMT W/SCRIPT USE &
REVIEW-MIN PSYCHOTH $ 83.84
90870 ELEC-CONVULS THERAP; SNGL SEIZURE $ 153.61
90887 INTERPT/EXPLAN RESULTS
EXAM/PROC/DATA TO FAMILY $ 113.22
PULMONARY DISEASES
31622 BRONCHOSCOPY; DX W/WO CELL
WASHING/BRUSHING $ 547.54
31625 BRONCHOSCOPY; W/BX $ 616.08
31628 BRONCHOSCOPY; W/ TRANSBRONCH LUNG
BX W/WO FLUORO $ 740.11
31645 BRONCHOSCPY; W/THERAP ASPIRAT
TRACHEOBRONCH INIT $ 577.73
32000 THORACENTESIS-ASPIRAT-INIT/ SUBSQT $ 179.93
36200 INTRO CATH AORTA $ 430.54
36215 SELECT CATH PLCMT ART SYST; EA 1ST
ORDER THORAC $ 549.07
36489 PLCMT CENTRAL VENOUS CATH; PERCUT
OVER AGE 2 $ 179.21
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
36500 VENOUS CATH SELECT ORGAN BLD SAMPL $ 257.75
36620 ART CATH/CANNULAT-SAMPL MONITOR
(SEP PRO); PERQ $ 139.23
70210 RAD EXAM SINUSES PARANASAL LESS
THAN 3 VIEWS $ 54.47
70220 RAD EXAM SINUSES PARANASAL COMPLT
MINI 3 VIEWS $ 72.83
71020 RAD EXAM CHEST 2 VIEWS FRONTAL &
LAT $ 58.75
71260 CAT THORAX; W/CONTRAST MAT $ 553.25
75774 ANGIO SELECT EA ADD VESSEL-AFTER
BASIC EXAM-S&I $ 813.96
80019 AUTO MULTICHANNEL TEST; 19/MORE
CHEM TESTS $ 19.58
82803 GASES BLD ANY COMBO-PH/
PCO2/PO2/CO2/HCO2 $ 56.92
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85027 BLD CT; HG & PLATELET CT AUTOMATED $ 20.81
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
93503 INSRT & PLCMT FLO DIREC
CATH-MONITOR PURPOSES $ 345.17
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
94060 BRONCHOSPSM EVAL: SPIROM PRE &
POST BRONCHODILAT $ 102.20
94160 VITAL CAPACITY SCREENING TESTS:
TOT CAPACITY $ 34.88
94240 FUNCT RESIDUAL CAPACITY/ RESIDUAL
VOLUM: MX METHD $ 74.05
94375 RESPIRATORY FLOW VOLUM LOOP $ 62.42
94656 VENTILATION ASSIST & MGMT; 1 ST DA $ 151.16
94657 VENTILATION ASSIST & MGMT; SUBSQT
DA $ 91.80
94720 CARBON MONOXIDE DIFFUS CAPACITY
ANY METHD $ 83.84
94760 NONINVASIVE EAR/PULSE OXIMETRY-O2
SAT; 1 DETERM $ 16.52
94761 NONINVASIVE EAR/PULSE OXIMETRY O2
SAT; MX DETERM $ 42.84
RADIOLOGY
70470 CONTRAST CAT SCAN OF HEAD $ 556.31
70551 MAGNETIC IMAGE, BRAIN (MRI) $ 831.71
70553 MAGNETIC IMAGE, BRAIN $1,762.56
71010 CHEST X-RAY $ 45.90
71020 CHEST X-RAY $ 58.75
72100 X-RAY EXAM OF LOWER SPINE $ 61.81
72110 X-RAY EXAM OF LOWER SPINE $ 85.68
72131 CAT SCAN OF LOWER SPINE $ 473.69
72148 MAGNETIC IMAGE, LUMBAR SPINE $ 908.21
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
73610 X-RAY EXAM OF ANKLE $ 48.96
73620 X-RAY EXAM OF FOOT $ 45.29
73630 X-RAY EXAM OF FOOT $ 48.96
73721 MAGNETIC IMAGE, JOINT OF LEG $ 815.18
74160 CONTRAST CAT SCAN OF ABDOMEN $ 541.62
76091 MAMMOGRAM, BOTH BREASTS $ 135.86
76700 ECHO EXAM OF ABDOMEN $ 197.68
76805 ECHO EXAM OF PREGNANT UTERUS $ 222.77
76815 ECHO EXAM OF PREGNANT UTERUS $ 148.72
76830 ECHO EXAM, TRANSVAGINAL $ 159.73
76856 ECHO EXAM OF PELVIS $ 159.73
77413 RADIATION TREATMENT DELIVERY $ 145.04
77430 WEEKLY RADIATION THERAPY $ 332.93
78465 HEART IMAGE (3D) MULTIPLE $ 865.98
RHEUMATOLOGY
20550 INJ TENDON SHEATH/LIG/ TRIGGER
PT/GANGLION CYST $ 104.45
20600 ARTHROCENTESIS/ASPIR/INJ; SM
JT/BURSA/CYST $ 96.29
20605 ARTHROCENTESIS/ASPIR/INJ; INTERMED
JT/BURSA/CYST $ 96.29
20610 ARTHROCENTESIS/ASPIR/INJ; MAJOR
JT/BURSA $ 105.26
21345 CLO TX NASOMAXIL FX W/ INTERDENTAL
FIXA/SPLINT $1,333.34
72050 RAD EXAM SPINE CERV; MINI 4 VIEWS $ 84.46
72110 RAD EXAM SPINE LUMBOSACRAL; COMPLT
W/ OBLIQ VIEWS $ 85.68
73120 RAD EXAM HAND; 2 VIEWS $ 45.29
73560 RAD EXAM KNEE; ANTEROPOSTERIOR &
LAT VIEWS $ 47.74
73620 RAD EXAM FT; ANTEROPOSTERIOR & LAT
VIEWS $ 45.29
85023 BLD CT; HG/PLATELET CT AUTO &
MANUAL WBC $ 24.48
85024 BLD CT; HG/PLATELET CT AUTO & AUTO
PART WBC $ 23.26
85025 BLD CT; HG/PLATELET CT AUTO & AUTO
COMPLT WBC $ 23.26
85027 BLD CT; HG & PLATELET CT AUTOMATED $ 20.81
85651 SED RATE ERYTHROCYTE NON-AUTOMATED $ 9.18
90780 IV INFUS THERAP/DX-BY PHYS/
SUPERVS; TO 1 HR $ 69.77
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
94010 SPIROMETRY W/RECRD-TOT & TIMED
VC-EXPIR FLO RATE $ 55.08
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
95860 NEEDLE EMG; 1 EXTREM & RELATED
PARASPINAL AREAS $ 130.97
95900 NERV CONDUCT VELOCITY/ LATENCY
STDY; MOTR EA NERV $ 66.71
95904 NERV CONDUC VELOCITY/ LATENCY
STDY; SENSRY EA NRV $ 57.53
96545 PROVISION CHEMOTX AGENT $ 46.51
99000 HANDL &/OR CONVEY SPECMN-TRANSF
OFFIC TO LAB $ 20.81
UROLOGICAL SURGERY
50220 NEPHRECTOMY INCL PART URETERECTOMY
W/RIB RESECT $2,193.41
50230 NEPHRECTOMY; RADICAL W/ REGIONAL
LYMPHADENECTOMY $2,913.12
50590 LITH EXTRACORPOREAL SHOCK WAVE $1,418.72
50780 URETERONEOCYSTOSTOMY; ANASTOM SNGL
URETER $2,310.50
51726 COMPLX CYSTOMETROGRAM $ 223.48
51840 ANT VESICOURETHROPEXY/
URETHROPEXY; SIMPL $1,446.56
51845 ABD-VAG VESICAL NECK SUSPEN W/WO
ENDO CONTRL $1,489.40
52000 CYSTOURETHROSCOPY (SEPART PROC) $ 248.47
52005 CYSTOURETHROSCOPY W/ URETERAL CATH
EXCLUS-RAD $ 342.01
52240 CYSTOURETHROSCOPY W/FULG &/OR
RESECT; LG TUMOR $1,528.67
52281 CYSTOURETHROSCOPY W/ CALIBRAT &/OR
DILAT URETHRAL $ 381.28
52310 CYSTOURETHROSCOPY W/ REMOV F B
(SEP PRO); SIMPL $ 435.54
52320 CYSTOURETHROSCOPY; W/ REMOV
URETERAL CALCU $ 716.14
<CAPTION>
CPT-4
CODE DESCRIPTION FEE
- ----------- ---------------------------------- ---------
<C> <S> <C>
52332 CYSTOURETHROSCOPY W/ INSRT
INDWELLING STENT $ 454.10
52335 CYSTOURETHROSCOPY W/ URETEROSCOPY
&/OR PYELOSCOPY $ 785.40
52336 CYSTOURETHROSCOPY W/ URETEROSCOPY;
W/REMOV CALCU $1,190.95
52337 CYSTOURETHROSCOPY W/ URETEROSCOPY;
W/LITH $1,375.16
52601 T U R P INCL CONTRL POSTOP
BLEEDING COMPLT $1,752.16
54161 CIRCUMCISION SURG EXC NOT
CLAMP/SLIT; EX NB $ 401.27
54640 ORCHIOPEXY-ING APPROACH-W/WO
HERNIA REPR $1,090.99
55040 EXC HYDROCELE; UNILAT $ 755.41
55250 VASECTOMY UNILAT/BILAT (SEP PRO)
W/POSTOP SEMEN $ 436.97
55700 BX PROSTATE; NEEDLE/PUNCH SNGL/MX
ANY APPROACH $ 229.91
55845 PROSTATECTOMY RETROPUBIC RAD;
W/BILAT LYMPHADEN $3,874.88
76870 ECHO SCROTUM & CONTENTS $ 154.22
76872 ECHO TRANSRECTAL $ 159.73
81000 UA DIP STICK/TABLET REAGENT;
W/MICRO $ 7.96
84150 PROSTAGLANDIN EA $ 72.22
86316 IMMUNOASSAY TUMOR ANTIG EA $ 39.78
87086 CULTURE BACTERIAL URIN; QUAN
COLONY CT $ 15.30
87088 CULTURE BACTERIAL URIN; IDENT ADD
QUAN/KIT $ 19.58
90782 THERAP/DX INJ; SUBQ/IM $ 6.73
90784 THERAP/DX INJ; IV $ 29.99
90788 IM INJ ANTIBIOTIC $ 7.34
96400 CHEMOTX ADMIN SUBCUT/IM W/WO LOCAL
ANES $ 8.57
96545 PROVISION CHEMOTX AGENT $ 46.51
</TABLE>
C-15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and Bylaws of the Company provide that the
Company shall indemnify its officers and directors to the full extent permitted
by law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 7,274
Printing and Engraving Expenses................................. 40,000
Accounting Fees and Expenses.................................... 135,209
Consultant Fees................................................. 370,829
Legal Fees and Expenses......................................... 360,887
Blue Sky Fees and Expenses...................................... 25,000
Transfer Agent's Fees and Expenses.............................. 12,000
Actuarial Fees and Expenses..................................... 133,209
Miscellaneous Expenses.......................................... 25,000
---------
Total........................................................... $1,109,408
---------
---------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold three shares of its Class C Common Stock to MedServ in a
private placement on September 1996 and raised $12,000 of gross proceeds
therefrom.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
ITEM #
- ---------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Certificate of Incorporation of the Registrant*
3.2 -- Bylaws of the Registrant*
4.1 -- Form of Stock Certificate*
5.1 -- Opinion of Fabiani & Kone, P.C.*
10.1 -- Form of Physician Participation Agreement with IPA**
10.2 -- Form of Hospital Participation Agreement with MedServ**
10.3 -- Form of Physician Attachments
10.4 -- Form of Stock Subscription Agreement
10.5 -- Loan Agreement, dated November 25, 1996, between the Company and Fleet Bank**
10.6 -- Line of Credit Note, dated November 25, 1996, issued to Fleet National Bank in principal amount of
$650,000**
10.7 -- Management Agreement by and between MedServ of Connecticut, Inc. and Registrant
10.8 -- IPA Agreement between MedServ of Connecticut, Inc. and MedServ IPA, Inc.
10.9 -- Form of Escrow Agreement with State Street Bank & Trust Company
23.1 -- Consent of Fabiani & Kone, P.C. (included in Exhibit 5.1)
23.2 -- Consent of Arthur Andersen LLP
24.1 -- Power of Attorney--Included on Page II-3
</TABLE>
- ------------------------
* To be filed by amendment
** Previously Filed
II-1
<PAGE>
ITEM 28. UNDERTAKINGS
Registrant undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (i)Include any
prospectus required by section 10(a)(3) of the Securities Act; (ii)Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the formation in the registration
statement; and notwithstanding the foregoing, an increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than
a 20% charge in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement. (iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Certificate of Incorporation and
Bylaws, the Connecticut Corporation Act, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
registration statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized in Cheshire, Connecticut on June 17,
1997.
Physicians Care for Connecticut, Inc.
By: /s/ JOSEPH R. COFFEY
------------------------------------------
Name: Joseph R. Coffey
Title: Chief Executive Officer
We, the undersigned officers and directors of Physicians Care for
Connecticut, Inc. hereby severally constitute and appoint Joseph R. Coffey and
Edward J. Berns, Esq. and each of them singly, our true and lawful attorneys,
with full power to them and each of them singly to sign for us and in our names
in the capacities indicated below, the Registration Statement on Form SB-2 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and, in connection with any registration of additional
securities pursuant to Rule 462(b) under the Securities Act of 1933, to sign any
abbreviated registration statement and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, in each case, with the Securities and Exchange Commission, and
generally to do all such things in our names and on our behalf in our capacities
with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
Director and Chief
/s/ JOSEPH R. COFFEY Executive Officer
- ------------------------------ (principal executive June 17, 1997
Joseph R. Coffey officer)
* Chairman of the Board of
- ------------------------------ Directors and President June 17, 1997
Craig W. Czarsty, MD
* Director
- ------------------------------ June 17, 1997
John M. Aversa, MD
* Director
- ------------------------------ June 17, 1997
Joseph A. Balsamo, MD
Director
- ------------------------------ June , 1997
Neil H. Brooks, MD
* Director
- ------------------------------ June 17, 1997
Ellen R. Fischbein, MD
Director, Chief Financial
* Officer and Treasurer
- ------------------------------ (principal financial and June 17, 1997
John B. Franklin, MD accounting officer)
II-3
<PAGE>
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
Director and Secretary
- ------------------------------ June , 1997
F.J. Montegut, MD
* Director
- ------------------------------ June 17, 1997
N. Chandra Narayanan, MD
Director
- ------------------------------ June , 1997
John W. Rodgers, MD
* Director
- ------------------------------ June 17, 1997
Earl J. Sittambalam, MD
* By: Edward J. Berns,
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM # PAGE
- --------- -----
<C> <S> <C> <C>
1.1 -- Form of Underwriting Agreement*.............................................................
3.1 -- Certificate of Incorporation of the Registrant*.............................................
3.2 -- Bylaws of the Registrant*...................................................................
4.1 -- Form of Stock Certificate*..................................................................
5.1 -- Opinion of Fabiani & Kone, P.C.*............................................................
10.1 -- Form of Physician Participation Agreement with IPA**........................................
10.2 -- Form of Hospital Participation Agreement with MedServ**.....................................
10.3 -- Form of Physician Attachments...............................................................
10.4 -- Form of Stock Subscription Agreement........................................................
10.5 -- Loan Agreement, dated November 25, 1996, between the Company and Fleet Bank**...............
10.6 -- Line of Credit Note, dated November 25, 1996, issued to Fleet National Bank in principal
amount of $650,000**........................................................................
10.7 -- Management Agreement by and between MedServ of Connecticut, Inc. and Registrant.............
10.8 -- IPA Agreement between MedServ of Connecticut, Inc. and MedServ IPA, Inc.....................
10.9 -- Form of Escrow Agreement with State Street Bank & Trust Company.............................
23.1 -- Consent of Fabiani & Kone, P.C. (included in Exhibit 5.1)...................................
23.2 -- Consent of Arthur Andersen LLP..............................................................
24.1 -- Power of Attorney--Included on Page II-3....................................................
</TABLE>
- ------------------------
* To be filed by amendment
** Previously Filed
<PAGE>
EXHIBIT 10.3
MEDSERV IPA, INC.
PHYSICIANS CARE FOR CONNECTICUT, INC.
PRIMARY CARE PHYSICIAN ATTACHMENT
I, ____________________, with a principal business address at
_____________ __________________________, acknowledge that I am a
participating provider in MedServ IPA, Inc. ("MedServ IPA"), and I agree as
follows:
1. I agree to be a participating provider in all Physicians Care for
Connecticut, Inc. ("Physicians Care") products for which MedServ IPA and its
participating physicians and Physicians Care share financial risk under the
terms of the [NETWORK/INSURER AGREEMENT] dated as of [DATE]. I agree to be
bound by all terms and conditions of such Agreement.
2. Recognizing that I must elect to participate in any Physicians Care
product for which I will be paid on a fee-for-service basis without
financial risk (the "Non-Risk Products"), the following constitutes my
election:
_____ I will participate in Non-Risk Products.
_____ I will not participate in Non-Risk Products.
3. I agree:
(i) to assume responsibility for the total management of the health
care of any Enrollee who has designated me as their Primary Care
Physician under any Physicians Care product requiring selection
of a Care Manager
(ii) to provide Enrollees regular preventative health examinations and
services (E.G., immunizations, hypertension screening) as
recommended by MedServ IPA and Physicians Care; and
(iii) to offer Enrollees such health education as deemed appropriate
pursuant to MedServ IPA and Physicians Care guidelines.
4. I shall maintain an open panel of patients; provided, however, that
my practice may be closed provided that it is closed to enrollees of all
managed care payors with whom I contact and for all products offered by such
payors. In the event that I do close my panel, I may accept immediate family
members of existing patients or patients with whom I have had a pre-existing
relationship in the immediately preceding thirty-six (36) months.
IN WITNESS WHEREOF, the undersigned have set their hands and seals this
___day of _________, 1997.
PHYSICIANS CARE FOR
CONNECTICUT, INC.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
By: Physician
</TABLE>
<PAGE>
MEDSERV IPA, INC.
PHYSICIANS CARE FOR CONNECTICUT, INC.
SPECIALTY PHYSICIAN ATTACHMENT
I, ______________, with a principal business address at ____________________
__________________________, acknowledge that I am a participating provider
in MedServ IPA, Inc. ("MedServ IPA"), and I agree as follows:
1. I agree to be a participating provider in all Physicians Care for
Connecticut, Inc. ("Physicians Care") products for which MedServ IPA and
its participating physicians share financial risk pursuant to the terms of
the [NETWORK/INSURER AGREEMENT] dated as of [DATE]. I agree to be bound by
all terms and conditions of such Agreement.
2. Recognizing that I must elect to participate in any Physicians Care
product for which I will be paid on a fee-for-service basis without
financial risk (the "Non-Risk Products"), the following constitutes my
election:
_____ I will participate in Non-Risk Products.
_____ I will not participate in Non-Risk Products.
3. I shall maintain an open panel of patients; provided, however, that
my practice may be closed provided that it is closed to enrollees of all
managed care payors with whom I contact and for all products offered by such
payors. Notwithstanding the foregoing, in the event that I do close my
panel, I may accept immediate family members of existing patients or
patients with whom I have had a pre-existing relationship in the immediately
preceding thirty-six (36) months.
IN WITNESS WHEREOF, the undersigned have set their hands and seals this
___day of _________, 1997.
PHYSICIANS CARE FOR
CONNECTICUT, INC.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
By: Physician
</TABLE>
<PAGE>
EXHIBIT 10.4
APPENDIX D
Physicians Care for Connecticut, Inc.
SUBSCRIPTION AGREEMENT
(Individual Physician)
<TABLE>
<S> <C>
NAME & ADDRESS
Print (or type) below the name and address to
whom you would like your stock certificate sent
- ------------------------------------------------ Your Name
(Name)
- ------------------------------------------------ Your Street Address (No P.O. Boxes please, since
(Address) stock will be sent registered mail)
- ------------------------------------------------ Your City and State
(City) (State)
---------- Your Zip Code
(Zip)
- --------------------------------------------------------------------------------------------------
STOCK REGISTRATION
- ------------------------------------------------ Stock must be listed by individual name. Include
(Name) the first name, middle initial and last name of
Please Print or Type the shareholder. Avoid the use of two initials.
Please omit words that do not affect ownership
rights, such as "Mrs." "Mr." "Dr." "special
account," "single person," etc.
IF STOCK IS TO BE LISTED IN A CORPORATE OR
PRACTICE NAME, PLEASE USE SUBSCRIPTION AGREEMENT
(GROUP).
- --------------------------------------------------------------------------------------------------
PHONE & FAX NUMBERS
( ---) --------------------- Phone All telephone numbers will be kept confidential.
( ---) --------------------- Fax Telephone numbers will not be used for any
( ---) --------------------- Phone solicitation purposes.
( ---) --------------------- Fax
- --------------------------------------------------------------------------------------------------
MEDICAL ASSOCIATION MEMBERSHIP
/ / I am now a member of my state and/or county Subscribers must be members in County Medical
Medical societies. I hereby affirm that I Society (if a county medical association exists
previously have filed an application for in such county) and the State Medical
such membership. Association if available, or apply for such
membership.
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SHARES PURCHASED AND PRICE
A.Primary Care Physicians (See definition of Every physician must purchase one share of Class
Primary Care Physician ("PCP") contained on A Common Stock. No Physician may purchase more
page 48 of the Prospectus): than one share of Class A
Common Stock.
1 Class A Shares: (NOTE: PCPS MAY ONLY PURCHASE
1 SHARE OF CLASS A STOCK)
@ $3,000 per share if shares purchased ------------------------------------------------
before --------------------- $
--------------
@ $4,000 per share if shares purchased
after--------------------- $
--------------
Class B shares: (NOTE: PCPS MAY PURCHASE AS Specialist Physicians must purchase at least one
MANY CLASS B SHARES AS DESIRED BUT ARE NOT share of Class B Stock. There is no limit on the
REQUIRED TO PURCHASE ANY CLASS B SHARES) number of Class B shares which can be purchased
by any physician.
@ $3,000 per share if shares purchased
before --------------------- $
-------------- See definition of Specialist Physician contained
@ $4,000 per share if shares purchased on Page of the Prospectus.
after--------------------- $
--------------
Total: $ ------
B. Specialist Physician (See definition of The PROMPT SUBSCRIPTION DEADLINE is , For
Specialist Physician contained on page 48 of Subscription Documents Received on or before the
the Prospectus): Prompt Subscription Deadline, the Price is
1 Class A shares: (NOTE: SPECIALISTS MAY ONLY $3,000 per share (Class A or Class B). For
PURCHASE 1 SHARE OF CLASS A STOCK) Subscription documents received after the Prompt
@ $3,000 per share if shares purchased Subscription Deadline, the price is $4,000 per
before --------------------- $ share. Subscription documents are Received if
- -------------- actually delivered to the Subscription Agent, or
@ $4,000 per share if shares purchased postmarked in each case on or before the Prompt
after--------------------- $ Subscription Deadline.
--------------
Total: $ ------
Class B shares: (NOTE: SPECIALISTS MUST
PURCHASE AT LEAST ONE SHARE OF CLASS B STOCK;
HOWEVER, AFTER PURCHASING A SHARE OF CLASS B
STOCK, SPECIALISTS MAY PURCHASE AS MANY CLASS B
SHARES AS DESIRED)
@ $3,000 per share if shares purchased
before --------------------- $
--------------
@ $4,000 per share if shares purchased
after--------------------- $
--------------
C. Hospital Investors.
Class B shares: (NOTE: HOSPITALS MAY NOT
PURCHASE CLASS A SHARES)
(NOTE: LICENSED HOSPITALS ARE REQUIRED TO
PURCHASE NOT LESS THAN 62.50 SHARES OF CLASS B
STOCK AT $4,000 DOLLARS PER SHARE, PROVIDED,
HOWEVER, THAT IF A VALIDLY LICENSED HOSPITAL
HAS LESS THAN 100 BEDS, THEN THE HOSPITAL IS
REQUIRED TO PURCHASE NOT LESS THAN 25 SHARES
OF CLASS B STOCK AT $4,000 PER SHARE.)
$ ------
Total: $ ------
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
CHECK PAYABLE TO:
State Street Bank & Trust -- Escrow Agent 1) Attach a check for total Purchase Price made
payable to State Street Bank & Trust Escrow
Agent for
--------------------------
- --------------------------------------------------------------------------------------------------
SOCIAL SECURITY NUMBER
- ---- ---- ------- Social Security Number Print (or type) social security number.
- --------------------------------------------------------------------------------------------------
CERTIFICATION OF RESIDENCE
AND LICENSING
I so certify By signing opposite, you certify that you are a
resident of one of the following states (please
check one state):
- -------------------------- / / Connecticut
(Sign Name) / / New York
/ / Rhode Island
/ / Massachusetts
- --------------------------------------------------------------------------------------------------
STOCK TRANSFER AND
REDEMPTION RESTRICTIONS
I so certify By signing opposite, you certify that you have
read and understand the restrictions on transfer
and redemption of the Common Stock set forth in
the Prospectus.
- --------------------------
(Sign Name)
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
REQUIRED DOCUMENTATION
Enclose the following document with signed
Subscription Agreement
/ / Check made payable to: State Street Bank &
Trust Co. -- Escrow Agent
/ / MedServ IPA Participation Agreement
/ / Physicians Care Primary Care Physician
Attachment or Physicians Care
Specialist Physician Attachment
- --------------------------------------------------------------------------------------------------
The undersigned agrees that after receipt by the Subscription Agent, this subscription agreement
may not be modified, withdrawn or canceled without the consent of Physicians Care for Connecticut,
Inc.
Under penalty of perjury, I certify that the Social Security Number and the information provided
in the subscription agreement are true, correct and complete, that I am not subject to back-up
withholding and that I am purchasing for my own account and that there is no agreement or
understanding regarding the transfer of this stock.
I acknowledge and agree that the purchase of the shares of stock in Physicians Care for
Connecticut, Inc. indicated above is subject to the terms, conditions, restriction, limitations
and obligations set forth in the prospectus.
Signature Date
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Newbury, Piret & Co., Inc.
Subscription Agent
1 Boston Place
26th Floor
Boston, MA 02108
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MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of June 1997, by and between MedServ of
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 (the "Manager") and Physicians Care for
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 ("Physicians Care").
WHEREAS, Physicians Care is organized under the laws of the State of
Connecticut and expects to obtain a license to do business as a health
maintenance organization ("HMO") in Connecticut, and may apply for a similar
license in other states, or may seek to be licensed to offer additional products
in the State of Connecticut;
WHEREAS, Physicians Care desires to purchase management and administrative
services to support its insurance business (the "Services");
WHEREAS, Manager has the resources and expertise to provide the Services and
Manager desires to provide such Services to Physicians Care; and
WHEREAS, the parties mutually desire to provide or arrange for the
provision of quality and cost effective care to enrollees in Physicians
Care's health plans (the "Plans") and to develop and operate Physicians Care
in a businesslike manner.
NOW, THEREFORE, in consideration of the mutual promises herein stated and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
I. AUTHORITY OF THE PARTIES
1.1 ENGAGEMENT OF MANAGER. Physicians Care hereby engages Manager as its
manager to operate Physicians Care in an efficient and businesslike manner and
in a manner that promotes quality healthcare in accordance with the terms
hereof. Manager hereby accepts the engagement.
1.2 DUTIES OF MANAGER. Physicians Care, acting through its Board of
Directors (the "Board of Directors") and in accordance with its Certificate of
Incorporation and Bylaws, shall at all times exercise ultimate authority over
the policies, assets and operations of Physicians Care and shall retain the
ultimate authority and responsibility regarding the powers, duties and
responsibilities vested in Physicians Care by law and regulation. Subject to the
foregoing and all other terms of this Agreement, Physicians Care hereby grants
and delegates to Manager the general authority to supervise and manage
Physicians Care on a day-to-day basis, subject to the direction of the
Physicians Care Board of Directors. Manager's specific responsibilities include,
but are not necessarily limited to, those set forth in Section II herein.
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1.3 PHYSICIANS CARE APPROVALS. If Physicians Care is required or
permitted hereunder to take any action or give any approval, Manager shall be
entitled to rely upon the statements of one or more representative(s)
designated by resolutions adopted by Physicians Care's Board of Directors, to
act on its behalf. If no representative(s) are so designated, all necessary
actions shall be taken and approvals shall be given by the Board of Directors
of Physicians Care on a timely basis.
1.4 MAINTENANCE OF SOUND OPERATIONS. Physicians Care shall conduct its
affairs in accordance with the provisions of any state and federal laws and
regulations to which it is subject. Physicians Care shall honor all legitimate
debts and obligations to its creditors.
II. MANAGEMENT SERVICES
2.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall perform all
management, administrative and other services that are reasonably necessary
for Physicians Care's financial stability, Physicians Care's competent and
efficient operations, and implementation of Physicians Care's policies as
established by Physicians Care's Board of Directors, including but not
limited to those services set forth in the remainder of this Section II. In
addition, Manager shall provide Physicians Care with all clerical services
reasonably required for the operation of an HMO. Manager shall use its best
efforts to act in a prompt, competent and businesslike manner to perform its
duties hereunder in good faith. Manager shall retain, in Physicians Care's
name and on Physicians Care's behalf and at Physicians Care's expense, such
accounting, actuarial, legal, and other purchased services as in Manager's
determination pursuant hereto that Physicians Care shall reasonably require
from time to time. Manager shall not be excused from its obligations to
provide management services hereunder on behalf of Physicians Care except to
the extent that Physicians Care refuses or is unable to expend funds as required
hereunder, execute agreements, or otherwise to act in a manner that
unreasonably prevents or constrains Manager from performing its
responsibilities under the Agreement.
2.2 APPLICATION FOR LICENSE AND PERMITS/REGULATORY REQUIREMENTS. Manager
shall apply for and use its best efforts to obtain and maintain, on behalf of
Physicians Care, all licenses, certificates, registrations and permits
required in connection with the management and operation of an HMO or any
other activity in which Physicians Care will engage as determined by the
Board of Directors. Physicians Care shall cooperate with Manager in applying
for, obtaining, and maintaining such licenses, certificates, registrations
and permits. Manager shall notify Physicians Care of changes in regulatory
requirements applicable to Physicians Care's business as soon as reasonably
possible, which notice shall state the actions which must be undertaken by
Physicians Care and/or Manager on its behalf to comply
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therewith. Manager shall propose a specific plan by which Physicians Care
will obtain National Committee for Quality Assurance Accreditation. Manager
shall periodically review the sufficiency of such agreements and shall
recommend to the Board of Directors modifications thereof which Manager
reasonably determines are necessary to comply with law or industry standards
or which will promote enrollment in Physicians Care's Plans.
2.3 SUBSCRIBER AGREEMENTS. Manager shall, in the name of and on behalf of
Physicians Care, negotiate and enter into agreements with employer groups or
individuals as necessary and/or appropriate to sell Physicians Care's Plans as
services.
2.4 UNDERWRITING. Manager shall be responsible for providing or securing
underwriting services necessary to establish the annual per capita revenue
requirement for each product offered by Physicians Care including all relevant
adjustments thereto for age/sex, health status, employer group size, rating
region, experience or plan types (e.g. family, spousal or individual) to develop
the budget of medical costs including line items for each category of medical
costs, and to complete any regulatory filing or to obtain regulatory approval
for the marketing and establishment of premium for each product, including the
rating and underwriting of accounts.
2.5 ENROLLEE MATERIALS. Manager shall be responsible for preparing and
revising, as appropriate, materials intended to inform or educate individuals
enrolled in Physicians Care's Plans (the "Enrollees") regarding terms and
conditions of the Plans, administrative procedures and Enrollee
responsibilities.
2.6 GRIEVANCE PROCEDURE. Manager shall be responsible for developing and
implementing a written grievance and complaint procedure for Physicians Care's
members.
2.7 ENROLLEE MANAGEMENT. Manager shall be responsible for obtaining or
providing Physicians Care with necessary services related to Enrollee
services and records, including receiving all documents necessary to confirm
enrollment, maintenance of accurate eligibility information, processing of
all Enrollee additions and deletions, and obtaining from Enrollees a general
consent for the release of medical and financial information to Physicians
Care and its Providers (whether directly or indirectly through MedServ IPA,
Inc. or any other party) as reasonably necessary to administer the Plans.
2.8 MARKETING AND ADVERTISING. Manager shall be responsible for developing
and implementing a marketing plan for Physicians Care, including a comprehensive
public relations and advertising program, designed to promote public awareness
of Physicians Care and enrollment in its Plans.
2.9 SALES. Manager shall be responsible for selling Physicians Care's
products whether directly or through a network of brokers and to document such
sales through execution of Subscriber Agreements.
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2.10 ACCOUNTING AND FINANCIAL SUPPORT. Manager shall be responsible for
establishing and administering accounting procedures and controls, and systems
for the preparation of appropriate financial, utilization, membership and
medical management reports for the efficient management and planning of
Physicians Care's business operations, systems for the billing of accounts and
the collection of accounts receivable, and systems to improve or expedite
providers access to relevant enrollment, claims and clinical information. The
foregoing shall include, but shall not be limited to:
a. Manager shall be responsible for preparing and presenting to
Physicians Care an annual operating and capital budget with appropriate
membership, revenue, and detailed line item cost estimates for each Plan
(the "Plan Budget"). Upon its adoption, the Plan Budgets shall serve as a
basis for the operation of Physicians Care during the year to which it is
related. All Plan Budgets shall be subject to the approval of Physicians Care.
b. Manager shall submit as soon as practicable but not less than
sixty (60) days prior to (i) the expiration of the initial Offering Period
for the Start-up and "Initial Operations" stages, and (ii) the first day of
each fiscal year of Physicians Care an administrative services budget with
detailed line item cost estimates for all Services contemplated to be
provided hereunder (the "Administrative Services Budget"). The start-up stage
shall commence as of the completion of the offering of Common Stock
contemplated by Physicians Care through the effective date of enrollment of
the first Enrollee in a Plan. The Initial Operations phase shall commence the
effective date of enrollment of the first Enrollee in a Plan and terminate on
the last day of the month in which Physicians Care attains a positive net
income from operations but not later than thirty-six (36) months after
commencement of the Initial Operations stage. The Administrative Services
Budget shall be the basis for compensation of the Manager pursuant to Section
VII.
c. Manager shall cause to be delivered to Physicians Care certain
financial statements and reports, including the following:
(i) Within forty-five (45) days after the close of each month, financial
statements for the preceding month and the fiscal year to date (unaudited
but consistent with generally accepted accounting principles ("GAAP")
consistently applied, except as directed by the Board of Directors)
containing a statement of income and expenses in reasonable detail,
variances from budget by Plan and in aggregate and such other financial
reports as Physicians Care may reasonably request from time to time;
(ii) Within sixty (60) days after the close of a fiscal year, financial
statements for the preceding fiscal year, prepared in accordance with GAAP
consistently applied, which shall be audited by an independent certified
public accounting firm approved by Physicians Care at Physicians Care's
expense, plus such other financial reports as Physicians Care may reasonably
request from time to time;
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(iii) Within time frames prescribed by regulatory authorities, financial
statements and other such reports prepared in accordance with standards
prescribed or permitted by such regulatory authorities;
(iv) Monthly and year-to-date summary reports regarding the utilization
and cost of health services and supplies;
(v) Marketing and enrollment reports for each Plan and as requested by
Physicians Care, indicating Enrollee demographics and employer profiles; and
(vi) If specifically requested by the Physicians Care's Board of
Directors, report(s) evaluating and making recommendations regarding the
performance by Manager or any of its designees of its obligations under this
Agreement, which report(s) shall be prepared at Physicians Care's expense by
a certified public accounting firm chosen by Manager with the approval of
Physicians Care which approval shall not be unreasonably withheld.
d. Manager shall be responsible for developing and implementing
accounting procedures appropriate to Physicians Care's operation.
e. Manager shall be responsible for preparing medical management
reports to assist providers in the evaluation of practice patterns for the
following categories: (i) by physician, (ii) by Member, (iii) by CPT-4 Code,
(iv) by diagnosis code, or (v) in such other format as may be reasonably
requested by Physicians Care.
f. Manager shall be responsible for preparing such other reports as
Physicians Care shall reasonably request.
2.11 CLAIMS ANALYSIS AND STATISTICAL REPORTING. As reasonably required and
requested by Physicians Care, Manager shall prepare and deliver to Physicians
Care reports setting forth various information and statistics regarding
utilization of services by Enrollees or performance of various operating
departments or divisions of Physicians Care.
2.12 PARTICIPATING PROVIDERS AND CREDENTIALING. 2.12.1 Manager shall, on
behalf of Physicians Care, be responsible for preparation and implementation of
contracts with providers of healthcare services or organizations thereof (I.E.,
physicians, IPAs, hospitals, etc.) with which or with whom Manager contracts,
to provide (or to arrange to provide) healthcare services to
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Enrollees (such contracting Providers are sometimes collectively referred
to herein as "Providers"). Manager is expressly authorized to contract with
MedServ IPA to make available a physician network in fulfillment of a
portion of its responsibilities under this subsection 2.12.2, provided that
under such contract MedServ shall have a right to terminate the contract in
the event that MedServ IPA contracts with an HMO licensed in Connecticut (the
"Competitor Contract") to make available the Physician Network to provide
healthcare services. MedServ agrees to issue notice of termination of such
contract upon receipt from Physicians Care of a certificate of an officer of
Physicians Care setting forth a resolution of Physicians Care's Board
determining in its reasonable judgment that the Competitor Contract is
contrary to the best interests of Physicians Care. The Manager shall cause
MedServ IPA to give notice to the Manager within five (5) days of execution
of a Competitor Contract.
Manager shall cause all contracts between Providers and MedServ IPA
or Physicians Care to contain terms required by law and consistent with the
Subscriber Agreements and as reasonably designed to promote enrollment in
Physicians Care's Plans. Such contracts shall specify that Providers shall
not, under any circumstances, seek payment from Enrollees for Covered
Services (as defined in the applicable Subscriber Agreement) provided to
Enrollees, except for copayments, deductibles or coinsurance amounts
specified in the applicable Subscriber Agreement with Physicians Care.
2.12.2 Manager shall periodically report to the Board of Directors
the status of Physicians Care's Provider networks and make recommendations
regarding additions/deletions from the Provider network.
2.12.3 Manager, on behalf of Physicians Care, shall conduct
credentialing activities for Physicians Care pursuant to credentialing
standards approved by the Board of Directors. Manager shall periodically
provide to the Board of Directors a comparison of Physicians Care's
credentialing standards to national standards and those of competitors.
2.13 QUALITY STANDARDS. Manager shall manage Physicians Care and shall
cause other agents or designees of Physicians Care, to perform their
responsibilities in a manner that enables Physicians Care to meet NCQA
accreditation standards and such other accreditation standards as reasonably
requested by Physicians Care's Board of Directors.
2.14 QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. Manager shall be
responsible for development, recommendation and implementation of quality
management, utilization review, and similar programs.
2.15 MANAGEMENT INFORMATION SYSTEM. Subject to the approval of the Board
of Directors, Manager shall be responsible for providing or arranging for the
provision of a management information services ("MIS") appropriate for the
management of Physicians Care's operations.
2.16 PLANNING AND PRODUCT DEVELOPMENT. Manager shall prepare business
plans for the Board of Directors as requested by the Board. Manager shall
periodically survey the plan design and benefits of competitors and shall make
recommendations regarding modification of Plan design and introduction of new
Plans.
2.17 DEPOSIT AND DISBURSEMENT OF FUNDS. 2.17.1 Manager shall open and
maintain an Operating Account and such other bank accounts in Physicians Care's
name in accordance with requirements of state and federal laws and as authorized
by the Board of Directors, shall deposit in such Operating Account all monies
received arising from the operation of Physicians Care and shall make
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disbursements from such Operating Account and other bank accounts on behalf
of Physicians Care in such amounts and at such times as the same are required
and as directed by the Board of Directors. Signatories and approvals as to
amounts on all checks shall be in accordance with the duly adopted policies
of the Board of Directors, which policies shall not adversely affect the
Manager's ability to perform its duties hereunder.
2.17.2 Physicians Care agrees to establish an Administrative Services
Account and to deposit monthly in advance into such account the amounts
estimated pursuant to the Administrative Services Budget to be due for such
month to the Manager for Services hereunder.
2.17.3 Manager shall recommend to the Board of Directors reasonable
and prudent investment guidelines that comply with applicable state and
federal laws and shall have authority to invest any surplus funds on behalf
of Physicians Care subject to guidelines approved by its Board of Directors.
2.18 LEGAL ACTIONS AND COUNSEL. Manager shall notify Physicians Care
immediately of any and all legal actions brought against Physicians Care. In
addition, Manager shall provide the services of a General Counsel for Physicians
Care as outlined in Section IV below.
2.19 REPORTS. Manager shall be responsible for the preparation and
provision of such reports as may be required by any regulatory agency having
jurisdiction over the operations of Physicians Care including, but not limited
to, those required by state governmental agencies, the Health Care Financing
Administration, and the Internal Revenue Service.
2.20 GOVERNMENT REGULATIONS. Manager shall use all reasonable efforts,
within the scope of its authority and responsibilities hereunder, to ensure that
Physicians Care complies with the requirements of any applicable state or
federal statute, ordinance, law, rule, regulation, or order of any governmental
or regulatory body having jurisdiction over Physicians Care, including any
applicable requirements relating to federal qualification. Manager shall notify
the Board of Directors if the Manager reasonably determines that Physicians Care
is not compliant with any governmental regulation.
2.21 ANCILLARY AND OTHER AGREEMENTS. In Physicians Care's name and at
Physicians Care's expense, Manager shall negotiate and cause Physicians Care to
enter into such agreements as Manager may deem necessary or advisable in
accordance with Physicians Care Board policy, for the furnishing of those goods
and services necessary and appropriate for the maintenance and operation of
Physicians Care which are Physicians Care's responsibility under this Agreement.
Any such agreement which may involve a conflict of interest shall be disclosed
to and be subject to the prior approval of Physicians Care's Board of Directors,
which approval shall not be unreasonably withheld. Provided that such agreements
are negotiated, entered into and administered at arm's length, Manager shall be
permitted to enter into and perform such contracts with Physicians Care.
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2.22 CAPITAL EXPENDITURES. Manager shall review and make recommendations
to Physicians Care concerning proposed capital expenditures.
2.23 COOPERATION. Manager agrees to cooperate with Physicians Care or as
directed by the Board of Directors, with any auditor, consultant, legal counsel,
or other party engaged by Physicians Care relating to Physicians Care's products
subject to this Agreement. The Manager agrees to provide such parties at
reasonable times and upon reasonable notice with full and complete access to all
books, records, documents and other information relating to management
activities performed on behalf of Physicians Care.
2.24 POLICIES AND PROCEDURES. Whenever the Manager reasonably determines
that policies and procedures of Physicians Care should be instituted, modified
or deleted to facilitate effective operation of Physicians Care, the Manager
shall make a recommendation to the Board of Directors accordingly.
III. SUPPORT SERVICES
3.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall provide all
clerical services reasonably required, including, but not limited to, claims
processing, member enrollment, and premium billing for Physicians Care's Plans.
Manager shall use its best efforts to act in a prompt, competent and
businesslike manner to perform its duties hereunder in good faith such that
Physicians Care offers a scope of services in support of administration of the
Plans which permits such Plans to be competitive in the marketplace.
3.2 ENROLLEE REGISTRATION. Manager shall be responsible for implementation
and maintenance of such systems and procedures as reasonably directed by
Physicians Care to enroll and disenroll new employer groups and individuals in a
prompt manner, and to maintain a continuous and accurate record of enrollment.
Such systems and procedures shall be installed and be operational no later than
the earliest effective date of any Physicians Care Subscriber Agreement. Such
system must permit Physician Care providers to confirm Enrollee eligibility
status electronically.
3.3 CLAIMS PROCESSING AND ADMINISTRATION. Manager shall be responsible for
the development, implementation, and maintenance of such systems and procedures
as may be reasonably directed by Physicians Care and as may be reasonably
necessary for the appropriate review and timely payment or disapproval of all
claims, with timing of such payments as directed by Physicians Care. Such system
shall use claim forms as approved by Physicians Care and shall capture all
information on such forms in the Manager's data base. Such systems and
procedures shall be installed and operational no later than the earliest
effective date of any Physicians Care Subscriber Agreement. Such system must
provide electronic submission and payment of claims.
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3.4 REFERRAL AUTHORIZATION. Manager shall be responsible for
implementation and maintenance of such systems and procedures as reasonably
directed by Physicians Care to monitor and record any prior authorization or
precertification required from a Physicians Care Manager or Physicians Care as a
condition of payment for Covered Services delivered to Enrollees. Such
authorization and precertification information shall be used as a Condition of
Payment to process and approve claims. Such system must permit Physicians Care
providers to submit such referral information to Physicians Care electronically.
3.5 DATABASE MANAGEMENT. Manager shall be responsible for maintenance and
management of a database of Physicians Care's claims, enrollment, customer
service and quality management information. Manager shall provide Physicians
Care with access to such database including reproduction on disks or electronic
transmissions to Physicians Care of data as reasonably requested by Physicians
Care. All data relating to Enrollees shall be the sole and exclusive property of
Physicians Care; provided, however, that during the term of this agreement,
Manager shall have a non-exclusive license to use such data solely for the
purpose of complying with its obligations hereunder to ensure effective
administration of the Plans.
3.6 PREMIUM BILLING AND COLLECTION OF ACCOUNTS. Manager shall be
responsible for the development, implementation, and maintenance of billing and
collection procedures reasonably appropriate to Physicians Care's operation.
IV. PERSONNEL
4.1 APPOINTMENT. Manager shall hire, appoint, and supervise the personnel
specified below, and all other personnel reasonably necessary or appropriate to
carry out its obligations under this Agreement and in accordance with the
Administrative Services Budget, all of whom shall be employees or independent
contractors of Manager. Such Manager personnel shall have the authority to act
on behalf of Physicians Care within the scope of authority common to their
positions in the industry, and the authority granted to Manager under this
Agreement, provided that they shall at all times perform their duties in
accordance with the Certificate of Incorporation and Bylaws of Physicians Care
and subject to the overall policy direction established by Physicians Care's
Board of Directors. The hiring, assignment and termination of such personnel
shall be within the discretion of Manager, but shall be subject to the approval
of the Board of Directors.
4.2 SPECIFIC PERSONNEL. Manager shall provide individuals to oversee the
operations of Physicians Care and arrange for the performance of services
reasonably required to be performed by Manager under this Agreement.
Specifically, the parties agree that Manager shall provide qualified individuals
to fill the following positions; among others:
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- CHIEF EXECUTIVE OFFICER("CEO"). The CEO shall be responsible to Physicians
Care's Board of Directors for the overall administration, operation and
performance of the Company.
- ASSOCIATE CHIEF EXECUTIVE OFFICER. The Associate Chief Executive Officer
shall assist the CEO in the discharge of his duties by consulting on
policies, performance goals, facilities planning and general operations of
the Company.
- VICE-PRESIDENT OF QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. The
Vice-President of Quality Management and Utilization Management will be
responsible for monitoring quantitative inpatient hospitalization and
outpatient ambulatory care experience and assuring that proper utilization
management techniques are used. The Vice-President of Quality Management
and Utilization Management shall also be responsible for the management of
quantative and qualitative information concerning patient outcomes and
physician/hospital practice patterns in accordance with the Physicians Care's
utilization standards.
- GENERAL COUNSEL. The General Counsel shall concentrate on legal matters
concerning procedures, entities, regulations, and laws relating to the
business of Physicians Care. The General Counsel shall also provide general
legal services required of corporate counsel on such matters as review,
negotiation, and drafting of contractual obligations, addressing members'
communications and questions, and coordinating services provided by outside
legal counsel as necessary and/or appropriate.
- CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be responsible for
the Company's overall financial plans, policies, and accounting practices.
- VICE PRESIDENT OF MEDICAL AFFAIRS. The Vice President of Medical Affairs
shall be responsible for overseeing the medical practices, medical service
delivery and quality of care for Physicians Care's Enrollees.
- DIRECTOR OF MIS. The Director of MIS shall be responsible for the operation
and maintenance of the computer system and information services provided for
Physicians Care, including all data storage, maintenance and reporting
responsibilities.
- VICE PRESIDENT OF MARKETING AND SALES. The Vice President of Marketing and
Sales shall be responsible for the overall administration of marketing and
sales activities.
4.3 OBLIGATIONS RELATING TO MANAGEMENT PERSONNEL. Physicians Care shall
cooperate in good faith with the management personnel provided by Manager
pursuant to this Agreement as may be reasonably necessary for such personnel to
perform their duties.
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4.4 COORDINATION OF PERSONNEL. Provided that the requirements of
Manager to operate Physicians Care can be adequately met, the personnel
appointed pursuant to this Section may also serve other entities which are
affiliates through common majority ownership or control of the Hartford
Medical Association County or New Haven County Medical Association or MedServ
IPA, Inc., or at the discretion of Physicians Care, such other entities as
approved by the Physicians Care Board of Directors.
4.5 CONSULTATIVE STAFF. Manager may, at its reasonable discretion,
utilize the consultative services and support of the professional staff at
its corporate offices and may engage the services of consultants or
independent contractors and other non-Manager personnel as may be necessary
in carrying out Manager's obligations hereunder. Compensation and expenses of
Manager's professional staff and all independent contractors providing
services shall be the responsibility of Manager and Physicians Care's sole
obligation shall be to pay the Management Fee to Manager and/or the costs as
specified under Section VII herein.
4.6 APPOINTMENT/REMOVAL OF PERSONNEL. The Board of Directors shall have
authority to approve appointment of any personnel for the positions
designated above and for any employment agreement with a term in excess of
one year. The Board of Directors may request the removal of any management
personnel selected by Manager and the Manager agrees to remove such personnel.
V. PROPERTY AND EQUIPMENT
5.1 ACQUISITION. Consistent with the Administrative Services Budget,
Manager shall be responsible for purchasing, leasing, renting, or otherwise
acquiring such property, equipment and supplies as Manager determines to be
reasonably necessary to provide the services set forth in this Agreement and
as may be reasonably required to carry out Physicians Care's contractual
obligations with Providers or Enrollees, subject to any limitations or
restrictions imposed by the Board of Directors. Title to all such property
shall be held by Physicians Care.
5.2 REPAIR AND MAINTENANCE. Manager shall be responsible for negotiating,
contracting for and supervising such repair and maintenance of any property and
equipment owned by Physicians Care as shall be necessary to maintain such
property and equipment in good working order.
5.3 UTILITIES AND SERVICES. Manager shall be responsible for negotiating
and entering into such administrative arrangements and agreements as it
determines to be reasonably necessary or advisable for the furnishing of
utilities, services, concessions and supplies for the maintenance and operation
of Physicians Care, and as may be necessary for Manager to provide the services
set forth in this Agreement.
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VI. INSURANCE
6.1 TYPES OF INSURANCE AND COSTS. Manager shall be responsible for
purchasing and maintaining on behalf of Physicians Care, at Physicians Care's
expense, various insurance policies as set forth in Exhibit 6.1 in such
amounts, with such companies, and on such terms and conditions upon which
Manager and Physicians Care shall mutually agree.
6.2 MANAGER'S INSURANCE. Manager shall obtain and maintain throughout the
term of this Agreement, at its sole expense, workers' compensation insurance and
other appropriate insurance covering employees of Manager who are utilized in
carrying out Manager's obligations under this Agreement and the other insurance
policies set forth in Exhibit 6.2.
6.3 NOTIFICATION OF CHANGES IN INSURANCE COVERAGE. Both parties agree
to provide the other with at least ten (10) days prior notice of the
cancellation, non-renewal or modification of any of the insurance policies
referenced in either Sections 6.1 or 6.2.
VII. COMPENSATION OF MANAGER
7.1 MANAGEMENT FEE. During the start-up and Initial Operation stages,
Manager shall be entitled to a Management Fee which shall be equal to the
Manager's actual cost of providing such services not to exceed amounts
approved in the Administrative Services Budget as described below plus an
allowance for Manager's profit and general administrative expense equal to 5
percent (5%) of such amounts. After completion of the start-up and Initial
Operations stages, the Manager shall be paid a negotiated percentage of
actual gross premium revenue per Enrollee per month as mutually agreed
between the Manager and Physicians Care as evidenced by an amendment to this
Agreement.
7.2 LIMITATION ON PAYMENTS. Physicians Care shall be responsible for
reimbursement of Manager for costs incurred to start up operations in any
service area, and for certain services directly attributable to Physicians
Care's business and operations up to the amount as set forth in the
Administrative Services Budget approved by the Board of Directors. The
Manager will make no expenditure in excess of the Administrative Services
Budget without the consent of the Board of Directors. If expenses for
services provided hereunder in aggregate are expected to exceed the
Administrative Services Budget by more than five percent (5%), or if expenses
related to any line item of such Budget are expected to exceed the amount
approved for such line item in such Budget by more than twenty percent (20%)
(whether or not aggregate expenses are expected to exceed the Budget), in
each case on a cumulative year to date basis, then the Manager agrees to
notify the Board of Directors of an anticipated increase to the Budget not
less than twenty (20) business days prior to any such excess being incurred,
such notice to include the reason for such variance and why it was not
anticipated at the time the Administrative Services Budget was approved the
requested modification to the Budget and alternatives available to Physicians
Care other than modification of the Budget. The Board shall act on such
request not more than twenty (20) business days after receipt of such
request.
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7.3 PROCESS FOR PAYMENT. For personnel costs associated with Services
provided hereunder, the Manager agrees to submit to Physicians Care not less
frequently than biweekly and not less than three (3) business days prior to
the due date for payment thereof, a detailed statement of actual personnel
expenses to be incurred for such period by the Manager. Unless objected to by
Physicians Care prior to such due date, the Manager may deduct from the
Administrative Services Account an amount equal to the personnel costs as set
forth in the detailed statement.
With respect to all other expenses of the Manager, the Manager agrees to
submit to Physicians Care an invoice and a detailed statement of actual
expenses on the fifth day of each month for the immediately preceding month.
Such detailed statement shall also include a certification of the Chief
Financial Officer of the Manager indicating the status of all accounts
payable of Physicians Care and the Manager related to Services hereunder, as
of the first day of the immediately preceding month, all additions to such
accounts payable for such month, and a detailed listing of the accounts
actually paid for such month. If not contested by Physicians Care within five
(5) business days of receipt hereof, the Manager may deduct from the
Administrative Services Account an amount equal to the undisputed amount of
such invoice. The Manager shall submit within thirty (30) days of the close
of each fiscal year a detailed reconciliation of all costs for Services
hereunder, payments made and amounts due. Physicians Care's failure to
contest any invoice shall not be deemed a waiver of any rights of Physicians
Care to dispute an amount due on annual reconciliation or within the
applicable statute of limitations.
VIII. RECORDS
8.1 OWNERSHIP OF RECORDS. All information relating to the operation of
Physicians Care, including but not limited to, all books of account, enrollment
records, general administrative records, account and Provider files, patient
records, and information generated under and/or contained in the MIS shall be
and remain the sole property of Physicians Care. Manager shall not possess any
interest, title, lien or right to any such data or records, except as expressly
set forth herein.
8.2 CONFIDENTIALITY OF RECORDS. 8.2.1 Manager shall use reasonable
efforts to protect the confidentiality of the records of Physicians Care and
shall to the extent of its authority and responsibility hereunder comply in
all material respects with all applicable laws and regulations relating to
the records of Physicians Care. In this connection, medical records and other
privileged Enrollee information, and information subject to confidentiality
agreements, will not be disclosed by Manager except (i) with the consent of
the subscriber or the parties to the applicable confidentiality agreement,
(ii) pursuant to a court order, (iii) as reasonably necessary for quality
assurance and utilization review programs of Physicians Care, or (iv) when
required by applicable law.
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8.3 COMPUTER PROGRAMS. Physicians Care covenants and agrees that any and
all computer programs and computer software developed or utilized by Manager in
order to fulfill Manager's responsibilities specified herein shall remain the
property of Manager, or shall be used by Manager pursuant to appropriate
authorization, and that Physicians Care shall not use such programs and software
for any purpose other than the activities of Physicians Care without the express
written consent of Manager; provided, however, that if Physicians Care funds the
development cost of any such program, whether in whole or in part, then such
program shall be the property of Physicians Care and Manager shall have a
license to use such program, which license shall automatically terminate upon
termination of this Agreement for any reason.
8.4 PROPRIETARY MATERIAL.
8.4.1 Physicians Care acknowledges that Manager, in providing
services under this Agreement, will by necessity divulge and provide to
Physicians Care confidential proprietary plans, programs, formula, methods
and other products and information (collectively, the "Proprietary Material")
relating to the business, services and activities of Manager in managing the
business and operations of Physicians Care including Proprietary Material
developed in the course of providing services hereunder. Physicians Care
agrees that, during the term of this Agreement and thereafter, Physicians
Care shall take reasonable steps to maintain the confidentiality of such
Proprietary Material and agrees not to disclose such Proprietary Material to
anyone other than Manager or other than is reasonably necessary in the
furtherance of Physicians Care's business and operations. This provision
shall not apply to any information which is now in, or subsequently enters
the public domain, provided that Physicians Care has not, in violation of
this provision, disclosed or caused to be disclosed such information so as to
make it enter the public domain. Proprietary Material shall be and remain the
property of Manager.
Upon termination of this Agreement all proprietary information shall be
destroyed by Physicians Care or returned to Manager whenever Manager so
requests in writing.
8.5 AUDIT OF RECORDS. Manager shall allow auditors designated by
Physicians Care at Physicians Care's expense to audit all of Manager's books
and records relating to Manager's expenses under this Agreement and to the
fees paid to Manager under this Agreement to verify the accuracy of the
aggregate amount of fees paid to Manager pursuant to Article VII.
IX. TERM OF AGREEMENT, TERMINATION
9.1 TERM. The initial term of this Agreement shall commence on the first
closing of the Offering of Shares of Physicians Care's Common Stock pursuant to
a certain SB-2 registration ("Effective Date") and shall continue for a period
of ten (10) years (the "Initial Term") unless sooner terminated as provided
herein. The Agreement shall thereafter be
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extended upon the same terms and conditions for successive three (3) year
terms ("Renewal Term"), unless terminated as provided herein. The word "term"
used in this Agreement without any modifier shall mean the Initial Term and
any Renewal Terms. Notwithstanding the foregoing, the Management Fee shall be
reevaluated for each calendar year in each Renewal Term pursuant to Section
7.1.
9.2 TERMINATION.
9.2.1 TERMINATION DURING RENEWAL TERM. This Agreement may be
terminated by either party by delivering one (1) year's prior written notice
of such termination to the other party.
9.2.2 TERMINATION UPON MUTUAL CONSENT. This Agreement may be
terminated at any time upon mutual consent of the parties.
9.2.3 BANKRUPTCY TERMINATION. Either party may terminate this
agreement immediately upon the bankruptcy of the other party. As used in this
Section 9.2.3, bankruptcy of a party hereto shall mean the filing of a
petition commencing a voluntary case against it under the Bankruptcy Code; a
general assignment by it for the benefit of creditors; its insolvency, its
inability to pay its debts as they become due; the filing by it of any
petition or answer in any proceeding seeking for itself or consenting to, any
insolvency, receivership, or similar relief under any law or regulation.
9.2.4 TERMINATION FOR BREACH OR DEFAULT. If either party fails
substantially to perform any of its material obligations hereunder (the
"Defaulting Party"), the other party (the "Non-defaulting Party") shall have
the right to give the Defaulting Party a notice of default ("Notice of
Default"). The Notice of Default shall set forth the nature of the obligation
that the Defaulting Party has not performed. If, within the ninety (90) day
period following the giving of the Notice of Default, the Defaulting Party in
good faith commences to perform such obligation and cure such default and,
thereafter, prosecutes to completion with diligence and continuity the curing
thereof without material adverse affect on the financial performance or
operations of Physicians Care, it shall be deemed that the default shall not
have occurred and the Agreement shall remain in effect. If within such ninety
(90) day period the Defaulting Party does not commence in good faith the
curing of such default or does not thereafter prosecute to completion with
diligence and continuity the curing hereof, the Non-defaulting Party shall
have the right to terminate this Agreement at the end of that ninety (90) day
period. The right to terminate this Agreement shall be in addition to any
other remedy available to the
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Non-defaulting Party, on account of any such breach or default. The waiver by
either party of a breach or violation of any provision of this Agreement
shall not operate as or be construed to be a waiver of any subsequent breach
thereof.
9.2.5 TERMINATION FOR SUSPENSION OR REVOCATION OF LICENSED PARTY.
Manager shall have the right to terminate this Agreement upon written notice
to Physicians Care if any of Physicians Care's Certificates of Authority to
operate Physicians Care are suspended or revoked or not renewed, except that
in the event that the loss of a Certificate is due to the actions of Manager,
Manager with the full cooperation of Physicians Care shall assume
responsibility for remedying the event which gave rise to the suspension,
revocation, or nonrenewal to ensure that Physicians Care maintains the
Certificates of Authority contemplated hereunder.
9.2.6 TERMINATION UPON FAILURE TO AGREE ON PERCENTAGE OF PREMIUM
PAYMENT OR BUDGET. This Agreement may be terminated by either party upon
failure to agree on the percentage of premium payment pursuant to Section 7.1
by delivering one year's prior written notice of such termination. The
payment rate to Manager shall be the rate then in effect upon failure to
agree on the percentage of premium payment.
9.5 COOPERATION FOLLOWING TERMINATION. Beginning on the date of receipt
of notice of termination for any reason by either party to this Agreement,
Manager shall upon written request of Physicians Care, continue to provide
services, equipment and supplies to Physicians Care in accordance with this
Agreement for a reasonable period of time, sufficient to enable Physicians
Care to engage another manager. During such period Manager shall be entitled
to payment in accordance with this Agreement.
X. INDEMNIFICATION
10.1 INDEMNIFICATION OF MANAGER. Physicians Care shall indemnify and hold
harmless Manager from and against any and all damages, liabilities, actions,
suits, proceedings, claims, demands, losses, costs and expenses (including
reasonable attorneys' fees) that shall or may arise out of or in connection with
certain acts or omissions by Physicians Care to the extent not covered by
insurance.
10.2 INDEMNIFICATION OF PHYSICIANS CARE. Manager shall indemnify and hold
harmless Physicians Care from and against any and all damages, liabilities,
actions, suits, proceedings, claims, demands, losses, costs and expenses
(including reasonable attorneys' fees) that shall or may arise out of or in
connection with certain acts or omissions by Manager except where Manager
carries out in good faith the directives or policies of Physicians Care's Board
of Directors without negligence or willful misconduct, to the extent not covered
by insurance.
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XI. GENERAL PROVISIONS
11.1 ASSIGNMENT AND SUBCONTRACTING. This Agreement shall be binding upon
and inure to the benefit of each of the parties' respective successors and
assigns, provided that such successor and/or assign is capable of fulfilling and
assumes the duties set forth in this Agreement, and the parties hereto remain
primarily liable for performance hereunder. Manager shall be permitted, in its
sole discretion, to fulfill or perform any of its obligations under this
Agreement by or through contracts or subcontracts with third parties therefore;
provided, however, that Manager shall remain fully liable and responsible for
the performance of its duties and obligations under this Agreement. Except as
set forth in this Section 10.1 neither party shall in any manner inconsistent
with this Agreement, assign, subcontract or otherwise delegate its rights and
responsibilities under this Agreement unless the other party shall so consent by
prior written consent, which consent shall not be unreasonably withheld.
11.2 NONASSUMPTION OF LIABILITIES. Manager shall not by entering into and
performing this Agreement, be or become liable for any of the existing or future
obligations, liabilities or debts of Physicians Care, and Physicians Care shall
not assume or become liable for any of the existing or future obligations,
liabilities or debts of Manager.
11.3 IMPOSSIBILITY OF PERFORMANCE. Neither Manager nor Physicians Care
shall be deemed to be in default of this Agreement if prevented from performing
any obligation hereunder for any reasons beyond its control, including without
limitation governmental laws and regulations, acts of God or the public, flood
or storm or strikes. In such case, the parties shall negotiate in good faith
with the goal or intent of preserving this Agreement and the respective rights
and obligations of the parties.
11.4 INTERPRETATION. The validity, enforceability and interpretation of
any provision of this Agreement determined and governed by the laws of the State
of Connecticut. The invalidity or enforceability of any terms or provisions
hereof shall not unless, otherwise specified herein, affect the validity or
enforceability of any other term or provision of this Agreement unless the term
or provision is material and its invalidity or unenforceability results in a
substantial economic detriment to Physicians Care or Manager.
11.5 INDEPENDENT CONTRACTORS. Nothing in this Agreement shall affect the
separate identity of Physicians Care and Manager. Other than as provided in this
Agreement or other written agreement, it is not the intention of the parties
hereto to create a partnership or agency relationship. Nothing contained in this
Agreement is intended to cause either party to be the partner or agent of the
other or as limiting in any manner the parties in the conduct of their
respective businesses, ventures or activities, except as may be permitted
under this Agreement.
11.6 ENTIRE AGREEMENT, AMENDMENT. This Agreement, including its
Attachments and riders, contains all the terms and conditions agreed upon by
the parties hereto, and constitutes the entire understanding of the parties.
It supersedes all other agreements of the parties, oral or otherwise,
regarding the subject matter. This Agreement may not be amended or modified
in any material respect except by written instruction duly executed by the
parties hereto.
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11.7 NOTICES. Any notice request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by registered or
certified mail, postage prepaid, return receipt requested as follows:
If to Manager:
MedServ of Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: President
If to Physicians Care:
Physicians Care For Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: Chairperson of the Board
or to such other address as addressee may have specified in a notice duly
given to the sender in the manner provided herein, Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to
have been given as of the date so delivered or mailed.
11.8 HEADING. The headings contained herein are for convenience of
reference only and are not intended to define, limit, or describe the scope or
intent of any provision of this Agreement.
11.9 WAIVER. The waiver by either party of any of the terms or provisions
of this Agreement shall not be deemed to constitute a waiver of any of its other
terms or provisions. No waiver of the provisions of this Agreement shall be
deemed to constitute a continuing waiver thereof unless otherwise expressly
provided herein.
11.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
11.11 AUTHORITY TO EXECUTE AGREEMENT. The individual executing this
Agreement on behalf of each party is duly empowered to execute the Agreement and
bind said party to the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MEDSERV OF CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
PHYSICIANS CARE FOR CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
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IPA AGREEMENT
THIS AGREEMENT, effective as of , is by and between MedServ
of Connecticut, Inc., a Connecticut corporation having a principal place of
business at 1520 Highland Avenue, Cheshire, Connecticut ("MedServ") and
MedServ IPA, Inc., a Connecticut corporation, having its principal place of
business at 1520 Highland Avenue, Cheshire, Connecticut (the "IPA").
WITNESSETH THAT
WHEREAS, MedServ is obligated, on behalf of Physicians Care for Connecticut,
Inc. ("Physicians Care") to provide a network of qualified physicians who will
provide or arrange provide medical and surgical services to Physicians Care's
Enrollees, as hereinafter defined; and
WHEREAS, the IPA operates a network of physicians in the State of
Connecticut and desires to make such network available to MedServ to provide
medical and surgical services to Physicians Care Enrollees; and
WHEREAS, IPA and MedServ desire and intend to secure a mutually productive
relationship from the operation of such network;
NOW, THEREFORE, MedServ and the IPA agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, in the event that any of
the definitions contained or referenced in this Section 1 shall conflict with
the definitions of the same terms set forth in Physicians Care's Subscriber
Agreement, as amended from time to time, the definitions provided in the
Subscriber Agreement shall prevail.
1.1. "Authorized Care" means those Covered Services which have been
authorized for an Enrollee by the Enrollee's Primary Care Physician, or as
required under the applicable Subscriber Agreement.
1.2. "Care Manager" means a person licensed to practice medicine by the
applicable state licensing board who (a) (i) is board eligible or board
certified in internal medicine, family medicine, general practitioner, or
pediatrics, or (ii) meets such other standards as determined by MedServ or
Physicians Care from time to time, and (b) devotes significant practice time to
providing primary care services or managing the delivery of other medical
services with a capability to make preliminary diagnoses or to provide treatment
of medical and healthcare needs, without limitation by problem origin, organ
system or gender, to arrange for delivery of all necessary care and to satisfy
other requirements as established in policy recording relating to qualifications
of Care Managers. Psychiatrists may serve as a Care Manager for mental health
benefits.
1.3. "Covered Services" means those Medically Necessary healthcare services
and supplies which an Enrollee is entitled to receive under a Physicians Care
health benefit plan and which are described and defined in the Enrollee's
Subscriber Agreement.
1.4. "Dependent" shall have the meaning assigned to it in the Enrollee's
Subscriber Agreement.
1.5. "Emergency Services" means those healthcare services provided to an
Enrollee in the event of the sudden onset of an illness or injury requiring
immediate medical or surgical care to prevent serious impairment of health, or
where taking the time to call his or her Care Manager might place the Enrollee's
life in danger. Heart attacks, strokes, poisoning, loss of consciousness, and
convulsions are examples of emergencies.
1.6. "Enrollee" means a person entitled to receive Covered Services under
the terms of an applicable Subscriber Agreement. For purposes of this Agreement,
an Enrollee includes any person for whom Physicians Care or its designee
provides, arranges, and/or finances managed healthcare or administrative
services. 1.7. "Enrollee Co-payment" means the amount that may be charged by
Physicians to an Enrollee
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at the time of providing Covered Services to the Enrollee as provided in the
Enrollee's Subscriber Agreement.
1.8. "Fiscal Year" means the fiscal year of Physicians Care, commencing on
each January 1st and ending on each December 31st.
1.9. "IPA Physician" means a physician who is a member in good standing of
the IPA.
1.10. "Medically Necessary" means medical treatment required by an Enrollee
as determined in accordance with accepted medical and surgical practices and
standards prevailing at the time of treatment and in conformity with the
professional and technical standards adopted by the Quality Care Committee.
1.11. "Non-Covered Services" means healthcare services which are not Covered
Services.
1.12. "Physician" means any person duly licensed under applicable laws and
regulations to practice medicine.
1.13. "Physicians Care Administrative Manual" or "Manual" means the
documents setting forth procedures for administration of Physicians Care health
benefit plans and which are incorporated by reference herein. The Manual
contains claims submission, medical management and discharge planning
procedures, recredentialing criteria, Enrollee grievance and appeal procedures,
and other information. MedServ reserves the right, at its sole discretion, to
modify the Manual from time to time. If any provision of the Manual is
inconsistent with the terms of the Subscriber Agreement, the terms of the
Subscriber Agreement shall prevail. The IPA hereby acknowledges receiving a copy
of the Manual.
1.14. "Service Area" means the State of Connecticut, or such other areas or
locales in which Physicians Care may be licensed to do business as a Health
Maintenance Organization.
1.15. "Subscriber" means the person who signs the application for Membership
with Physicians Care and in whose name the subscription premium or service fee
is paid. A Subscriber signs for himself or herself and any Dependents.
1.16. "Subscriber Agreement" means the applicable contract between an
individual, a family or an employer, trust or other entity on behalf of
employees, retirees, affiliated persons, and Dependents, with Physicians Care or
any of its affiliates, including all amendments thereto, under which the
Subscriber, designated persons and their Dependents are entitled to receive
Covered Services.
2. NETWORK DEVELOPMENT. IPA agrees, on an exclusive basis on behalf of
Physicians Care and subject to Section 18.2(b), to develop a network of
qualified Physicians in each county of the Service Area as provided in Exhibit A
covering such medical specialties and having such geographic distribution as
required to serve the needs of Enrollees. Each Physician in the Network shall be
permitted to participate in Physicians Care only after satisfaction of all
credentialing requirements as established by Physicians Care. IPA agrees to
provide to MedServ on a monthly basis a schedule of all IPA Physicians,
specifically identifying any additions or deletions.
3. PROVISION OF COVERED SERVICES. Subject to the provisions of this
Agreement, the IPA agrees to establish a network of qualified Physicians in the
Service Area covering all medical specialties and shall cause IPA Physicians to
provide Covered Services to Physician Care Enrollees as follows:
(a) subject to reasonable policies, procedures, and payment standards
developed by MedServ, (i) to provide Covered Services within the scope of an
IPA Physician's expertise and to the extent credentialed to provide such
services and (ii) to arrange to provide and to authorize, where appropriate,
the provision of Covered Services to Enrollees by other providers;
(b) where medically appropriate and practicable, to authorize, manage,
and review services provided outside the Service Area which are provided to
Enrollees;
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(c) to participate in the medical management and quality assurance
programs developed by MedServ to administer and deliver Covered Services to
Enrollees; and
(d) to provide or arrange for the provision of Covered Services without
discriminating among Enrollees, or between Enrollees and other patients on
the basis of race, color, age, religion, gender, national origin, sexual
preference, or HMO Membership, and to provide services to its patients with
the highest regard for personal dignity.
4. UTILIZATION MANAGEMENT AND QUALITY MANAGEMENT PROGRAMS. The parties agree
to develop mutually agreeable Utilization Management and Quality Management
Programs which the IPA shall adopt and implement in connection with services
rendered by IPA Physicians. The IPA shall periodically make recommendations to
MedServ concerning the types of Utilization Management and Quality Management
Programs which the IPA believes are desirable.
5. COMPENSATION TO IPA PHYSICIANS FOR MEDICAL SERVICES. Except for Enrollee
Co-payments or any other charges specifically permitted by this Agreement or the
applicable Subscriber Agreement including, without limitation, missed
appointment charges and charges to Enrollees for Non-Covered Services, the IPA
agrees that it will cause IPA Physicians to accept the compensation paid by
Physicians Care as payment in full and to look solely to Physicians Care for
compensation for Covered Services provided to Enrollees whenever Physicians Care
is legally obligated to pay for Covered Services. Except as provided herein, the
IPA shall not assert, and shall cause IPA Physicians not to assert, any claim or
demand on Enrollees or Subscribers, for compensation for Covered Services
provided to Enrollees hereunder whenever Physicians Care is legally obligated to
pay for Covered Services. MedServ will use its best efforts to give the IPA
notice of material defaults in payment of claims or administrative fees by
health benefit plan sponsors other than Physicians Care (e.g., self-funded
employers) that may have adverse consequences on the IPA. This provision shall
survive the termination or expiration of this Agreement with respect to services
provided prior to the effective date of such termination or expiration.
The amount due to IPA Physicians for services rendered shall be the fee
schedule, case rate or capitation payment amounts customarily paid by Physicians
Care and in effect from time to time net of any co-payment, coinsurance or
deductibles; provided, however, that if Physicians Care has a risk contract (the
"Risk Contract") which is applicable to such IPA Participating Physicians, then
the financial terms of such Risk Contract shall control.
6. IPA PHYSICIAN CREDENTIALING AND QUALIFICATIONS. The IPA shall be
responsible for assuring that its IPA Physicians meet the following
qualifications:
(a) LICENSURE. All Covered Services (other than Emergency Services)
provided to Enrollees under this Agreement will be provided by IPA
Physicians acting within the scope of their licenses, certifications or
expertise and as credentialed. The IPA will ensure that all IPA Physicians
meet continuing education and other similar requirements established by the
professional organizations overseeing licensure or certification in their
respective fields. The IPA will cooperate with MedServ to establish and
maintain an auditable system to ensure that the requirements of licensure
are met in a timely manner by all IPA Physicians.
(b) CREDENTIALING. The IPA shall credential all IPA Physicians pursuant
to Physicians Care policies and in accordance with all NCQA standards and
guidelines. IPA shall maintain a full and complete credentialing file for
each IPA Physician and shall provide MedServ and Physicians Care with access
to or copies of such file on its reasonable request.
(c) PRIVILEGES. The IPA shall ensure that each IPA Physician providing
inpatient services under this Agreement has taken or will take all steps
necessary to obtain and maintain hospital privileges at a hospital and or
such other healthcare facilities which have an effective participation
agreement with Physicians Care.
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(d) CENSURE OR SUSPENSION. The IPA shall immediately notify MedServ in
the event that any IPA Physician is disciplined by the applicable state
licensing agency charged with licensing physicians or any healthcare
facility, is censured by or expelled from any county medical society, or has
his or her privileges at any healthcare facility suspended, revoked,
restricted, made probationary, or otherwise diminished in any way, including
resignation or non-renewal. The IPA shall also immediately notify MedServ in
the event that any IPA Physician's participation with the IPA is terminated
in any way.
(e) PEER GROUP MONITORING. In addition to ensuring that all IPA
Physicians comply with the above requirements evidencing licensure, the IPA
shall, with the assistance of MedServ, develop peer group monitoring systems
to ensure that all IPA Physicians function in a competent and professional
manner when providing Covered Services and comply with professionally
recognized quality of care standards.
The IPA shall also maintain all licenses, permits and registrations which
may be required by law in order for the IPA to provide services under this
Agreement.
7. IPA COMPENSATION FOR SERVICES. The IPA shall be compensated pursuant to
Exhibit B for administrative services provided pursuant to this Agreement.
8. ENROLLEE SELECTION OF CARE MANAGER. If required pursuant to Physicians
Care's Subscriber Agreements, Physicians Care may require each Enrollee to
select a Care Manager to be primarily responsible for the coordination of the
Enrollee's overall healthcare as his or her "Care Manager," and to allow
reasonable changes to such selection. Subject to the right of an IPA Physician
to close his/her panel to new patients upon reasonable notice, each Enrollee may
select the Care Manager of said Enrollee's choice.
9. NOTIFICATION OF CHANGES. The IPA agrees to provide MedServ with
reasonable notice of any material change to be made in the structure or
operation of the IPA.
10. INSURANCE. The IPA shall have and maintain policies of professional
liability insurance in amounts and on terms reasonably satisfactory to MedServ,
and the IPA shall have and maintainadequate casualty insurance on its real and
personal property. Currently, the IPA maintains the following insurance
coverages:
<TABLE>
<CAPTION>
COVERAGE PER OCCURRENCE LIMIT AGGREGATE LIMIT
- ------------------------------------------------------- -------------------- ---------------
<S> <C> <C>
Directors' and Officers' Liability..................... $ 1,000,000 N/A
General Liability
Professional Liability................................. $ 1,000,000 $ 1,000,000
Excess Professional Liability.......................... $ 1,000,000 $ 1,000,000
</TABLE>
To the extent available at commercially reasonable rates, IPA shall cause
MedServ to be a named insured under any such policy. The IPA shall notify
MedServ of any material changes in this coverage and shall provide MedServ, upon
request, with evidence of such coverage. In the event any policy is a "claims
made" policy, IPA agrees to purchase an appropriate "tail" policy upon
termination of this Agreement or any such policy.
11. FINANCIAL REPORTING. The IPA shall have annual financial statements
which accurately reflect the financial condition of the IPA prepared and
delivered to MedServ within 120 days after the end of each of the IPA's fiscal
years. Upon request, MedServ shall permit a reasonable extension of the
deadline. The annual financial statements shall be prepared in accordance with
generally accepted accounting principles and shall be audited or reviewed by a
firm of certified public accountants reasonably acceptable to MedServ. The IPA's
annual financial statements shall include at least the following elements:
(i) Balance Sheet;
(ii) Income Statement;
(iii) Statement of Changes in Cash.
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12. INSOLVENCY.
(a) PAYMENTS OR DISTRIBUTIONS WHILE INSOLVENT. With the consent of MedServ,
which consent shall not be unreasonably withheld, the IPA will not make any form
of payment or distribution to IPA Physicians if the IPA is at that time not
generally meeting its debts as they come due, or if making such payment or
distribution would render the IPA unable generally to meet its debts as they
come due or render it unable to meet its obligations under this Agreement, or
would cause the IPA to have a negative net worth.
(b) PHYSICIANS CARE INSOLVENCY. Notwithstanding anything to the contrary
contained herein, in the event that Physicians Care becomes unable generally to
meet its debts as they come due or is insolvent as determined by the Insurance
Commissioner, the IPA agrees that it shall cause IPA Physicians to continue to
provide or to arrange for the provision of Covered Services to Enrollees in
accordance with the terms of this Agreement for the period for which premiums
have been paid to Physicians Care by or on behalf of Enrollees.
13. OTHER PAYMENTS.
13.1 ENROLLEE PAYMENTS. IPA Physicians may charge to Enrollees any
Enrollee Co-payments permitted by the applicable Subscriber Agreement. The IPA
Physicians may also bill Enrollees a reasonable charge for missed appointments
in accordance with the applicable Subscriber Agreement and may bill for
Non-Covered Services in accordance with the Manual.
13.2 COORDINATION OF BENEFITS AND SUBROGATION. The IPA shall cause IPA
Physicians to cooperate with coordination of benefits and subrogation policies
and procedures established by MedServ or Physicians Care. Physicians Care shall
not make any payment in excess of the amount Physicians Care would be obligated
to make as if the primary payor. If Physicians Care pays as the primary payor
and subsequently determines that another party is liable to make payments as
primary payor, the IPA Physician agrees to remit to Physicians Care any excess
payment. Physicians Care may set off against payments otherwise due the IPA
Physician the amount of such excess payment.
14. MEDSERV OBLIGATIONS AND RIGHTS.
(a) ADMINISTER PLAN. MedServ agrees that the maintenance of appropriate
administrative, marketing, and actuarial systems and the employment of qualified
personnel are essential parts of its obligations under this Agreement.
(b) ENROLLEE ORIENTATION AND EDUCATION. MedServ or Physicians Care, as
applicable, shall be responsible for advising Enrollees of their rights and
obligations under the applicable Subscriber Agreement as promptly as practicable
after they become Enrollees. IPA shall cause IPA Physicians to cooperate in
responding to Enrollee inquiries regarding their rights and obligations under
applicable Subscriber Agreements.
(c) LICENSES AND PERMITS. MedServ, on behalf of Physicians Care, shall
obtain and keep in full force and effect throughout the term hereof all
necessary licenses and permits with respect to the operation of MedServ and/or
Physicians Care and, if requested by IPA, provide copies thereof to the IPA at
MedServ's expense.
(d) MANAGEMENT INFORMATION DATA. MedServ agrees to provide the IPA with
computer hardware adequate to access directly the IPA-specific database
maintained by MedServ relating to Covered Services provided to Enrollees and to
provide direct access to said database, including enrollment data and data on
referral authorizations and referral accounts payable. MedServ also agrees to
provide the IPA with the management information reports listed in Exhibit C.
(e) ENROLLEE SATISFACTION SURVEYS. MedServ and the IPA agree to jointly
develop and the IPA shall administer and utilize a regular program of Enrollee
satisfaction surveys to analyze Enrollee perception of
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the quality of services provided by Participating Providers and to take such
reasonable steps as may be necessary to correct any deficiencies revealed by
such surveys.
15. INDEMNIFICATIONS.
15.1 INDEMNIFICATION BY MEDSERV. MedServ agrees to indemnify, defend, and
save harmless the IPA, its officers, directors and employees, from and against
any and all claims, costs, liabilities, losses and damages made against or
suffered by them, or any or all of them, arising out of or in any way connected
with the operation or administration of MedServ, except those arising out of the
conduct, acts, or omissions of the IPA, its officers, directors, employees, or
agents, or of IPA Physicians.
15.2 INDEMNIFICATION BY THE IPA. The IPA agrees to indemnify, defend, and
save harmless MedServ, its affiliates and their officers, directors and
employees, from and against any and all claims, costs, liabilities, losses, and
damages made against or suffered by them, or any or all of them, arising out of
or in any way connected with by the conduct, acts, or omissions of the IPA, its
officers, partners, directors, employees, agents, independent contractors, or
IPA Physicians.
16. CONFIDENTIALITY.
16.1 BY MEDSERV. MedServ agrees to comply with all applicable state and
federal laws respecting the confidentiality of proprietary information, data,
and other confidential or personal information concerning the medical, personal,
or business affairs of Enrollees acquired in the course of providing or
arranging for Physicians Care benefits. MedServ agrees to maintain the
confidentiality of this Agreement and all financial, operating, proprietary or
business information relating to the IPA which is not otherwise public
information and shall respect the confidentiality of any information, not
described above, specified in writing by the IPA as confidential information.
MedServ shall exercise its best efforts to prevent any of its agents, employees,
legal counsel, independent contractors or any other person involved in doing
business with or controlled by MedServ from disclosing, using or transmitting to
any other person or entity any of the above described information. Nothing
herein shall prohibit MedServ from making any use, disclosure, or transmission
of information to the extent that such use, disclosure, or transmission is
necessary and appropriate to enable MedServ to perform its obligations under
this Agreement, or is required by law or if such use, disclosure, or
transmission is made to or by Physicians Care. MedServ shall include the
substantive provisions of this paragraph in all written contracts for amounts in
excess of ten thousand dollars ($10,000) between MedServ and its subcontractors,
independent contractors, and agents. MedServ shall cause Physicians Care to
obtain from Enrollees any general consent required for the release of medical
information to IPA or IPA Physicians reasonably necessary for the administration
of each Subscriber Agreement or this Agreement.
16.2 BY THE IPA. The IPA agrees to comply with all applicable state and
federal laws respecting the confidentiality of proprietary information, data,
and other confidential or personal information concerning the medical, personal,
or business affairs of Enrollees acquired in the course of providing or
arranging for the provision of services hereunder and agrees to maintain the
confidentiality of this Agreement and all financial, operating, proprietary or
business information relating to MedServ or Physicians Care which is not
otherwise public information. The IPA shall respect the confidentiality of any
information, not described above, specified in writing by MedServ or Physicians
Care as confidential information, and shall exercise its best efforts to prevent
any of its agents, employees, legal counsel, independent contractors or any
other person involved in doing business with or controlled by the IPA from
disclosing, using or transmitting to any other person or entity any of the above
described information. Nothing herein shall prohibit the IPA from making any
use, disclosure, or transmission of information to the extent that such use,
disclosure, or transmission is necessary and appropriate to enable the IPA to
perform its obligations under this Agreement, or is required by law. The IPA
shall include the substantive provisions of this paragraph in all written
contracts for amounts in excess of ten thousand dollars ($10,000) between the
IPA and its subcontractors, independent contractors, and agents.
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IPA represents and warrants that it has obtained from each IPA Physician any
consents necessary for the release to IPA of any information relating to such
Physician's provision of healthcare services to Enrollees. IPA agrees to cause
IPA Physicians to obtain from Enrollees any special consents required by law for
the release to IPA, MedServ or Physicians Care of any medical information
reasonably necessary for the administration of each Subscriber Agreement or this
Agreement.
17. TERM AND TERMINATION.
17.1 TERM. The term of this Agreement shall begin not later than thirty
(30) days after the first closing of the offering of Common Stock of Physicians
Care and shall remain in effect for a period of ten (10) years (the "Initial
Term"), unless terminated as provided herein. Thereafter, this Agreement shall
be automatically renewed for a term of five (5) years (the "Renewal Term"),
unless terminated as provided herein. The word "Term" as used in this Agreement
without any modifier shall mean the Initial Term and the Renewal Term.
17.2 TERMINATION.
(a) FOR CAUSE TERMINATION. This Agreement may be terminated at any time (i)
upon one hundred and eighty (180) days prior written notice, for breach hereof,
provided that no breach shall be deemed to have occurred if the breaching party
has cured said breach prior to the expiration of the notice period; or (ii) by
MedServ if the IPA executes a Competitor Contract and Physicians Care determines
in its reasonable judgment that the execution of such contracts is contrary to
the best interests of Physicians Care.
(b) TERMINATION OF EXCLUSIVE STATUS. The exclusive status granted to IPA
pursuant to Section 2 hereof may be terminated at any time with respect to all
or any portion of the Service Area in the event MedServ or the Board of
Directors of Physicians Care determine in their reasonable judgment that the
number of IPA Physicians is not sufficient to service the needs of Enrollees, in
which case Physicians Care or MedServ may contract directly with Physicians.
(c) TERMINATION OF PARTICIPATION OF IPA PHYSICIANS.
The IPA shall ensure that no IPA Physician provides services to Enrollees
upon the occurrence of the following:
i. WITH CAUSE TERMINATION OF PARTICIPATION. If an IPA Physician
violates or fails to comply with any of the material requirements of this
Agreement, the IPA agrees to terminate the participation of the IPA
Physician in Physicians Care upon thirty (30) days prior written notice as
requested by MedServ or Physicians Care. If the breach is cured during such
thirty (30) day period, then no breach shall be deemed to have occurred and
this Agreement shall remain in effect. If the breach is not cured during
such thirty (30) day period, then such IPA Physician shall no longer provide
services to Physicians Care Enrollees hereunder.
ii. IMMEDIATE TERMINATION OF PARTICIPATION. Notwithstanding any other
provision of this Agreement to the contrary, the IPA shall, upon its own
initiative or MedServ's request, immediately terminate an IPA Physician's
provision of services to Enrollees hereunder in the event that the IPA
Physician:
- shall have his or her license to practice medicine revoked or subject to
sanction;
- is subject to the loss, suspension, or reduction of medical staff
privileges at a hospital or federal or state controlled substance
registrations; or
- undertakes any activity which results or may be reasonably considered to
place in jeopardy the life, health, or safety of patients, whether acting
pursuant to this Agreement or otherwise.
18.3 EFFECTS OF NOTICE OF TERMINATION.
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(a) MedServ and the IPA will work together in good faith to plan
cooperatively the manner in which the IPA will be phased out as Physicians
Care's provider network, including, but not limited to, the procedure and timing
of notice to IPA Physicians that this Agreement has been terminated including a
process to enable IPA Physicians to execute a participation agreement directly
with Physicians Care.
(b) Upon termination, the IPA shall turn over to MedServ all tangible
personal property, if any, belonging to MedServ and shall further make available
to MedServ, at MedServ's expense, such information and copies of records as
MedServ may reasonably request concerning Enrollees. Original medical records of
Enrollees shall remain the property of IPA Physicians. MedServ shall turn over
to the IPA all tangible personal property, if any, belonging to the IPA.
19. DISPUTE RESOLUTION. MedServ and the IPA agree that the creation of a
system for resolving disputes arising from performance under or interpretation
of this Agreement is essential to the continuation of their relationship. Both
parties agree to use good faith efforts to resolve such disagreements in the
context of the following system:
(a) INFORMAL DISPUTE RESOLUTION. The parties agree that a
representative of the IPA will meet with a representative of MedServ to seek
to resolve the issue or dispute. If an issue or dispute is not resolved
within 30 days after the commencement of such a meeting, any party to the
dispute may request the appointment of a mediator to assist the parties to
resolve the issue.
(b) MEDIATION. The parties agree to complete the selection of a
mediator within 10 days following the receipt of the request for mediation
by a party. The parties agree to cooperate in good faith in the mediator's
efforts to assist the parties to resolve the issue. The parties agree to
split the costs of mediation services equally between the two sides of the
dispute. If the issue is not resolved within 45 days of the commencement of
mediation, any party to the dispute may request arbitration.
(c) ARBITRATION. A party requesting arbitration will do so in writing
addressed to the other party. The parties agree to complete the selection of
the arbitrator(s) within 10 days following receipt of the request by a
party. If the parties fail to complete selection of the arbitrator(s) within
the above time limits, the party requesting arbitration may request the
American Arbitration Association to appoint an arbitrator. Immediately
following the selection of an arbitrator, the parties will meet with the
mediator to frame the issues to be placed before the arbitrator. The parties
agree to be guided by the mediator in the process of framing the issues. The
parties agree that arbitration proceedings will be commenced within 45 days
of selection of the arbitrator(s) and concluded within 90 days of selection
of the arbitrator(s). Unless otherwise agreed by the parties in writing, the
arbitration hearings shall not last more than one day, with each party
receiving equal time to present its case before the arbitrator. The
arbitrator shall render a decision within 10 days after conclusion of the
hearings. The decision of the arbitrator(s) shall be final and conclusive of
the issue in dispute. The cost of the arbitrator's services will be
allocated between the two sides of the dispute by the arbitrator(s). An
arbitrator shall not be authorized to award punitive damages to any of the
parties. All arbitration proceedings shall be conducted in the State of
Connecticut.
MISCELLANEOUS
20. IPA'S COMPLIANCE WITH LAW. The IPA agrees to comply with all federal,
state, and municipal laws, statutes, ordinances, orders, and regulations
applicable to the conduct of its business and with professionally recognized
quality of care standards.
21. MEDSERV'S COMPLIANCE WITH LAW. MedServ shall operate itself and shall
manager and operate Physicians Care in accordance with all laws, rules and
regulations applicable thereto.
22. RELATIONSHIP OF PARTIES. Each party is and shall continue to be an
independent entity hereunder. Neither party is the agent or representative of
the other, nor shall either party have any express or implied
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right or authority to assume or create any obligation on behalf of or in the
name of the other, unless specifically authorized for the purpose.
23. FORCE MAJEURE. Each party will make a good faith effort to meet its
obligations under this Agreement in the case of an event beyond its control.
These events include, but are not limited to, war, riot, civil insurrection,
epidemic, public emergency, and natural disaster. Other causes include the
partial or complete destruction of MedServ or IPA facilities. For the purposes
of this Section 23, an event is not within the control of either MedServ or the
IPA if neither one can exercise influence or control over its occurrence.
24. GOVERNMENTAL ACTION. Both parties recognize the existence or potential
existence of legislation or administrative rules and regulations or actions
which may affect or impair the delivery of the services described herein by the
IPA and/or IPA Physicians. The obligations of the IPA, the IPA Physicians and
MedServ pursuant to the Agreement shall be subject to such legislation, rules,
regulations and actions.
25. RIGHTS OF ENROLLEES. The rights and benefits of Enrollees shall arise
solely from the Subscriber Agreement. No rights or causes of action shall accrue
to any Enrollee from the terms of this Agreement. The parties agree that no
Enrollee is a third-party beneficiary hereof.
26. ASSIGNMENT. This Agreement and the respective rights and obligations of
the parties hereto may not be assigned or transferred in any manner without the
prior express written consent of both parties, and, in the absence of such
consent, any purported assignment shall be wholly void; provided, however, that
either party may fulfill or perform any of obligations under this Agreement by
or through contracts or subcontracts with third parties as long as the party to
this Agreement remains primarily liable for performance hereunder.
27. NOTICES. Any notice required under the terms of this Agreement shall be
in writing and shall be sent by overnight mail addressed to each party at the
address set forth below the signature of its officer affixed to the Agreement,
or transmitted by facsimile to the officer who signed this Agreement on behalf
of the respective parties. Any such notice shall be effective upon receipt.
28. INTEGRATION CLAUSE. This Agreement constitutes the entire contract
between the parties hereto and supersedes any prior agreements between the IPA
and MedServ with respect to the arrangement of the provision of Covered Services
to Enrollees after the date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on this day of , 1997 in two or more copies for themselves and their
successors by their duly authorized officers.
MEDSERV FOR CONNECTICUT, INC.
BY: _________________________________
MEDSERV IPA, INC.
BY: _________________________________
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ESCROW AGREEMENT
This ESCROW AGREEMENT is made as of this ___ day of ______________, 1997
by and among Physicians Care for Connecticut, Inc., a Connecticut corporation
with a principal place of business at 1520 Highland Avenue, Cheshire, CT
06410 (the "Company"), State Street Bank and Trust Company, a national bank
organized under the laws of the United States of America acting by and
through its Corporate Trust Department with a principal place of business at
777 Main Street, Hartford, Connecticut 06115, in its capacity as escrow agent
only (the "Escrow Agent") and those persons executing counterpart signature
pages hereto ("Subscribers").
W I T N E S S E T H:
WHEREAS, the Company and the Subscribers desire to create an escrow
account for the reasons set forth on Exhibit A attached hereto; and
WHEREAS, the Company and the Subscribers agree to appoint the
Escrow Agent as the escrow agent for such account, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises and obligations
set forth below, and for other valuable consideration the sufficiency and
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT AND CREATION OF ACCOUNT.
Contemporaneously, with the execution of this Agreement, the Company has
deposited with the Escrow Agent those assets listed on Exhibit B attached
hereto. The Company and the Subscribers hereby appoint the Escrow Agent as
escrow agent hereunder and direct it to hold those assets listed on Exhibit B
attached hereto. The Company and the Subscribers hereby appoint the Escrow
Agent as escrow agent hereunder and direct it to hold those assets described
in said Exhibit B, together with any additional assets which may be deposited
with the Escrow Agent from time to time to be held pursuant to this Agreement
and all income earned from investment of the assets described in Exhibit B
and any additions thereto (collectively the "Escrow Assets"), in a separate
account in the name of "Physicians Care" (the "Escrow Account"). The Escrow
Account shall be invested, administered and distributed in accordance with
the terms set forth below.
2. INVESTMENT OF ESCROW ASSETS. The Escrow Assets shall be invested in
accordance with the instructions set forth in Exhibit C attached hereto. Such
instructions may be modified only by a written certificate executed by an
authorized officer of the Company and delivered to the Escrow Agent. The
Escrow Agent shall make monthly accountings of such investments, the income
received therefrom, and the then existing balance of the Escrow Account to
the Company.
3. DISTRIBUTIONS FROM ESCROW ACCOUNT. The Escrow Agent shall make
distributions from the Escrow Account in accordance with the instructions set
forth in Exhibit D attached hereto. Such instructions may be modified only by
a written certificate executed by an authorized officer of the Company and
delivered
<PAGE>
to the Escrow Agent. Notice of each disbursement from the Escrow Account
shall be provided to the Company within five (5) days of each such
disbursement. Upon the final distribution of all of the Escrow Assets, this
Agreement shall terminate and the Escrow Agent shall have no further
obligations or liabilities hereunder.
4. COMPENSATION OF ESCROW AGENT. In consideration of the services
provided by the Escrow Agent in the performance of its duties hereunder,
the Company agrees to reimburse the Escrow Agent for all costs and
expense incurred by it with respect to this Agreement, including reasonable
fees of legal counsel and other consultants, and to further compensate the
Escrow Agent in accordance with the fee arrangement described in Exhibit E
attached hereto.
5. LIMITATION OF ESCROW AGENT'S DUTIES.
(a) All parties hereto acknowledge that the duties of the Escrow Agent
hereunder are solely ministerial in nature, and have been requested for their
convenience. The Escrow Agent shall not be deemed to be the agent of
either/any party hereto, or to have any legal or beneficial interest in any
of the Escrow Assets. The parties agree that the Escrow Agent is a party to
the Escrow Agreement only and has no duties or responsibilities in connection
with any agreements related hereto. The parties agree that the Escrow Agent
shall not be liable for any act or omission taken or suffered in good faith
with respect to this Agreement unless such act or omission is the result of
the gross negligence or willful misconduct of the Escrow Agent.
(b) The Escrow Agent may consult with legal counsel and shall be fully
protected and incur no liability to any action or inaction taken in good
faith in accordance with the advice of such counsel. The Escrow Agent shall
have no responsibility for determining the genuineness or validity of any
certificate, document, notice or other instrument or item presented to or
deposited with it, and shall be fully protected in acting in accordance with
any written instruction given to it by any of the parties hereto and
reasonably believed by the Escrow Agent to have been signed by the proper
representatives of such parties.
(c) The Escrow Agent shall not be responsible for any losses relative to
the investment or liquidation of the Escrow Assets, provided such Escrow
Assets are invested and held in accordance with Section 2 above. The Escrow
Agent further shall not be responsible for assuring that the Escrow Assets
are sufficient for the disbursements contemplated under Section 3 above.
(d) The Escrow Agent shall not be required to institute legal proceedings
of any kind. The Escrow Agent shall not be required to defend any legal
proceedings which may be instituted against it with respect to this Agreement
unless requested to do so in writing by any of the parties hereto, and unless
and until it is indemnified by the requesting party to the satisfaction of
the Escrow Agent, in its sole discretion, against the cost and expense of
such defense,
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including without limitation the reasonable fees and expenses of its legal
counsel. If any conflicting demand shall be made upon the Escrow Agent, it
shall not be required to determine the same or take any action thereon and
may await settlement of the controversy by appropriate and nonappealable
legal proceedings. Upon the commencement of any action against or otherwise
involving the Escrow Agent with respect to this Agreement, or upon advice of
counsel under subsection (b) hereunder, the Escrow Agent shall be entitled to
interplead the matter of this escrow into a court of competent jurisdiction
in the State of Connecticut and, in such event, the Escrow Agent shall be
relieved of and discharged from any and all obligations and liabilities under
this Agreement. In any such action, the Escrow Agent shall be entitled to the
indemnities provided in Section 6 below.
6. INDEMNIFICATION OF ESCROW AGENT. The parties hereto jointly and
severally hold harmless and indemnify the Escrow Agent, its directors,
officers, employees and agent from and against all obligations, liabilities,
claims, suits, judgments, losses, damages, costs or expenses of any kind or
nature, including without limitation reasonable attorneys' fees, which may be
imposed on, incurred by, or asserted against the Escrow Agreement or the
Escrow Agent's duties hereunder. The foregoing indemnities shall survive the
resignation of the Escrow Agent or the termination of this Agreement. To the
extent the Escrow Agent is entitled to indemnification hereunder and such
indemnification is not timely paid, the parties agree the Escrow Agent shall
have - and hereby grant the Escrow Agent - a first lien for the payment of
such expenses upon the Escrow Assets in the Escrow Account.
7. RESIGNATION OF ESCROW AGENT. The Escrow Agent in its sole discretion
may resign at any time and be discharged of its duties by giving thirty (30)
days prior written notice to the parties hereto, and which notice shall
specify the date of such resignation. In the event the parties fail to
appoint a successor escrow agent and notify the Escrow Agent in writing of
such appointment within such thirty-day period, the Escrow Agent shall be
deemed to be solely a custodian of the Escrow Account without further duties
hereunder, and shall be entitled to petition a court of competent
jurisdiction to appoint a successor escrow agent. Upon the appointment of a
successor escrow agent by the parties hereunder or by such court, the Escrow
Agent's duties and liabilities under this Agreement shall terminate.
8. NOTICES. All demands, notices and communications hereunder shall be in
writing and shall be given prepaid, by hand-delivery, courier service or
certified or registered United States mail, return receipt requested, and
addressed to the party for whom intended, at the following addresses:
(a) If to the Company:
1520 Highland Avenue
Cheshire, CT 06410
Attn: President
Phone: (203) 699-2400
Fax: (203)
(b) If to any Subscriber: to the address set forth on said
Subscriber's counterpart signature page hereto.
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(c) If to the Escrow Agent:
State Street Bank and Trust Company
Corporate Trust Administration
777 Main Street - CT/MO/0238
Hartford, Connecticut 06115
Attn:___________________
Tel:
Fax:
9. GOVERNING LAW AND SEVERABILITY. This agreement shall be construed, and
the obligations, rights and remedies of the parties hereunder shall be
determined, in accordance with the laws of the State of Connecticut. The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provision was
omitted.
10. GENERAL PROVISIONS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument. This Agreement shall bind and
inure to the benefit of the parties hereto, and their respective successors
and assigns, and shall not be modified or amended except by a written
instrument executed by all parties hereto.
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PHYSICIANS CARE FOR CONNECTICUT, INC.
ESCROW AGREEMENT
COUNTERPART SIGNATURE PAGE
Reference is hereby made to that certain Escrow Agreement made as of _____
__, 1997 (the "Escrow Agreement") by and among Physicians Care for
Connecticut, Inc. ("the Company"), State Street Bank and Trust Company and
those subscribers executing this counterpart signature page to the Escrow
Agreement. Capitalized terms used as defined terms herein and not otherwise
defined shall have the meanings ascribed to such terms in the Purchase
Agreement.
The undersigned is purchasing Common Stock of the Company pursuant to a
Registration Statement on Form SB-2 of the Company (Reg. No. _______). By
execution of this Counterpart Signature Page to the Escrow Agreement, the
undersigned hereby agrees to be bound by and obtain the benefit of the rights
and restrictions of the Escrow Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Counterpart
Signature Page as of the ____ day of ___________, 1997.
SUBSCRIBER
______________________________________
Name:
AMOUNT PLACED INTO ESCROW: ____________
Notice Address:
______________________________________
Street Address
______________________________________
City State Zip Code
PHYSICIANS CARE FOR CONNECTICUT, INC.
By: ___________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY, AS ESCROW AGENT ONLY
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
REASONS FOR ESCROW
The Subscribers have agreed to purchase from the Company shares of the
Company's Common Stock. A condition to the purchase and sale of said shares
is that the Company receive from Subscribers subscriptions to purchase an
aggregate of $8 million. Accordingly, monies received prior to achievement of
the $8 million threshold are to be placed into escrow to be realeased upon
and subject to actual achievement of the $8 million threshold.
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EXHIBIT B TO ESCROW AGREEMENT
ESCROW ASSETS
Monies provided from time to time by Newbury, Piret & Co., Inc. as
Subscription Agent for the Company, said monies to be in the form of checks
in varying amounts which shall be provided under cover expressly referencing
this Agreement.
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EXHIBIT C TO ESCROW AGREEMENT
INVESTMENT INSTRUCTIONS
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EXHIBIT D TO ESCROW AGREEMENT
DISBURSEMENT INSTRUCTIONS
Upon a certificate from a duly authorized officer of the Company, the
Escrow Agent will release Escrow Assets in accordance with the instructions
contained in said certificate.
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EXHIBIT E TO ESCROW AGREEMENT
FEE ARRANGEMENT
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Hartford, Connecticut
June 12, 1997
