UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB/A
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: March 31, 1998
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( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from:______________to________________
Commission file number: 0-13265
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UCI MEDICAL AFFILIATES, INC,
----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-2225346
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
1901 Main Street, 12th Floor, Mail Code 1105, Columbia, SC 29201
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(Address of principal executive offices)
(803) 252-3661
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(Issuer's telephone number)
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(Former name, address or fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days ( X )Yes ( ) No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. ( )Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
6,084,600 shares of $.05 common stock outstanding at March 31, 1998
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Transitional Small Business Disclosure Format (check one):( )Yes ( X ) No
<PAGE>
UCI MEDICAL AFFILIATES, INC.
INDEX
Page
Number
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - March 31, 1998
and September 30, 1997 3
Consolidated Statements of Operations for the quarters and
the six months ending March 31, 1998 and March 31, 1997 4
Consolidated Statements of Cash Flows for the six months
ending March 31, 1998 and March 31, 1997 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
PART II OTHER INFORMATION
Items 1-6 13
SIGNATURES 14
<PAGE>
UCI MEDICAL AFFILIATES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 September 30,
1997
(unaudited) (audited)
------------- -------------
<S><C>
Assets
Current assets
Cash and cash equivalents $ 0 $ 14,676
Accounts receivable, less allowance for doubtful accounts
of $768,073 and $878,469 6,789,279 5,943,884
Inventory 544,396 502,888
Deferred taxes 334,945 334,945
Prepaid expenses and other current assets 902,526 579,217
--------------- ----------------
Total current assets 8,571,146 7,375,610
Property and equipment, less accumulated depreciation of
$3,219,434 and $2,724,222 4,468,271 4,002,699
Deferred taxes 1,417,237 1,417,237
Excess of cost over fair value of assets acquired, less
accumulated amortization of $1,981,781 and $1,664,739 8,513,467 7,801,607
Other assets 263,999 266,379
--------------- ----------------
Total Assets $ 23,234,120 $ 20,863,532
=============== ================
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 908,374 840,879
Current portion of long-term debt payable to employees 220,508 177,445
Accounts payable 2,817,692 2,039,506
Accrued salaries and payroll taxes 1,017,226 959,068
Other accrued liabilities 447,786 437,667
---------------- ---------------
Total current liabilities 5,411,586 4,454,565
Long-term debt, net of current portion 7,882,309 6,438,655
Long-term debt payable to employees, net of current portion 598,676 481,815
---------------- ----------------
Total Liabilities 13,892,571 11,375,035
---------------- ----------------
Commitments and contingencies 0 0
Stockholders' Equity
Preferred stock, par value $.01 per share:
Authorized shares - 10,000,000; none issued 0 0
Common stock, par value $.05 per share:
Authorized shares - 10,000,000
Issued and outstanding- 6,084,600 and 5,744,965
shares 304,230 287,248
Paid-in capital 16,322,924 15,435,535
Accumulated deficit (7,285,605) (6,234,286)
--------------- ----------------
Total Stockholders' Equity 9,341,549 9,488,497
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 23,234,120 $ 20,863,532
=============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UCI MEDICAL AFFILIATES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ------------ ----------- ------------
<S><C>
Revenues $8,614,687 $6,714,653 $ 16,692,563 $13,202,561
Operating costs 8,069,557 6,145,402 16,312,823 12,275,634
----------- ------------ ------------ ------------
Operating margin 545,130 569,251 379,740 926,927
General and administrative expenses 20,654 52,194 46,088 89,903
Depreciation and amortization 421,846 296,842 828,014 586,317
----------- ------------ ----------- ------------
Income (loss) from operations 102,630 220,215 (494,362) 250,707
Other income (expense)
Interest expense, net of interest in (276,609) (189,766) (555,960) (356,560)
Gain (loss) on disposal of equipment 0 (5,219) (439) (5,219)
----------- ------------ ----------- ------------
Other income (expense) (276,609) (194,985) (556,399) (361,779)
Income (loss) before benefit (provision )for
income taxes (173,979) 25,230 (1,050,761) (111,072)
Benefit (provision )for income taxes 0 166,383 (558) 332,765
----------- ------------ ----------- ------------
Net income (loss) $ (173,979) $ 191,613 $(1,051,319) $ 221,693
============ =========== ============ ============
Basic earnings (loss) per share $ (.03) $ .04 $ (.17) $ .05
=========== ============ ============ ============
Basic weighted average common shares
outstanding 6,063,335 4,807,803 6,052,540 4,807,805
=========== =========== ============ =============
Diluted earnings (loss) per share $ (.03) $ .04 $ (.17) $ .05
=========== ============ ============== ============
Diluted weighted average common shares
outstanding 6,078,635 4,819,474 6,069,465 4,819,481
=========== ============ =============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UCI MEDICAL AFFILIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
----------------------------
1998 1997
------------- -------------
<S><C>
Operating activities:
Net income (loss) $ (1,051,319) $ 221,693
Adjustments to reconcile net income (loss) to net cash provided by (used-in)
operating activities:
(Gain) loss on disposal of equipment 439 5,219
Provision for losses on accounts receivable 502,966 266,080
Depreciation and amortization 828,013 586,317
Deferred taxes 0 (350,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,059,231) (1,261,039)
(Increase) decrease in inventories (41,508) 238
(Increase) decrease in prepaid expenses and other
current assets (323,309) (143,982)
Increase (decrease) in accounts payable and accrued
expenses 840,420 (153,836)
------------ ------------
Cash provided by (used in) operating activities (303,529) (829,310)
------------- -------------
Investing activities:
Purchases of property and equipment (544,653) (275,875)
Acquisitions of goodwill (182,991) (26,551)
(Increase) decrease in other assets 2,380 2,715
------------ -------------
Cash provided by (used in) investing activities (725,264) (299,711)
------------- -------------
Financing activities:
Net borrowings (payments) under line-of-credit agreement 94,156 1,935,396
Increase in long-term debt 1,575,893 280,000
Payments on long-term debt (655,932) (1,155,669)
------------- -------------
Cash provided by (used in) financing activities 1,014,117 1,059,727
------------- -------------
Increase (decrease) in cash and cash equivalents (14,676) (69,294)
Cash and cash equivalents at beginning of period 14,676 237,684
------------- -------------
Cash and cash equivalents at end of period $ 0 $ 168,390
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of those of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the six month or three month periods ended March 31, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 1998. For further information, refer to the
audited consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended September 30, 1997.
The consolidated financial statements include the accounts of UCI Medical
Affiliates, Inc. ("UCI") and all wholly-owned and beneficially owned
subsidiaries (UCI Medical Affiliates of South Carolina, Inc. ("UCI-SC") and
Doctor's Care P.A. ("P.A.")). Because of the corporate practice of medicine
laws in the state in which the Company operates, the Company does not own
medical practices but instead enters into an exclusive long-term management
services agreement with the P.A. which operate the medical practices. In
addition, the Company has the contractual right to designate, in its sole
discretion and at any time, the licensed medical provider who is the owner of
the capital stock of the P. A. at a nominal cost ("nominee arrangements").
Through the Administrative Services Agreement, the Company has exclusive
authority over decision making relating to all major ongoing operations of the
underlying professional corporations with the exception of the professional
aspects of medical practice as required by state law. Under the Administrative
Services Agreement, the Company establishes annual operating and capital budgets
for the P. A. and compensation guidelines for the licensed medical
professionals. The Administrative Services Agreement has an initial term of
forty years. The method of computing the management fees are based on billings
of the affiliated practices less the amounts necessary to pay professional
compensation and other professional expenses. In all cases, these fees are meant
to compensate the Company for expenses incurred in providing covered services
plus a profit. These interest are unilaterally salable and transferable by the
Company and fluctuate based upon the actual performance of the operations of the
professional corporation.
Through the Administrative Services Agreement and the nominee arrangement, the
Company has a significant long-term financial interest in the affiliated
practices and, therefore, according to Emerging Issues Task Force Issue No.
97-2, "Application of FASB Statement No. 94, Consolidation of All Majority-Owned
Subsidiaries, and APB No. 16, Business Combinations, to Physician Practice
Management Entities and Certain Other Entities with Contractual management
Arrangements," may consolidate the results of the affiliated practices with
those of the Company. Because the Company must present consolidated financial
statements, net patient service revenues are presented in the accompanying
statement of operations. All significant intercompany accounts and transactions,
including management fees, have been eliminated.
The P.A. enters into employment agreements with physicians for terms ranging
from one to ten years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. Over 80% of the physicians employed by the P.A. are paid on an
hourly basis for time scheduled and worked at the medical centers while other
physicians are salaried. A few of the physicians have incentive compensation
arrangements which are contractually based upon factors such as productivity,
collections and quality.
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 revenues and expenses
and the disclosure of contingent assets and liabilities. Actual results could
differ from those estimates and assumptions. Significant estimates are discussed
in these footnotes, as applicable.
<PAGE>
Procedurally, the management agreement calls for the P.A. to provide medical
services and charge a fee to the patient or to the patient's insurance carrier
or employer for such services. Physician salaries are paid out of these revenues
and all remaining revenues are passed to UCI-SC as a management fee. UCI-SC
provides all support personnel (nurses, technicians, receptionists), all
administrative functions (billing, collecting, vendor payment), and all
facilities, supplies and equipment. The consolidated accounts of the Company
include all revenue and all expenses (including physician salaries) of all three
entities.
The net assets of the P.A. are not material for any period presented and
intercompany accounts and transactions have been eliminated.
EARNINGS PER SHARE
The computation of basic earnings (loss) per share and diluted earnings (loss)
per share is in conformity with the provisions of Statement of Financial
Accounting Standards No. 128.
SUBSEQUENT EVENTS
UCI Medical Affiliates of Georgia, Inc., a South Carolina corporation and
wholly-owned subsidiary of the Company ("UCI-GA"), acquired substantially all of
the assets of MainStreet Healthcare Corporation ("MHC") effective for accounting
purposes as of May 1, 1998 (the "Acquisition") and was accounted for using the
purchase method of accounting per APB 16. The closing of the Acquisition was
completed on May 13, 1998. As partial consideration for the Acquisition, the
Company delivered to MHC at the closing of the Acquisition a Conditional
Delivery Agreement (the "Conditional Delivery Agreement") by and between the
Company, UCI of GA and MHC which requires the Company to issue to MHC 2,901,396
shares of common stock of the Company after the approval of such issuance by the
shareholders of the Company. The Conditional Delivery Agreement states that in
the event the shareholders of the Company fail to approve the issuance of such
shares to MHC, the Acquisition shall be unwound, and the assets shall be
returned to MHC. However, holders of an aggregate of 54% of the issued and
outstanding shares of the Company's common stock as of the date of this filing
have executed and delivered separate agreements with MHC to vote their shares at
the Annual Meeting in favor of the issuance of such stock to MHC. Upon the vote
of such shareholders as indicated, the proposals relating to the Acquisition are
assured to be approved, regardless of the votes that may be cast by any other
holders of common stock entitled to vote. The Acquisition has already been
approved by the shareholders of MHC. The Company is, therefore, of the opinion
that it is a remote possibility that the Acquisition will be required to be
unwound as contemplated in the Conditional Delivery Agreement.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
The consolidated financial statements include the accounts of UCI Medical
Affiliates, Inc. ("UCI") and all wholly-owned and beneficially owned
subsidiaries (UCI Medical Affiliates of South Carolina, Inc. ("UCI-SC") and
Doctor's Care of South Carolina, P.A. ("P.A.")). Because of corporate practice
of medicine laws in the state in which the Company operates, the Company does
not own medical practices but instead enters into an exclusive long-term
management services agreement with the P.A. which operates the medical
practices. In addition, the Company has the contractual right to designate, in
its sole discretion and at any time, the licensed medical provider who is the
owner of the capital stock of the P.A. at a nominal cost ("nominee
arrangement"). Through the Administrative Services Agreement, the Company has
exclusive authority over decision making relating to all major ongoing
operations of the underlying P.A. with the exception of the professional aspects
of medical practice as required by state law. Under the Administrative Services
Agreement, the Company establishes annual operating and capital budgets for the
P.A. and compensation guidelines for the licensed medical professionals. The
Administrative Services Agreement has an initial term of forty years. The method
of computing the management fees are based on billings of the affiliated
practices less the amounts necessary to pay professional compensation and other
professional expenses. In all cases, these fees are meant to compensate the
Company for expenses incurred in providing covered services plus a profit. These
interest are unilaterally salable and transferable by the Company and fluctuate
based upon the actual performance of the operations of the P.A.
Through the Administrative Services Agreement and the nominee arrangement, the
Company has a significant long-term financial interest in the affiliated
practices and, therefore, according to Emerging Issues Task Force Issue No.
97-2, "Application of FASB Statement No. 94, Consolidation of All Majority-Owned
Subsidiaries, and APB No. 16, Business Combinations, to Physician Practice
Management Entities and Certain Other Entities with Contractual management
Arrangements," must consolidate the results of the affiliated practices with
those of the Company. Because the Company must present consolidated financial
statements, net patient service revenues are presented in the accompanying
statement of operations. All significant intercompany accounts and transactions,
including management fees, have been eliminated. In November 1997 the Emerging
Issue Task Force (EITF) finalized EITF 97-2 which provides guidance on
consolidation of physician practices and enhances related disclosures of
physician practice management companies. This EITF 97-2 is effective for fiscal
years ending after December 15 1998. The Company is in the process of evaluating
any potential effect on its financial reporting format.
Procedurally, the Administrative Services Agreement calls for the P.A. to
provide medical services and charge a fee to the patient or to the patient's
insurance carrier or employer for such services. Physician salaries are paid out
of these revenues and all remaining revenues are passed to UCI-SC as a
management fee. UCI-SC provides all support personnel (nurses, technicians,
receptionists), all administrative functions (billing, collecting, vendor
payment), and all facilities, supplies and equipment. The consolidated accounts
of the Company include all revenue and all expenses (including physician
salaries) of all three entities.
The P.A. enters into employment agreements with physicians for terms ranging
from one to ten years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. Over 80% of the physicians employed by the P.A. are paid on an
hourly basis for time scheduled and worked at the medical centers. The other
physicians are salaried. A few of the physicians have incentive compensation
arrangements, however, no amounts were accrued or paid during the Company's
three prior fiscal years that were significant. As of December 31, 1997 and
1996, the P.A. employed 98 and 71 medical providers, respectively.
<PAGE>
The net assets of the P.A. are not material for any period presented and
intercompany accounts and transactions have been eliminated.
Results of Operations For the Three Months Ended March 31, 1998 as Compared to
- --------------------------------------------------------------------------------
the Three Months Ended March 31, 1997
- -------------------------------------
Revenues of $8,615,000 for the quarter ending March 31, 1998 reflect an increase
of 28% from those of the quarter ending March 31, 1997.
This increase in revenue is attributable to a number of factors. The Company
engaged in a significant expansion, increasing the number of medical centers
from 30 to 40. This expansion included Springwood Lake Family Practice, Woodhill
Family Practice and Midtown Family Practice, all of Columbia, South Carolina and
all acquired in August 1977; Doctor's Care - Camden acquired in September 1997;
three Progressive Therapy Services offices all located in Columbia, South
Carolina and all acquired in October 1997; Doctor's Care - New Ellenton acquired
in November 1997; a Physical Therapy practice in Columbia, South Carolina opened
in November 1997; and Ridgeview Family Practice of Columbia, South Carolina,
opened in December 1997. Of the $1,900,000 in revenue growth from the second
quarter of fiscal 1997 to the second quarter of fiscal 1998, approximately
$1,283,000 was from the ten locations opened after March 31, 1997.
The Company has increased its services provided to members of Health Maintenance
Organizations (HMOs). In such arrangements, the Company, through Doctor's Care,
P.A., acts as the designated primary caregiver for members of the HMO who have
selected Doctor's Care as their primary care provider. The Company began
participating in an HMO operated by Companion HealthCare Corporation
("Companion"), a wholly owned subsidiary of Blue Cross Blue Shield of South
Carolina. The Company now acts as primary care provider for four HMOs, including
Companion and is the primary care "gatekeeper" for approximately 23,000 HMO
lives. While HMOs do not, at this time, have a significant penetration into the
South Carolina market, the Company believes that HMOs and other managed care
plans will experience a substantial increase in market share in the next few
years, and the Company is therefore positioning itself for that possibility.
Capitated revenue grew from approximately $708,000 in the second quarter of
fiscal 1997 to approximately $852,000 in the second quarter of fiscal 1998.
The Company negotiates contracts with HMOs for the P.A.'s physicians to provide
health care on a capitated reimbursement basis. Under these contracts, which
typically are automatically renewed on an annual basis, the P.A. physicians
provide virtually all covered primary care services and receive a fixed monthly
capitation payment from the HMOs for each member who chooses a P.A. physician as
his or her primary care physician. The capitation amount is fixed depending upon
the age and sex of the HMO enrollee. Contracts with HMOs accounted for
approximately 11% of the Company's net revenue in the second quarter of fiscal
1998.
To the extent that enrollees require more care than is anticipated, aggregate
capitation payments may be insufficient to cover the costs associated with the
treatment of enrollees. No capitation contracts currently in place at the
Company have been determined to be insufficient to cover related costs of
treatment. Higher capitation rates are typically received for senior patients
because their medical needs are generally greater and consequently the cost of
covered care is higher.
Increased revenues also reflect the Company's heightened focus on occupational
medicine and industrial health services. Focused marketing materials, including
quarterly newsletters for employers, were developed to spotlight the Company's
services for industry. Additionally, the Company has an agreement with Companion
Property and Casualty Insurance Company, wherein the Company acts as the primary
care provider for injured workers of firms insured through Companion Property
and Casualty Insurance Company. Companion Property and Casualty Insurance
Company is wholly owned by Blue Cross Blue Shield of South Carolina and is a
primary shareholder of the Company.
Patient encounters increased to 119,000 in the second quarter of fiscal 1998
from 95,000 in the second quarter of fiscal 1997.
Even with the positive effects of the factors mentioned above, revenues were
short of goals for the quarter, due in part to the increased competition from
hospitals and other providers in Columbia, Greenville, Sumter and Myrtle Beach.
In each of these areas, regional hospitals have acquired or opened new primary
care physician practices that compete directly with the Company for patients. In
each case, the hospital owners of our competition is believed to have
significantly greater resources than the
<PAGE>
Company. Management believes that such competition will continue into the future
and plans to compete on a basis of quality service and accessibility.
An operating margin of $545,000 was earned during the second quarter of fiscal
1998 as compared to an operating margin of $569,000 realized for the second
quarter of fiscal 1997. Management believes that this margin deterioration is
mainly the result of some start-up costs being absorbed for the locations added
since December 1996. Start-up costs are mainly the result of personnel costs
exceeding revenues at centers that are not seeing patients at or near capacity.
These costs are expensed as incurred by the Company. Additionally, patient
visits did not meet budget for the first quarter of fiscal 1998, possibly due to
the competition factors discussed above. Management does not currently believe
that this negative trend is indicative of the results that may be expected for
the fiscal year 1998.
This margin deterioration is also attributable to increased cost-cutting
pressures being applied by managed care insurance payors that cover many of the
Company's patients. As managed care plans attempt to cut costs, they typically
increase the administrative burden of providers such as the Company by requiring
referral approvals and by requesting hard copies of medical records before they
will pay claims. The number of patients at the Company's Centers that are
covered by a managed care plan versus a traditional indemnity plan continues to
grow. Management expects this trend to continue.
Depreciation and amortization expense increased to $422,000 in the second
quarter of fiscal 1998, up from $297,000 in the second quarter of fiscal 1997.
This increase reflects higher depreciation expense as a result of significant
leasehold improvements and equipment upgrades at a number of the Company's
medical centers, as well as an increase in amortization expense related to the
intangible assets acquired from the Company's purchases of existing practices as
noted above. Interest expense increased from $190,000 in the second quarter of
fiscal 1997 to $277,000 in the second quarter of fiscal 1998 primarily as a
result of the interest costs associated with the indebtedness incurred in the
Company's purchase of these assets and centers.
Effective October 1, 1993, the Company adopted Statement of Financial Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109") which requires the use of an
asset and liability approach to account for income taxes. The effect of adopting
SFAS 109 was to reduce income tax expense for the second quarter of fiscal 1997
by $175,000. As part of the adoption of SFAS 109, the Company has recognized a
deferred tax asset relating to net operating loss carry forwards which are
available to offset future taxable income.
In determining that it was more likely than not that the recorded deferred tax
asset would be realized, management of the Company considered the following:
o The budgets and forecasts that management and the Board of Directors had
adopted for the next five fiscal years including plans for expansion.
o The ability to utilize NOL's prior to their expiration.
o The potential limitation of NOL utilization in the event of a change in
ownership.
o The generation of future taxable income in excess of income reported on
the consolidated financial statements.
For the Six Months Ended March 31, 1998 as Compared to the Six Months Ended
- --------------------------------------------------------------------------------
March 31, 1997
- --------------
Revenues of $16,693,000 reflect an increase of 26% from the same period in
fiscal 1997 and is attributable to the expansion, marketing and line of business
factors discussed above. Patient encounters increased to 234,000 for the six
months ended March 31, 1998 from 191,000 for the six months ended March 31,
1997.
Financial Condition at March 31, 1998
- -------------------------------------
Cash and cash equivalents decreased by $15,000 during the six months ended March
31, 1998 and were utilized mainly for working capital needs and to fund the
expansion previously discussed.
<PAGE>
Accounts receivable increased 14% during the period, reflecting the addition of
the new centers and the overall growth in patient visits to existing centers.
The increase in goodwill attributable to the purchases of the eight practices
noted above was somewhat offset by the amortization recorded.
The $778,000 increase in accounts payable over the past six months is partially
due to the growth in the number of medical centers but is also reflective of the
tight cash position of the Company due to recent operating losses. Management
believes that it will be able to service these payables out of cash generated
through operations; if not, the Company will be dependent upon securing external
financing (either bank debt or equity) to repay these obligations..
Long-term debt increased from $6,920,000 at September 30, 1997 to $8,481,000 at
March 31, 1998 primarily as a result of indebtedness incurred in capital leases
for Center upfits, and in the utilization of an operating line of credit and
debt incurred as a result of practice acquisitions. Management believes that it
will be able to fund debt service requirements out of cash generated through
operations.
Additionally, on October 6, 1997, the Company completed a private placement of
$1.5 million, 6.5% five-year convertible subordinated debenture with FPA Medical
Management, Inc., a national physician practice management company headquartered
in San Diego, California. The debentures are convertible to common stock at any
time within the five year period at a fixed price premium to the current stock
price and are subject to Rule 144 of the Securities and Exchange Commission when
converted.
Overall, the Company's current assets exceeded its current liabilities at March
31, 1998 by $3,160,000.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital principally to fund growth (acquire new centers),
for working capital needs and for the retirement of indebtedness. The Company's
capital requirements and working capital needs have been funded through a
combination of external financing (including bank debt and proceeds from the
sale of common stock to Companion HealthCare Corporation and Companion Property
and Casualty Insurance Company), internally generated funds and credit extended
by suppliers.
Operating activities used $304,000 of cash during the six months ended March 31,
1998. This reflects growth in the Company's accounts receivable as well as
prepaid expenses offset by an increase in accounts payable and accrued expenses.
The growth in accounts receivable is the result of growth in the number of
Centers, patient visits and charges per patient visit. If the operating cash
flow shortage continues, the Company may consider additional capital sources to
obtain funding. There is no assurance that any additional financing, if
required, will be available or acceptable to the Company.
Investing activities used $725,000 of cash during the period as a result of
expansion efforts. Continued growth is anticipated during the remainder of
fiscal 1998.
Subsequent Events
- -----------------
Effective May 1, 1998, UCI acquired the assets of MainStreet Healthcare
Corporation of Atlanta, Georgia for a combination of cash, debt, UCI stock and
debt assumption. MainStreet, with annualized revenues of approximately $7
million and with approximately 100 employees, owns and operates nine primary
care medical offices in the Atlanta, Georgia area and two primary care medical
offices in Knoxville, Tennessee.
This Form 10-Q contains forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this press release that such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking statements.
Although the Company's management believes that their expectations of future
performance are based on reasonable assumptions within the bounds of their
knowledge of their business and operations, there can be no assurance that
actual results will not differ materially from their expectations. Factors which
could cause actual results to differ from expectations include, among other
things, the difficulty in controlling the Company's cost of providing healthcare
and administering its network of Centers; the possible
<PAGE>
negative effects from changes in reimbursement and capitation payment levels and
payment practices by insurance companies, healthcare plans, government payors
and other payment sources; the difficulty of attracting primary care physicians;
the increasing competition for patients among healthcare providers; possible
government regulations in multiple jurisdictions negatively impacting the
existing organizational structure of the Company; the possible negative effects
of prospective healthcare reform; the challenges and uncertainties in the
implementation of the Company's expansion and development strategy; the
dependence on key personnel, and other factors described in other reports filed
by the Company with the Securities and Exchange Commission.
<PAGE>
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
The Company is not a party to any pending litigation other than
routine litigation incidental to the business or that which is
immaterial in amount of damages sought.
Item 2 Changes in Securities
Recent Sales of Unregistered Securities
---------------------------------------
During the three months ended March 31, 1998, the securities
identified below were issued by the Company without registration
under the Securities Act of 1933. In each case, all of the shares
were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act of 1933 as a transaction, not
involving a general solicitation, in which the purchaser was
purchasing for investment. The Company believes that each purchaser
was given or had access to detailed financial and other information
with respect to the Company and possessed requisite financial
sophistication.
On March 1, 1998, the Company issued 32,433 shares of its common
stock to Allan M. Weldon, M.D. as part of the purchase price in
connection with the Company's acquisition of substantially all the
assets of the medical practice of Dr. Weldon.
Item 3 Defaults upon Senior Securities
This item is not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
This item is not applicable.
Item 5 Other Information
This item is not applicable.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits included on the attached Exhibit Index
------------
are filed as part of this report.
(b) Reports on Form 8-K.
------------------------
The Company filed a Form 8-K on February 17, 1998 which reported the
execution of an Acquisition Agreement and Plan of Reorganization of
MainStreet Healthcare Corporation of Atlanta. Revised financial
statements of the same entity were filed in a Form 8-K/A filed
on August 13,1998, and revised pro forma financial information
regarding the combined entity were filed in a Form 8-K/A filed on
May 28, 1998.
The Company filed a Form 8-K on March 11, 1998 which reported the
acquisition by UCI-SC of Allan M. Weldon, M.D. of Columbia, South
Carolina. Financial statements of the acquired entity and pro forma
financial information regarding the combined entity were filed in a
Form 8-K/A on May 11, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned hereunto duly authorized.
UCI Medical Affiliates, Inc.
(Registrant)
/s/ M.F. McFarland, III, M.D. /s/ Jerry F. Wells, Jr., CPA
- ------------------------------ -----------------------------
Marion F. McFarland, III, M.D. Jerry F. Wells, Jr., CPA
President, Chief Executive Officer, Executive Vice President of Finance,
and Chairman of the Board Chief Financial Officer, and
Principal Accounting Officer
Date: August 19, 1998
<PAGE>
UCI MEDICAL AFFILIATES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- ----------- -------------------------------------- -------------------------
<S><C>
10.19 Administrative Services Agreement dated April 24, 1998 by and 14
between Doctor's Care of Georgia, P.C., a Georgia professional
corporation and UCI Medical Affiliates of Georgia, Inc., a South
Carolina corporation.
10.20 Administrative Services Agreement dated April 24, 1998 by and 26
between Doctor's Care of Tennessee, P.C., a Tennessee
professional corporation and UCI Medical Affiliates of Georgia,
Inc., a South Carolina corporation.
27 Financial Data Schedule Filed separately as Article Type 5
via Edgar
99.1 News Release dated May 14, 1998, announcing the acquisition of 38
Atlanta based MainStreet Healthcare Corporation, the acquisition
of the Columbia, SC, practice of Allan M. Weldon, M.D., and the
second quarter fiscal year 1998 results.
</TABLE>
Exhibit 10.19
Administrative Services Agreement
dated April 24, 1998
by and between
Doctor's Care of Georgia, P.C. and
UCI Medical Affiliates of Georgia, Inc.
16
<PAGE>
Exhibit 10.19
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is entered into and
effective as of April 24, 1998, by and between Doctor's Care of Georgia, P.C., a
Georgia professional corporation (hereinafter referred to as "Doctor's Care"),
and UCI Medical Affiliates of Georgia, Inc, a South Carolina corporation
(hereinafter referred to as "Medical Management").
RECITALS
WHEREAS, Doctor's Care is a medical practice that provides medical
services to patients. Doctor's Care's services are performed by employed
physicians, by physician employees of independent physician practices under
contract with Doctor's Care and pursuant to contracts with independent
physicians, as well as by nurse practitioners and other physician extenders
(collectively referred to as "Doctor's Care Personnel");
WHEREAS, Doctor's Care does not own or possess facilities for the
provision of its services nor does it own or possess medical equipment,
furnishings or supplies that are required for the delivery of medical services;
WHEREAS, except for the Doctor's Care Personnel, Doctor's Care does not
employ, and is not desirous of employing, other personnel who may be necessary
to the proper operation of a medical practice, including nurses, technicians,
administrative and management staff;
WHEREAS, Medical Management is in the business of providing comprehensive
management services to medical practices, including the provision of office
space and equipment, the hiring of non-medical personnel, the recruitment of
medical personnel, the provision of billing and collection services, and the
coordination of relationships between primary care physicians, specialist
physicians and hospitals under managed care and other arrangements;
WHEREAS, Medical Management has special expertise and experience in the
operation, management and marketing of the non-medical aspects of medical
clinics of the type operated or intended to be operated by Doctor's Care.
Medical Management has been and will continue to be primarily involved in the
non-medical development and management of medical facilities. Medical Management
has developed and will continue to develop the non-medical aspects of a number
of facilities where high quality health care has been and will be provided at
low cost because of efficiencies of scale and management expertise; and
WHEREAS, the parties desire that Medical Management provide the
above-described services to Doctor's Care, according to the terms and conditions
set forth below.
THEREFORE, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Definitions.
1.1 "Ancillary Services" means services other than medical and
nursing services, including but not limited to radiology, health education,
pharmacy, pathology and laboratory, and therapy services provided to Doctor's
Care patients.
1.2 "Quality Assurance Program" (Program) is the ongoing monitoring
of the quality of medical services through qualitative and quantitative analyses
and the recommendation of quality improvements.
1.3 "Utilization Review" means the review of medical care provided
to patients for necessity and appropriateness conducted either concurrently with
the provision of the services or retrospectively after they have been rendered,
and which review may result in advice to a physician that a reviewed service is
not necessary or appropriate or not eligible for reimbursement under a Payor
Agreement.
1.4 "Patient" means a person who receives medical care services from
Doctor's Care.
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<PAGE>
1.5 "Payor" means an employer, insurance carrier, health service
plan, trust, nonprofit hospital service plan, governmental unit or any other
entity which is obligated to provide or reimburse health care providers for
providing health care services to a Patient.
1.6 "Payor Agreement" means an agreement between a Payor and
Doctor's Care (or its authorized representative) under which Doctor's Care
renders health care services to Patients.
2. Term of Agreement. Commencing on the effective date set forth above,
this Agreement shall continue in effect for a period of forty (40) years. It
shall automatically renew for an additional ten (10) year term unless Medical
Management shall provide Doctor's Care at least one hundred and twenty (120)
days' advance written notice of its intention to let the Agreement expire.
Thereafter, it shall renew for successive ten (10) year terms unless either
party shall provide the other at least one hundred and twenty (120) days'
advance written notice of its intention to let the Agreement expire at the end
of any such term prior to the end of such term.
3. Obligations of Medical Management.
3.1 Facilities. Medical Management shall provide to Doctor's Care,
for Doctor's Care's use, suitable facilities in which it can provide health care
services. Medical Management shall own, enter into a lease, sublease or other
occupancy agreement for each such facility if required by the owner. The
facilities which are subject to this Agreement shall be designated from time to
time exclusively by Medical Management. Each such facility and hereafter
acquired or leased facility so designated by Medical Management is hereinafter
referred to as an "Office" and all such facilities and hereafter acquired or
leased facility so designated by Medical Management are hereinafter referred to
as the "Offices."
3.2 Furniture. Fixtures and Equipment
3.2.1 During the term of this Agreement and all renewals and
extensions hereof, Medical Management shall provide Doctor's Care at each
Office at which Doctor's Care performs its health care services, the
medical equipment, office equipment, furniture, fixtures, furnishings and
leasehold improvements.
3.2.2 The use by Doctor's Care of such furniture, fixtures,
furnishings, and equipment shall be subject to the following conditions:
3.2.2.1 Title to all such furniture, fixtures,
furnishings, and equipment shall remain in Medical Management and
upon termination of this Agreement, Doctor's Care shall immediately
return and surrender all such furniture, fixtures, furnishings, and
equipment to Medical Management in as good condition as when
received, normal wear and tear excepted. Doctor's Care expressly
agrees to execute any appropriate UCC-1 Financing Statement and
UCC-1 Fixture Filings, and any amendments thereto, if so requested
in writing by Medical Management.
3.2.2.2 Medical Management shall be fully and entirely
responsible for all repairs and maintenance of all such furniture,
fixtures, furnishings, and equipment, provided, however, that
Doctor's Care agrees that it will use its best efforts to prevent
damage, excessive wear, and breakdown of all such furniture,
fixtures, furnishings, and equipment, and shall advise Medical
Management of any and all needed repairs and equipment failures.
3.3 Development, Management and Administrative Services. During the
term of this Agreement, and all renewals and extensions hereof, Doctor's Care
hereby engages Medical Management to serve as Doctor's Care's exclusive manager
and administrator of all non-medical functions and non-physician services
relating to the operation of the Offices; and Medical Management agrees to
furnish to Doctor's Care all of the non-medical development, management and
administrative services as may be needed by Doctor's Care in connection with the
operation of the Offices. Such non-medical development, management and
administrative services shall include the following:
3.3.1 Bookkeeping and Accounts. Medical Management shall
provide all bookkeeping and accounting services necessary or appropriate
to support the Offices, including, without limitation, maintenance,
custody and supervision of all business records, papers, documents,
ledgers, journals and reports, and the
18
<PAGE>
preparation, distribution and recordation of all bills and statements for
professional services rendered by Doctor's Care, including the billing and
completion of reports and forms required by insurance companies or
governmental agencies, or other third-party payors (such records, papers,
documents, ledgers, journals and reports shall not be deemed to include
patient records and other records, reports and documents which relate to
patient treatment by Doctor's Care's physicians); provided, however, it is
understood that all such business records, papers and documents are the
sole property of Doctor's Care, and shall be available for inspection by
Doctor's Care at all times, and shall be delivered to Doctor's Care upon
termination of this Agreement. Doctor's Care shall provide Medical
Management with a complete copy of all such documents, records, and papers
at Doctor's Care's expense upon termination of this Agreement.
3.3.2 General Administrative Services. Medical Management
shall provide Doctor's Care with overall supervision and management,
including the maintenance and repair, of the Offices, and all furniture,
fixtures, furnishings, equipment and leasehold improvements located in or
at the Offices.
3.3.3 Contract Administration. Medical Management shall
provide Doctor's Care with administrative services to enable Doctor's Care
to perform on a timely basis all non-medical aspects of all Payor
Agreements. Such services shall include the preparation and analysis of
reports to enable Doctor's Care to provide physician staffing and
supervision at the Offices for the rendering of efficient, high quality
medical care to patients.
3.4. Non-Physician Personnel. Medical Management shall provide
such support personnel and nursing personnel to Doctor's Care as may be
reasonably necessary to enable Doctor's Care to perform medical services
at the Offices subject to the following:
3.4.1 Medical Management shall provide all support
personnel necessary for Doctor's Care's practice, including, but not
limited to, all non-physician technical personnel, nurses,
receptionists, secretaries, clerks, purchasing and marketing
personnel, janitorial and maintenance personnel, and non-physician
supervisory personnel as may be deemed reasonably necessary by
Medical Management for the proper and efficient operation of the
Office. Notwithstanding the foregoing, if any billing rules (such as
Medicare/Medicaid "incident to" rules) require Doctor's Care to be
the employer of certain non-physician medical personnel in order for
their services to be reimbursed, then Doctor's Care shall be the
employer of such non-physician medical personnel (who shall be
deemed to be a portion of the "Doctor's Care Personnel"); and
3.4.2 Medical Management shall be responsible for hiring
and firing all such support personnel, and shall determine
compensation for all such personnel, including determination of
salaries, fringe benefits, bonuses, health and disability insurance,
workers' compensation insurance, and any other benefits that each
such employee shall receive; and
3.4.3 Medical Management shall manage and supervise all
such licensed support personnel employed on behalf of Doctor's Care
including, but not limited to all nurses, x-ray technicians and
laboratory technicians, regarding those aspects of their employment
that do not involve performance under the scope of their licensure;
provided, however, that Doctor's Care shall manage and supervise all
activities of such licensed support personnel performed under the
scope of their licensure;
19
<PAGE>
3.5 Supplies. Medical Management shall acquire and supply to
Doctor's Care all medical and non-medical supplies of every kind, name or
nature, which may reasonably be required by Doctor's Care for the operations of
the Offices.
3.6 Security and Maintenance. Medical Management shall provide
Doctor's Care with all services and personnel necessary to provide Doctor's Care
with proper security, maintenance, and cleanliness of the Offices and the
furniture, fixtures, equipment, and leasehold improvements located thereat.
Additionally, Medical Management shall furnish to or obtain for group all
laundry, linens, uniforms, printing, stationery, forms, telephone service,
postage, duplication services, and any and all other supplies and services of a
similar nature which are necessary in connection with the day-to-day operation
of the Offices.
3.7 Physician Recruiting and Training. Medical Management shall
assist Doctor's Care in recruiting, screening and evaluating prospective
physician employees and physician contractors for Doctor's Care, and Medical
Management shall assist Doctor's Care in training Doctor's Care's physicians in
the delivery of medical services at the Offices in a manner consistent with
Medical Management's established standards, practices, procedures and policies
as may from time to time be in effect.
3.8 Insurance. Medical Management shall use all reasonable efforts
to obtain and maintain in full force and effect during the term of this
Agreement, and all extensions and renewals thereof, commercial general liability
and property insurance which Medical Management deems appropriate to protect
against loss in the nature of fire, other catastrophe, theft, business
interruption, public liability, and non-medical negligence, with minimum
coverage limits of $1,000,000 per occurrence. Medical Management shall use all
reasonable efforts to obtain medical malpractice insurance for Doctor's Care and
its physician employees in an amount not less than $1,000,000 per incident with
a $3,000,000 annual limit per physician either on an "occurrence" or on a
"claims made" basis in its judgment. If obtained on a "claims made" basis, such
insurance arrangements shall include provision for the purchase of "tail
coverage" if such coverage is available at reasonable rates. Medical Management
may arrange for such malpractice insurance or portion thereof, including "tail
coverage" to be underwritten or funded by an entity which is wholly or partially
owned by Medical Management.
3.9 Billing and Collection. In order to relieve Doctor's Care of the
administrative burden of handling the billing and collection of sums due under
prepaid health plans, fees for medical, x-ray, laboratory and all services
provided by or on behalf of Doctor's Care and for which Doctor's Care may
charge, Medical Management shall be responsible, on behalf of and for Doctor's
Care and any contract physicians or independent physician groups or other
organizations practicing medicine for or on behalf of Doctor's Care, on their
respective billheads as their agent, for billing and collecting the charges made
with respect to all medical, x-ray, laboratory and all other services provided
at the Offices. Doctor's Care agrees that it will keep and provide to Medical
Management all documents, opinions, diagnoses, recommendations, and other
evidence and records necessary for the purpose of supporting the fees charged
for all medical and other services from time to time. It is expressly understood
that the extent to which Medical Management will endeavor to collect such
charges, the methods of collecting, the settling of disputes with respect to
charges, and the writing off of charges that may be or appear to be
uncollectible shall at all times be within the sole discretion of Medical
Management (but subject to all applicable governmental regulations and the terms
and conditions of applicable provider agreements), and that Medical Management
does not guarantee the extent to which any charges billed will be collected.
Doctor's Care or its duly authorized agent shall have the right at all
reasonable times and upon the giving of reasonable notice to examine, inspect
and copy the records of Medical Management pertaining to such fees, charges,
billings and collections. At Doctor's Care's request, Medical Management will
re-assign to Doctor's Care for collection by Doctor's Care, any accounts which
Medical Management has determined to be uncollectible.
3.10 Bank Accounts and Disbursements. During the term of this
Agreement, Medical Management is hereby expressly authorized to, and shall
disburse from one or more bank accounts of Doctor's Care sums for the payment of
the Cost of Medical Services as that term is defined in Section 7 below, Medical
Management's compensation and all other costs, expenses and disbursements which
are required or authorized by this Agreement. For administrative convenience,
Medical Management shall maintain said bank accounts.
3.11 Market Research. Medical Management shall conduct market
research with respect to rates, charges, competitive conditions, competition and
business opportunities for Medical Management and Doctor's Care.
20
<PAGE>
Medical Management shall compile such information and provide marketing reports
and analyses to Doctor's Care. All such marketing services shall be conducted in
accordance with the laws, rules, regulations and guidelines of all applicable
governmental and quasi-governmental agencies including, but not limited to, the
Medical Board of Georgia.
3.12 Contract Negotiations. Medical Management shall negotiate on
Doctor's Care's behalf, contracts with prepaid health plans, preferred provider
organizations, other group plans, independent physician associations, hospitals
and other health care providers for Doctor's Care's services at the Offices, for
admission of Doctor's Care's patients for hospitalization and for the provision
of health care services for Doctor's Care's patients by other physicians with
specialties not available at Doctor's Care. Upon request by Medical Management,
Doctor's Care hereby agrees to take any action convenient or necessary for
Doctor's Care to approve and enter into any such contracts.
3.13 Management and Planning Reports. Medical Management shall
supply Doctor's Care on a regular, periodic basis, such internal reports as may
be necessary or appropriate for the parties to assist each other in evaluating
the non-medical aspects of the performance and productivity of their respective
employees and contractors as well as in evaluating the efficiency and
effectiveness of the rendition of their respective management and other
non-professional services. Medical Management shall provide Doctor's Care with
data and reports for Doctor's Care's exclusive use in conducting Doctor's Care's
medical practice, evaluating the performance of Doctor's Care's physicians and
for other purposes related to maintaining a high level of patient care quality
and improving the efficiency of Doctor's Care's physicians. Medical Management
shall meet periodically with Doctor's Care's utilization review designees,
medical directors of Offices, Doctor's Care's peer review committees and other
representatives of Doctor's Care to review the data and reports provided by
Medical Management, to consult with each other with regard to the interpretation
of such data and reports, to evaluate the application of such data and reports
to the operation of the Offices and to detect and discuss trends in Doctor's
Care's medical practice at the Offices.
3.14 Utilization Review. Medical Management shall establish and
administer a program of Utilization Review of medical care rendered by Doctor's
Care that is consistent with the terms of the Payor Agreements, and Doctor's
Care agrees that it and its physicians shall adhere to the advice of such
program to the extent that it is consistent with the physician's professional
judgment.
3.15 Quality Assurance. It is understood that Doctor's Care has an
established Quality Assurance Program to assure a standard of care that is
consistent with the laws of the state and federal governments, with the
applicable contractual obligations of Doctor's Care, and with the prevailing
standards of medical practice and medical care in the community. Medical
Management shall assist in the implementation of this Quality Assurance Program.
3.16 Arrangements with Other Providers. The parties hereto
acknowledge and agree that Medical Management may enter into arrangements with
health care providers other than Doctor's Care, including specialty physicians
and hospitals, for the provision of services to patients.
3.17 Doctor's Care Operations. Medical Management shall have
exclusive authority over all decision-making for ongoing Doctor's Care major or
central operations except for the dispensing of medical services. This authority
includes, but is not limited to, the scope of services, patient acceptance
policies and procedures, pricing of services, negotiation and execution of
contracts, issuance of debt, and establishment and approval of operating and
capital budgets.
3.18 Compensation and Selection of Physicians. Medical Management
shall have exclusive decision-making authority over the total compensation of
Doctor's Care's Personnel. Medical Management shall have the authority to
establish and implement guidelines for the selection, hiring and firing of
Doctor's Care's Personnel; without limiting the generality of the foregoing,
Doctor's Care shall not employ or contract with any Doctor's Care Personnel
without the prior consent of Medical Management.
3.19 Notice of Certain Corporate Actions. During the term of this
Agreement and any extension or renewal thereof, (i) if Doctor's Care shall
desire to amend its bylaws or its Articles of Incorporation; or (ii) if any
capital reorganization of the Doctor's Care, reclassification of the capital
stock of Doctor's Care, consolidation or merger of Doctor's Care with or into
another corporation, sale lease, or transfer of all or substantially all of the
property and assets of Doctor's Care shall desire to be effected; or (iii) if
Doctor's Care shall desire to pay any dividend, in shares of stock or cash or
otherwise, or make any distribution upon the shares of its capital stock, then
in any such case, Doctor's Care shall cause to be
21
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delivered to Medical Management, at least thirty (30) days prior to the record
date fixed for the purpose of determining shareholders entitled to vote on such
action, or to receive such dividend, distribution, or offer, or to receive
shares or other assets deliverable upon such reorganization, reclassification,
consolidation, merger, sale, lease, transfer, dissolution, liquidation, or
winding up, as the case may be, a notice containing a brief description of the
proposed action and stating such record date.
3.20 Proceeds of Sale of Doctor's Care and/or Offices. During the
term of this Agreement and any renewal or extension thereof, in the event all or
substantially all the assets of Doctor's Care or one or more of the Offices are
sold or otherwise transferred, such sale or transfer shall not be effective
except upon the prior written consent of Medical Management which may be
withheld for any or no reason, and Medical Management shall be entitled to any
and all the proceeds of such sale or transfer.
4. Compliance with Payor Agreements. Medical Management agrees to perform
its duties hereunder so as to comply with Doctor's Care's obligations under the
Payor Agreements.
5. Conduct of Medical Practice. Doctor's Care shall be solely and
exclusively in control of all aspects of the practice of medicine and the
delivery of medical services in its practice. The rendition of all medical
professional services, including, but not limited to, diagnosis, treatment,
surgery, therapy and the prescription of medicine and drugs, and the supervision
of preparation of medical reports shall be the responsibility of Doctor's Care.
Except as otherwise set forth herein, Doctor's Care shall have the sole right
and authority to hire, employ, train, supervise, terminate and compensate all of
the Doctor's Care Personnel. Medical Management shall have the authority to
establish fees or charges for the rendition of such services. Doctor's Care
agrees to assign a physician to act as its Medical Director and to assure that
its Offices are adequately staffed during operating hours with such medical
personnel as may be necessary to efficiently carry out the practice of medicine
at such Offices, all of whom shall be duly licensed by the state in which they
practice.
6. Exclusivity. During the term of this Agreement, Doctor's Care agrees
not to contract for or to obtain management or administrative services with any
organization other than Medical Management.
7. Medical Management's Compensation.
7.1 Definitions.
7.1.1 "Books and Records" means Doctor's Care's books of
account, accounting and financial records and all other records relating to and
used in the conduct of Medical Management's duties hereunder and also used in
the preparation of reports and financial statements. The books and records at
all times shall be correct and complete and contain correct and timely entries
made with respect to transactions entered into pursuant hereto in accordance
with GAAP.
7.1.2 "Cost of Medical Services" means any and all expenses of
Doctor's Care with respect to providing services at the Offices or related in
any way to the business of Doctor's Care, including without limitation the
aggregate compensation of Doctor's Care Personnel, plus the cost of such
Doctor's Care Personnel's benefits, including, but not limited to vacation pay,
sick pay, health care expenses, Doctor's Care's share of Doctor's Care
Personnel's, employment and payroll taxes, professional dues, and other expenses
and payments required to be made to or for said Doctor's Care Personnel,
pursuant to employment agreements or otherwise, including expense reimbursements
and all discretionary bonuses, incentives, and/or payments based on
profitability or productivity paid or accrued for Doctor's Care Personnel at
said Offices; and also includes the cost of Ancillary Services ordered by
Doctor's Care Personnel on behalf of Doctor's Care's patients and the cost of
medical malpractice insurance for Doctor's Care and Doctor's Care Personnel.
7.1.3 "GAAP" means at any particular time generally accepted
accounting principles as m effect at such time. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method of
valuation as used in the preparation of Medical Management's financial
statements.
7.1.4 "Net Revenues" means all Revenues net of allowances for
uncollectible accounts.
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7.1.5 "Revenues" means all amounts assigned and paid hereunder
by Doctor's Care to Medical Management pursuant to Subsection 7.2.
7.2 Assignment to Medical Management. Doctor's Care hereby assigns
to Medical Management all of Doctor's Care's rights and interest in all sums
which Doctor's Care receives or becomes entitled to receive for the performance
of medical services by employees of Doctor's Care and from charges by Doctor's
Care for supplies and other items for which Doctor's Care is entitled to charge
as reflected in invoices issued by Doctor's Care with respect to the Offices.
Notwithstanding the foregoing, no assignment shall be made of any sums or rights
to payment, the assignment of which is prohibited by law (e.g., amounts
receivable from Medicare claims). In lieu of assignment of the payments
described above, Doctor's Care hereby agrees to pay to Medical Management an
amount equal to the amount of any such payments within two (2) business days of
receiving such payments.
7.3 Remittances on Behalf of Doctor's Care. Medical Management shall
pay on Doctor's Care's behalf from the Net Revenues the Cost of Medical
Services. Medical Management shall have access to the Books and Records for the
purpose of determining payments to be made under this Subsection 7.3.
7.4 Medical Management's Compensation. As compensation for the
provision of its services hereunder, Medical Management shall receive the
balance, if any, of the Net Revenues remaining after payments of the Costs of
Medical Services as set forth in Section 7.3.
8. Records.
8.1 Medical Management agrees to maintain documentation of source
data related to quality assurance, Utilization Review and cost and utilization
reports prepared for and/or submitted to Doctor's Care for a period of at least
five years from the close of the contract period specified in this Agreement.
8.2 Medical Management agrees to make all of its books and records
pertaining to the services furnished under the terms of this Agreement (subject
to applicable ethical and legal confidentiality requirements) available for
inspection, examination or copying by duly authorized representatives of
Doctor's Care.
9. Insurance and Indemnification.
9.1 Medical Management shall confirm that any physician provider
used by Doctor's Care to serve the needs of Patients shall have professional
liability insurance or protection limits of coverage as follows: at least
$1,000,000 per occurrence and $3,000,000 annual aggregate for said physician.
Medical Management shall provide evidence of the above-described coverage to
Doctor's Care upon request.
9.2 Doctor's Care further agrees, during the term of this Agreement,
to indemnify and hold harmless Medical Management against any claims or
liabilities arising under this Agreement which are the sole responsibility of
Doctor's Care or its employees or agents.
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10. Confidentiality.
10.1 Patient Records. All patients records, reports and information
obtained, generated, or encountered relating to Offices, which have not and
hereafter are not designated by Medical Management as being Medical Management's
property shall at all times be the property of Doctor's Care and so long as in
the possession, use or control of either party, shall be kept in the strictest
confidence by both parties. Medical Management shall instruct all of its
personnel to keep confidential any such information, as well as any financial,
statistical, personnel, and patient information obtained or encountered relating
to Doctor's Care or to Doctor's Care's operations. Both parties agree to comply
with all applicable laws, regulations and professional standards concerning the
confidentiality of patient records.
10.2 Proprietary Information. Doctor's Care recognizes that due to
the nature of this Agreement, Doctor's Care will have access to information of a
proprietary nature owned by Medical Management including, but not limited to,
any and all computer programs (whether or not completed or in use) and any and
all operating manuals or similar materials which constitute the non-medical
systems, policies and procedures, and methods of doing business developed by
Medical Management for the operation of facilities managed by Medical
Management. Consequently, Doctor's Care acknowledges and agrees that Medical
Management has a proprietary interest in all such information and that all such
information constitutes confidential and proprietary information and is the
trade secret property of Medical Management. Doctor's Care hereby waives any and
all right, title and interest in and to such trade secrets and confidential
information and agrees to return all copies of such trade secrets and
confidential information related thereto to Medical Management, at Doctor's
Care's expense, upon the termination of the Agreement.
Doctor's Care further acknowledges and agrees that Medical Management is
entitled to prevent its competitors from obtaining and utilizing its trade
secrets and confidential information. Therefore, Doctor's Care agrees to hold
Medical Management's trade secrets and confidential information in strictest
confidence and not to disclose them or allow them to be disclosed, directly or
indirectly, to any person or entity other than those persons or entities who are
employed by or affiliated with Medical Management or Doctor's Care, without the
prior written consent of Medical Management. Doctor's Care shall not, either
during the term of this Agreement, or at any time after the expiration or sooner
termination of this Agreement, disclose to anyone other than persons or entities
who are employed by or affiliated with Medical Management or Doctor's Care any
confidential or proprietary information or trade secret information obtained by
Doctor's Care from Medical Management, except as otherwise required by law.
Doctor's Care agrees to require each independent contractor and employee of
Doctor's Care, and any such persons or entities to whom such information is
disclosed for the purpose of performance of Medical Management's or Doctor's
Care's obligations under this Agreement, to execute a "Confidentiality
Agreement" in a form acceptable to Medical Management.
Doctor's Care acknowledges and agrees that a breach of this Section 10
will result in irreparable harm to Medical Management which cannot be reasonably
or adequately compensated in damages, and therefore Medical Management shall be
entitled to injunctive and equitable relief to prevent a breach and to secure
enforcement thereof, in addition to any other relief or award to which Medical
Management may be entitled.
11. Cooperation.
11.1 Doctor's Care and Medical Management agree that they shall at
all times maintain an effective liaison and close cooperation with each other to
facilitate provision of high quality and cost effective health care to Patients.
11.2 Each of the parties agrees to cooperate fully with each other
in connection with the performance of their respective obligations under this
Agreement, and both parties agree to employ their best efforts to resolve any
dispute that may arise under or in connection with this Agreement. Subject to
Medical Management maintaining the confidentiality of patient records and
Doctor's Care's confidential information, Doctor's Care shall provide to Medical
Management full and complete access to Doctor's Care's premises, and to Doctor's
Care charts, books, and records, in order that Medical Management can perform
its functions hereunder.
11.3 During the term of this Agreement, Doctor's Care shall not add
facilities or clinics for the practice of medicine by Doctor's Care's physicians
without the prior approval of Medical Management.
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11.4 Notwithstanding any other provisions contained herein, Medical
Management shall not be liable to Doctor's Care, and shall not be deemed to be
in default hereunder, for the failure to perform or provide any of the supplies,
services, personnel, or other obligations to be performed or provided by Medical
Management pursuant to this Agreement if such failure is a result of a labor
dispute, act of God, or any other event which is beyond the reasonable control
of Medical Management.
12. License of Intellectual Property. During the term of this Agreement
and any extension or renewals thereof, each of the party's hereto hereby grants
royalty free to the other party hereto the non-exclusive right and license to
use any and all trademarks, trade names, service marks, logos, and other
intellectual property rights owned by the granting party. The licensed
intellectual property and any goodwill associated therewith are and shall at all
times remain the property of the granting party.
13. Doctor's Care Patient Grievances. Medical Management agrees to comply
with the complaint, grievance and disenrollment policies of Payors in resolving
any Patient grievances related to the provision of medical services by Doctor's
Care. Doctor's Care shall bring to the attention of Medical Management all
applicable complaints or grievances involving Doctor's Care, and Medical
Management shall promptly, in accordance with any applicable Payor procedures,
investigate such complaints and use its best efforts to resolve them in a fair
and equitable manner. Medical Management agrees to notify Doctor's Care monthly
of any complaints from Patients and of actions taken or proposed with respect to
the disposition of such complaints.
14. Professional Training and Licensing Standards.
14.1 Medical Management warrants that any provider that it engages
to provide services to Patients is in compliance with applicable local, state,
and federal laws, regulations and/or licensing requirements relating to the
provision of services that they will provide.
14.2 Doctor's Care shall provide Medical Management with a copy of
credentials requirements and agrees to provide Medical Management with
documentation that each physician providing services to Doctor's Care Patients
is appropriately credentialled. This documentation will include proof of
licensure and specialty certification as applicable. This documentation shall be
maintained on file by Medical Management and reviewed by Doctor's Care and
Medical Management on an annual basis. Doctor's Care will maintain oversight
responsibility to assure that all licensed physicians are credentialled
according to its managed care Quality Assurance Program.
15. Non-Discrimination.
15.1 In the performance of this contract, Doctor's Care and Medical
Management shall not unlawfully discriminate against any employee or applicant
for employment because of race, religion, color, national origin, ancestry,
physical or psychological disability, medical condition, marital status, age,
sex or sexual orientation. Doctor's Care and Medical Management shall insure
that the evaluation and treatment of their employees and applicants for
employment are free of such discrimination and shall comply with all the
provisions of law applicable thereto.
15.2 The applicable regulations of law relating to the treatment and
evaluation of employees and applicants for employment are incorporated into this
Agreement by reference and made a part hereof as if set forth in full. Doctor's
Care and Medical Management shall give written notice of their obligations under
this clause to labor organizations with which they have a collective bargaining
or other agreement.
16. Arbitration. If a dispute or matter in controversy arises between the
parties hereto which they are unable to resolve to their mutual satisfaction
within ten (10) days of written notice from one to the other of the existence of
such dispute, then either party may notify the other party in writing (the
"Notice") that the dispute be submitted to binding arbitration as provided
herein. The arbitration panel shall consist of three (3) arbitrators, one of
whom shall be selected by Medical Management, one of which shall be selected by
Doctor's Care, each within 10 days of the Notice, and the third shall be
selected by the first two within ten (10) days of their selection. If either
party shall fail to make a selection within ten (10) days, the first arbitrator
shall select the remaining two (2). In the event that any arbitrator shall
resign or otherwise fail to perform his duties, his successor shall immediately
be selected by the party who selected such arbitrator in the first instance. The
arbitration panel shall have the authority to assess costs and shall award
attorneys' fees. Either party may have recourse
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to the courts for enforcement of the award of the arbitration panel.
Notwithstanding any provision of this Section 16, the arbitration panel shall
have no authority to override Medical Management's exclusive authority over the
ongoing major or central operations of Doctor's Care, as specifically set forth
in Subsection 3.17 and as otherwise set forth in this Agreement. With respect to
any dispute brought by Doctor's Care, the arbitration panel and any court of
competent jurisdiction may order termination of this Agreement only upon a
finding beyond a reasonable doubt that Medical Management (a) was grossly
negligent, (b) committed a fraudulent act, or (c) committed illegal acts.
17. Waiver of Violation. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach thereof.
18. Miscellaneous.
18.1 Enforceability. If any provision of this Agreement shall be for
any reason invalid or unenforceable, the remaining provisions shall be
nevertheless effective.
18.2 Amendments. This Agreement constitutes the entire written
understanding between the parties and may only be amended by Medical Management
providing notice to Doctor's Care of such amendment.
18.3 Independent Relationship.
In the performance of this Agreement, it is mutually understood and
agreed that all physicians practicing medicine at any of the Offices are at all
times acting and performing as employees of Doctor's Care or as independent
contractors with Doctor's Care ("Doctor's Care's Physicians") and not employees
or agents of Medical Management. Medical Management shall neither have nor
exercise any control or direction over the methods by which Doctor's Care or
Doctor's Care's Physicians shall practice medicine. The function of Medical
Management is to provide Doctor's Care with all non-medical services in a
competent, efficient, and satisfactory manner. Doctor's Care and Doctor's Care's
Physicians shall have no claim under this Agreement or otherwise against Medical
Management for workers' compensation, unemployment compensation, sick leave,
vacation pay, retirement benefits, Social Security benefits, or any other
employee benefits, all of which shall be the sole responsibility of Doctor's
Care. Since Doctor's Care's Physicians are not employees of Medical Management,
it shall not withhold on behalf of Doctor's Care's Physicians pursuant to this
Agreement any sums for income tax, unemployment insurance, Social Security, or
otherwise pursuant to any law or requirement of any governmental agency, and all
such withholding, if any is required, shall be the sole responsibility of
Doctor's Care. Doctor's Care shall indemnify and hold harmless Medical
Management from any and all loss or liability arising with respect to any of the
foregoing benefits or withholding requirements.
18.4 Assignability. This Agreement and all rights and obligations
hereunder may not be assigned by Doctor's Care without the prior written consent
of Medical Management. Medical Management may assign this Agreement or any or
all rights and obligations hereunder at any time upon notice to Doctor's Care.
18.5 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of South Carolina.
[SIGNATURE PAGE ATTACHED]
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IN WITNESS WHEREOF, the parties hereto have caused this
Administrative Services Agreement to be executed by their duly authorized
representatives as of the date first above written.
UCI MEDICAL AFFILIATES OF GEORGIA, INC.
By: /S/ M. F. MCFARLAND, III, M.D.
- ------------------------------------
M.F. McFarland, III, M.D.
Title: President and Chief Executive Officer
Address:
1901 Main Street
Suite 1200
Columbia, SC 29201
DOCTOR'S CARE OF GEORGIA, P.C.
By: /S/ JERRY F. WELLS, JR.
- -----------------------------
Jerry F. Wells, Jr.
Title: Secretary and Treasurer
Address:
1901 Main Street
Suite 1200
Columbia, SC 29201
27
Exhibit 10.20
Administrative Services Agreement
dated April 24, 1998
by and between
Doctor's Care of Tennessee, P.C. and
UCI Medical Affiliates of Georgia, Inc.
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Exhibit 10.20
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is entered into and
effective as of April 24, 1998, by and between Doctor's Care of Tennessee, P.C.,
a Tennessee professional corporation (hereinafter referred to as "Doctor's
Care"), and UCI Medical Affiliates of Georgia, Inc, a South Carolina corporation
(hereinafter referred to as "Medical Management").
RECITALS
WHEREAS, Doctor's Care is a medical practice that provides medical
services to patients. Doctor's Care's services are performed by employed
physicians, by physician employees of independent physician practices under
contract with Doctor's Care and pursuant to contracts with independent
physicians, as well as by nurse practitioners and other physician extenders
(collectively referred to as "Doctor's Care Personnel");
WHEREAS, Doctor's Care does not own or possess facilities for the
provision of its services nor does it own or possess medical equipment,
furnishings or supplies that are required for the delivery of medical services;
WHEREAS, except for the Doctor's Care Personnel, Doctor's Care does not
employ, and is not desirous of employing, other personnel who may be necessary
to the proper operation of a medical practice, including nurses, technicians,
administrative and management staff;
WHEREAS, Medical Management is in the business of providing comprehensive
management services to medical practices, including the provision of office
space and equipment, the hiring of non-medical personnel, the recruitment of
medical personnel, the provision of billing and collection services, and the
coordination of relationships between primary care physicians, specialist
physicians and hospitals under managed care and other arrangements;
WHEREAS, Medical Management has special expertise and experience in the
operation, management and marketing of the non-medical aspects of medical
clinics of the type operated or intended to be operated by Doctor's Care.
Medical Management has been and will continue to be primarily involved in the
non-medical development and management of medical facilities. Medical Management
has developed and will continue to develop the non-medical aspects of a number
of facilities where high quality health care has been and will be provided at
low cost because of efficiencies of scale and management expertise; and
WHEREAS, the parties desire that Medical Management provide the
above-described services to Doctor's Care, according to the terms and conditions
set forth below.
THEREFORE, the parties hereto, intending to be legally bound, do hereby
agree as follows:
1. Definitions.
1.1 "Ancillary Services" means services other than medical and
nursing services, including but not limited to radiology, health education,
pharmacy, pathology and laboratory, and therapy services provided to Doctor's
Care patients.
1.2 "Quality Assurance Program" (Program) is the ongoing monitoring
of the quality of medical services through qualitative and quantitative analyses
and the recommendation of quality improvements.
1.3 "Utilization Review" means the review of medical care provided
to patients for necessity and appropriateness conducted either concurrently with
the provision of the services or retrospectively after they have been rendered,
and which review may result in advice to a physician that a reviewed service is
not necessary or appropriate or not eligible for reimbursement under a Payor
Agreement.
1.4 "Patient" means a person who receives medical care services from
Doctor's Care.
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1.5 "Payor" means an employer, insurance carrier, health service
plan, trust, nonprofit hospital service plan, governmental unit or any other
entity which is obligated to provide or reimburse health care providers for
providing health care services to a Patient.
1.6 "Payor Agreement" means an agreement between a Payor and
Doctor's Care (or its authorized representative) under which Doctor's Care
renders health care services to Patients.
2. Term of Agreement. Commencing on the effective date set forth above,
this Agreement shall continue in effect for a period of forty (40) years. It
shall automatically renew for an additional ten (10) year term unless Medical
Management shall provide Doctor's Care at least one hundred and twenty (120)
days' advance written notice of its intention to let the Agreement expire.
Thereafter, it shall renew for successive ten (10) year terms unless either
party shall provide the other at least one hundred and twenty (120) days'
advance written notice of its intention to let the Agreement expire at the end
of any such term prior to the end of such term.
3. Obligations of Medical Management.
3.1 Facilities. Medical Management shall provide to Doctor's Care,
for Doctor's Care's use, suitable facilities in which it can provide health care
services. Medical Management shall own, enter into a lease, sublease or other
occupancy agreement for each such facility if required by the owner. The
facilities which are subject to this Agreement shall be designated from time to
time exclusively by Medical Management. Each such facility and hereafter
acquired or leased facility so designated by Medical Management is hereinafter
referred to as an "Office" and all such facilities and hereafter acquired or
leased facility so designated by Medical Management are hereinafter referred to
as the "Offices."
3.2 Furniture. Fixtures and Equipment
3.2.1 During the term of this Agreement and all renewals and
extensions hereof, Medical Management shall provide Doctor's Care at each
Office at which Doctor's Care performs its health care services, the
medical equipment, office equipment, furniture, fixtures, furnishings and
leasehold improvements.
3.2.2 The use by Doctor's Care of such furniture, fixtures,
furnishings, and equipment shall be subject to the following conditions:
3.2.2.1 Title to all such furniture, fixtures,
furnishings, and equipment shall remain in Medical Management and
upon termination of this Agreement, Doctor's Care shall immediately
return and surrender all such furniture, fixtures, furnishings, and
equipment to Medical Management in as good condition as when
received, normal wear and tear excepted. Doctor's Care expressly
agrees to execute any appropriate UCC-1 Financing Statement and
UCC-1 Fixture Filings, and any amendments thereto, if so requested
in writing by Medical Management.
3.2.2.2 Medical Management shall be fully and entirely
responsible for all repairs and maintenance of all such furniture,
fixtures, furnishings, and equipment, provided, however, that
Doctor's Care agrees that it will use its best efforts to prevent
damage, excessive wear, and breakdown of all such furniture,
fixtures, furnishings, and equipment, and shall advise Medical
Management of any and all needed repairs and equipment failures.
3.3 Development, Management and Administrative Services. During the
term of this Agreement, and all renewals and extensions hereof, Doctor's Care
hereby engages Medical Management to serve as Doctor's Care's exclusive manager
and administrator of all non-medical functions and non-physician services
relating to the operation of the Offices; and Medical Management agrees to
furnish to Doctor's Care all of the non-medical development, management and
administrative services as may be needed by Doctor's Care in connection with the
operation of the Offices. Such non-medical development, management and
administrative services shall include the following:
3.3.1 Bookkeeping and Accounts. Medical Management shall
provide all bookkeeping and accounting services necessary or appropriate
to support the Offices, including, without limitation, maintenance,
custody and supervision of all business records, papers, documents,
ledgers, journals and reports, and the
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preparation, distribution and recordation of all bills and statements for
professional services rendered by Doctor's Care, including the billing and
completion of reports and forms required by insurance companies or
governmental agencies, or other third-party payors (such records, papers,
documents, ledgers, journals and reports shall not be deemed to include
patient records and other records, reports and documents which relate to
patient treatment by Doctor's Care's physicians); provided, however, it is
understood that all such business records, papers and documents are the
sole property of Doctor's Care, and shall be available for inspection by
Doctor's Care at all times, and shall be delivered to Doctor's Care upon
termination of this Agreement. Doctor's Care shall provide Medical
Management with a complete copy of all such documents, records, and papers
at Doctor's Care's expense upon termination of this Agreement.
3.3.2 General Administrative Services. Medical Management
shall provide Doctor's Care with overall supervision and management,
including the maintenance and repair, of the Offices, and all furniture,
fixtures, furnishings, equipment and leasehold improvements located in or
at the Offices.
3.3.3 Contract Administration. Medical Management shall
provide Doctor's Care with administrative services to enable Doctor's Care
to perform on a timely basis all non-medical aspects of all Payor
Agreements. Such services shall include the preparation and analysis of
reports to enable Doctor's Care to provide physician staffing and
supervision at the Offices for the rendering of efficient, high quality
medical care to patients.
3.4. Non-Physician Personnel. Medical Management shall provide
such support personnel and nursing personnel to Doctor's Care as may be
reasonably necessary to enable Doctor's Care to perform medical services
at the Offices subject to the following:
3.4.1 Medical Management shall provide all support
necessary for Doctor's Care's practice, including, but not limited
to, all non-physician technical personnel, nurses, receptionists,
secretaries, clerks, purchasing and marketing personnel, janitorial
and maintenance personnel, and non-physician supervisory personnel
as may be deemed reasonably necessary by Medical Management for the
proper and efficient operation of the Office. Notwithstanding the
foregoing, if any billing rules (such as Medicare/Medicaid "incident
to" rules) require Doctor's Care to be the employer of certain
non-physician medical personnel in order for their services to be
reimbursed, then Doctor's Care shall be the employer of such
non-physician medical personnel (who shall be deemed to be a portion
of the "Doctor's Care Personnel"); and
3.4.2 Medical Management shall be responsible for hiring
and firing all such support personnel, and shall determine
compensation for all such personnel, including determination of
salaries, fringe benefits, bonuses, health and disability insurance,
workers' compensation insurance, and any other benefits that each
such employee shall receive; and
3.4.3 Medical Management shall manage and supervise all
such licensed support personnel employed on behalf of Doctor's Care
including, but not limited to all nurses, x-ray technicians and
laboratory technicians, regarding those aspects of their employment
that do not involve performance under the scope of their licensure;
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provided, however, that Doctor's Care shall manage and supervise all
activities of such licensed support personnel performed under the
scope of their licensure;
3.5 Supplies. Medical Management shall acquire and supply to Doctor's
Care all medical and non-medical supplies of every kind, name or nature, which
may reasonably be required by Doctor's Care for the operations of the Offices.
3.6 Security and Maintenance. Medical Management shall provide Doctor's
Care with all services and personnel necessary to provide Doctor's Care with
proper security, maintenance, and cleanliness of the Offices and the furniture,
fixtures, equipment, and leasehold improvements located thereat. Additionally,
Medical Management shall furnish to or obtain for group all laundry, linens,
uniforms, printing, stationery, forms, telephone service, postage, duplication
services, and any and all other supplies and services of a similar nature which
are necessary in connection with the day-to-day operation of the Offices.
3.7 Physician Recruiting and Training. Medical Management shall
assist Doctor's Care in recruiting, screening and evaluating prospective
physician employees and physician contractors for Doctor's Care, and Medical
Management shall assist Doctor's Care in training Doctor's Care's physicians in
the delivery of medical services at the Offices in a manner consistent with
Medical Management's established standards, practices, procedures and policies
as may from time to time be in effect.
3.8 Insurance. Medical Management shall use all reasonable efforts
to obtain and maintain in full force and effect during the term of this
Agreement, and all extensions and renewals thereof, commercial general liability
and property insurance which Medical Management deems appropriate to protect
against loss in the nature of fire, other catastrophe, theft, business
interruption, public liability, and non-medical negligence, with minimum
coverage limits of $1,000,000 per occurrence. Medical Management shall use all
reasonable efforts to obtain medical malpractice insurance for Doctor's Care and
its physician employees in an amount not less than $1,000,000 per incident with
a $3,000,000 annual limit per physician either on an "occurrence" or on a
"claims made" basis in its judgment. If obtained on a "claims made" basis, such
insurance arrangements shall include provision for the purchase of "tail
coverage" if such coverage is available at reasonable rates. Medical Management
may arrange for such malpractice insurance or portion thereof, including "tail
coverage" to be underwritten or funded by an entity which is wholly or partially
owned by Medical Management.
3.9 Billing and Collection. In order to relieve Doctor's Care of the
administrative burden of handling the billing and collection of sums due under
prepaid health plans, fees for medical, x-ray, laboratory and all services
provided by or on behalf of Doctor's Care and for which Doctor's Care may
charge, Medical Management shall be responsible, on behalf of and for Doctor's
Care and any contract physicians or independent physician groups or other
organizations practicing medicine for or on behalf of Doctor's Care, on their
respective billheads as their agent, for billing and collecting the charges made
with respect to all medical, x-ray, laboratory and all other services provided
at the Offices. Doctor's Care agrees that it will keep and provide to Medical
Management all documents, opinions, diagnoses, recommendations, and other
evidence and records necessary for the purpose of supporting the fees charged
for all medical and other services from time to time. It is expressly understood
that the extent to which Medical Management will endeavor to collect such
charges, the methods of collecting, the settling of disputes with respect to
charges, and the writing off of charges that may be or appear to be
uncollectible shall at all times be within the sole discretion of Medical
Management (but subject to all applicable governmental regulations and the terms
and conditions of applicable provider agreements), and that Medical Management
does not guarantee the extent to which any charges billed will be collected.
Doctor's Care or its duly authorized agent shall have the right at all
reasonable times and upon the giving of reasonable notice to examine, inspect
and copy the records of Medical Management pertaining to such fees, charges,
billings and collections. At Doctor's Care's request, Medical Management will
re-assign to Doctor's Care for collection by Doctor's Care, any accounts which
Medical Management has determined to be uncollectible.
3.10 Bank Accounts and Disbursements. During the term of this
Agreement, Medical Management is hereby expressly authorized to, and shall
disburse from one or more bank accounts of Doctor's Care sums for the payment of
the Cost of Medical Services as that term is defined in Section 7 below, Medical
Management's compensation and all other costs, expenses and disbursements which
are required or authorized by this Agreement. For administrative convenience,
Medical Management shall maintain said bank accounts.
3.11 Market Research. Medical Management shall conduct market
research with respect to rates, charges, competitive conditions, competition and
business opportunities for Medical Management and Doctor's Care.
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Medical Management shall compile such information and provide marketing reports
and analyses to Doctor's Care. All such marketing services shall be conducted in
accordance with the laws, rules, regulations and guidelines of all applicable
governmental and quasi-governmental agencies including, but not limited to, the
Medical Board of Tennessee.
3.12 Contract Negotiations. Medical Management shall negotiate on
Doctor's Care's behalf, contracts with prepaid health plans, preferred provider
organizations, other group plans, independent physician associations, hospitals
and other health care providers for Doctor's Care's services at the Offices, for
admission of Doctor's Care's patients for hospitalization and for the provision
of health care services for Doctor's Care's patients by other physicians with
specialties not available at Doctor's Care. Upon request by Medical Management,
Doctor's Care hereby agrees to take any action convenient or necessary for
Doctor's Care to approve and enter into any such contracts.
3.13 Management and Planning Reports. Medical Management shall supply
Doctor's Care on a regular, periodic basis, such internal reports as may be
necessary or appropriate for the parties to assist each other in evaluating the
non-medical aspects of the performance and productivity of their respective
employees and contractors as well as in evaluating the efficiency and effective-
ness of the rendition of their respective management and other non-professional
services. Medical Management shall provide Doctor's Care with data and reports
for Doctor's Care's exclusive use in conducting Doctor's Care's medical
practice, evaluating the performance of Doctor's Care's physicians and for other
purposes related to maintaining a high level of patient care quality and
improving the efficiency of Doctor's Care's physicians. Medical Management shall
meet periodically with Doctor's Care's utilization review designees, medical
directors of Offices, Doctor's Care's peer review committees and other represen-
tatives of Doctor's Care to review the data and reports provided by Medical
Management, to consult with each other with regard to the interpretation of such
data and reports, to evaluate the application of such data and reports to the
operation of the Offices and to detect and discuss trends in Doctor's Care's
medical practice at the Offices.
3.14 Utilization Review. Medical Management shall establish and adminis-
ter a program of Utilization Review of medical care rendered by Doctor's Care
that is consistent with the terms of the Payor Agreements, and Doctor's Care
agrees that it and its physicians shall adhere to the advice of such program to
the extent that it is consistent with the physician's professional judgment.
3.15 Quality Assurance. It is understood that Doctor's Care has an
established Quality Assurance Program to assure a standard of care that is
consistent with the laws of the state and federal governments, with the
applicable contractual obligations of Doctor's Care, and with the prevailing
standards of medical practice and medical care in the community. Medical
Management shall assist in the implementation of this Quality Assurance Program.
3.16 Arrangements with Other Providers. The parties hereto acknowledge
and agree that Medical Management may enter into arrangements with health care
providers other than Doctor's Care, including specialty physicians and
hospitals, for the provision of services to patients.
3.17 Doctor's Care Operations. Medical Management shall have exclusive
authority over all decision-making for ongoing Doctor's Care major or central
operations except for the dispensing of medical services. This authority
includes, but is not limited to, the scope of services, patient acceptance
policies and procedures, pricing of services, negotiation and execution of
contracts, issuance of debt, and establishment and approval of operating and
capital budgets.
3.18 Compensation and Selection of Physicians. Medical Management shall
have exclusive decision-making authority over the total compensation of Doctor's
Care's Personnel. Medical Management shall have the authority to establish and
implement guidelines for the selection, hiring and firing of Doctor's Care's
Personnel; without limiting the generality of the foregoing, Doctor's Care shall
not employ or contract with any Doctor's Care Personnel without the prior
consent of Medical Management.
3.19 Notice of Certain Corporate Actions. During the term of this
Agreement and any extension or renewal thereof, (i) if Doctor's Care shall
desire to amend its bylaws or its Articles of Incorporation; or (ii) if any
capital reorganization of the Doctor's Care, reclassification of the capital
stock of Doctor's Care, consolidation or merger of Doctor's Care with or into
another corporation, sale lease, or transfer of all or substantially all of the
property and assets of Doctor's Care shall desire to be effected; or (iii) if
Doctor's Care shall desire to pay any dividend, in shares of stock or cash or
otherwise, or make any distribution upon the shares of its capital stock, then
in any such case, Doctor's Care shall cause to be
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delivered to Medical Management, at least thirty (30) days prior to the record
date fixed for the purpose of determining shareholders entitled to vote on such
action, or to receive such dividend, distribution, or offer, or to receive
shares or other assets deliverable upon such reorganization, reclassification,
consolidation, merger, sale, lease, transfer, dissolution, liquidation, or
winding up, as the case may be, a notice containing a brief description of the
proposed action and stating such record date.
3.20 Proceeds of Sale of Doctor's Care and/or Offices. During the
term of this Agreement and any renewal or extension thereof, in the event all or
substantially all the assets of Doctor's Care or one or more of the Offices are
sold or otherwise transferred, such sale or transfer shall not be effective
except upon the prior written consent of Medical Management which may be
withheld for any or no reason, and Medical Management shall be entitled to any
and all the proceeds of such sale or transfer.
4. Compliance with Payor Agreements. Medical Management agrees to perform
its duties hereunder so as to comply with Doctor's Care's obligations under the
Payor Agreements.
5. Conduct of Medical Practice. Doctor's Care shall be solely and
exclusively in control of all aspects of the practice of medicine and the
delivery of medical services in its practice. The rendition of all medical
professional services, including, but not limited to, diagnosis, treatment,
surgery, therapy and the prescription of medicine and drugs, and the supervision
of preparation of medical reports shall be the responsibility of Doctor's Care.
Except as otherwise set forth herein, Doctor's Care shall have the sole right
and authority to hire, employ, train, supervise, terminate and compensate all of
the Doctor's Care Personnel. Medical Management shall have the authority to
establish fees or charges for the rendition of such services. Doctor's Care
agrees to assign a physician to act as its Medical Director and to assure that
its Offices are adequately staffed during operating hours with such medical
personnel as may be necessary to efficiently carry out the practice of medicine
at such Offices, all of whom shall be duly licensed by the state in which they
practice.
6. Exclusivity. During the term of this Agreement, Doctor's Care agrees
not to contract for or to obtain management or administrative services with any
organization other than Medical Management.
7. Medical Management's Compensation.
7.1 Definitions.
7.1.1 "Books and Records" means Doctor's Care's books of
account, accounting and financial records and all other records relating to and
used in the conduct of Medical Management's duties hereunder and also used in
the preparation of reports and financial statements. The books and records at
all times shall be correct and complete and contain correct and timely entries
made with respect to transactions entered into pursuant hereto in accordance
with GAAP.
7.1.2 "Cost of Medical Services" means any and all expenses of
Doctor's Care with respect to providing services at the Offices or related in
any way to the business of Doctor's Care, including without limitation the
aggregate compensation of Doctor's Care Personnel, plus the cost of such
Doctor's Care Personnel's benefits, including, but not limited to vacation pay,
sick pay, health care expenses, Doctor's Care's share of Doctor's Care
Personnel's, employment and payroll taxes, professional dues, and other expenses
and payments required to be made to or for said Doctor's Care Personnel,
pursuant to employment agreements or otherwise, including expense reimbursements
and all discretionary bonuses, incentives, and/or payments based on
profitability or productivity paid or accrued for Doctor's Care Personnel at
said Offices; and also includes the cost of Ancillary Services ordered by
Doctor's Care Personnel on behalf of Doctor's Care's patients and the cost of
medical malpractice insurance for Doctor's Care and Doctor's Care Personnel.
7.1.3 "GAAP" means at any particular time generally accepted
accounting principles as m effect at such time. Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method of
valuation as used in the preparation of Medical Management's financial
statements.
7.1.4 "Net Revenues" means all Revenues net of allowances for
uncollectible accounts.
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7.1.5 "Revenues" means all amounts assigned and paid hereunder
by Doctor's Care to Medical Management pursuant to Subsection 7.2.
7.2 Assignment to Medical Management. Doctor's Care hereby assigns
to Medical Management all of Doctor's Care's rights and interest in all sums
which Doctor's Care receives or becomes entitled to receive for the performance
of medical services by employees of Doctor's Care and from charges by Doctor's
Care for supplies and other items for which Doctor's Care is entitled to charge
as reflected in invoices issued by Doctor's Care with respect to the Offices.
Notwithstanding the foregoing, no assignment shall be made of any sums or rights
to payment, the assignment of which is prohibited by law (e.g., amounts
receivable from Medicare claims). In lieu of assignment of the payments
described above, Doctor's Care hereby agrees to pay to Medical Management an
amount equal to the amount of any such payments within two (2) business days of
receiving such payments.
7.3 Remittances on Behalf of Doctor's Care. Medical Management shall
pay on Doctor's Care's behalf from the Net Revenues the Cost of Medical
Services. Medical Management shall have access to the Books and Records for the
purpose of determining payments to be made under this Subsection 7.3.
7.4 Medical Management's Compensation. As compensation for the
provision of its services hereunder, Medical Management shall receive the
balance, if any, of the Net Revenues remaining after payments of the Costs of
Medical Services as set forth in Section 7.3.
8. Records.
8.1 Medical Management agrees to maintain documentation of source
data related to quality assurance, Utilization Review and cost and utilization
reports prepared for and/or submitted to Doctor's Care for a period of at least
five years from the close of the contract period specified in this Agreement.
8.2 Medical Management agrees to make all of its books and records
pertaining to the services furnished under the terms of this Agreement (subject
to applicable ethical and legal confidentiality requirements) available for
inspection, examination or copying by duly authorized representatives of
Doctor's Care.
9. Insurance and Indemnification.
9.1 Medical Management shall confirm that any physician provider
used by Doctor's Care to serve the needs of Patients shall have professional
liability insurance or protection limits of coverage as follows: at least
$1,000,000 per occurrence and $3,000,000 annual aggregate for said physician.
Medical Management shall provide evidence of the above-described coverage to
Doctor's Care upon request.
9.2 Doctor's Care further agrees, during the term of this Agreement,
to indemnify and hold harmless Medical Management against any claims or
liabilities arising under this Agreement which are the sole responsibility of
Doctor's Care or its employees or agents.
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10. Confidentiality.
10.1 Patient Records. All patients records, reports and information
obtained, generated, or encountered relating to Offices, which have not and
hereafter are not designated by Medical Management as being Medical Management's
property shall at all times be the property of Doctor's Care and so long as in
the possession, use or control of either party, shall be kept in the strictest
confidence by both parties. Medical Management shall instruct all of its
personnel to keep confidential any such information, as well as any financial,
statistical, personnel, and patient information obtained or encountered relating
to Doctor's Care or to Doctor's Care's operations. Both parties agree to comply
with all applicable laws, regulations and professional standards concerning the
confidentiality of patient records.
10.2 Proprietary Information. Doctor's Care recognizes that due to
the nature of this Agreement, Doctor's Care will have access to information of a
proprietary nature owned by Medical Management including, but not limited to,
any and all computer programs (whether or not completed or in use) and any and
all operating manuals or similar materials which constitute the non-medical
systems, policies and procedures, and methods of doing business developed by
Medical Management for the operation of facilities managed by Medical
Management. Consequently, Doctor's Care acknowledges and agrees that Medical
Management has a proprietary interest in all such information and that all such
information constitutes confidential and proprietary information and is the
trade secret property of Medical Management. Doctor's Care hereby waives any and
all right, title and interest in and to such trade secrets and confidential
information and agrees to return all copies of such trade secrets and
confidential information related thereto to Medical Management, at Doctor's
Care's expense, upon the termination of the Agreement.
Doctor's Care further acknowledges and agrees that Medical Management is
entitled to prevent its competitors from obtaining and utilizing its trade
secrets and confidential information. Therefore, Doctor's Care agrees to hold
Medical Management's trade secrets and confidential information in strictest
confidence and not to disclose them or allow them to be disclosed, directly or
indirectly, to any person or entity other than those persons or entities who are
employed by or affiliated with Medical Management or Doctor's Care, without the
prior written consent of Medical Management. Doctor's Care shall not, either
during the term of this Agreement, or at any time after the expiration or sooner
termination of this Agreement, disclose to anyone other than persons or entities
who are employed by or affiliated with Medical Management or Doctor's Care any
confidential or proprietary information or trade secret information obtained by
Doctor's Care from Medical Management, except as otherwise required by law.
Doctor's Care agrees to require each independent contractor and employee of
Doctor's Care, and any such persons or entities to whom such information is
disclosed for the purpose of performance of Medical Management's or Doctor's
Care's obligations under this Agreement, to execute a "Confidentiality
Agreement" in a form acceptable to Medical Management.
Doctor's Care acknowledges and agrees that a breach of this Section 10
will result in irreparable harm to Medical Management which cannot be reasonably
or adequately compensated in damages, and therefore Medical Management shall be
entitled to injunctive and equitable relief to prevent a breach and to secure
enforcement thereof, in addition to any other relief or award to which Medical
Management may be entitled.
11. Cooperation.
11.1 Doctor's Care and Medical Management agree that they shall at
all times maintain an effective liaison and close cooperation with each other to
facilitate provision of high quality and cost effective health care to Patients.
11.2 Each of the parties agrees to cooperate fully with each other
in connection with the performance of their respective obligations under this
Agreement, and both parties agree to employ their best efforts to resolve any
dispute that may arise under or in connection with this Agreement. Subject to
Medical Management maintaining the confidentiality of patient records and
Doctor's Care's confidential information, Doctor's Care shall provide to Medical
Management full and complete access to Doctor's Care's premises, and to Doctor's
Care charts, books, and records, in order that Medical Management can perform
its functions hereunder.
11.3 During the term of this Agreement, Doctor's Care shall not add
facilities or clinics for the practice of medicine by Doctor's Care's physicians
without the prior approval of Medical Management.
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11.4 Notwithstanding any other provisions contained herein, Medical
Management shall not be liable to Doctor's Care, and shall not be deemed to be
in default hereunder, for the failure to perform or provide any of the supplies,
services, personnel, or other obligations to be performed or provided by Medical
Management pursuant to this Agreement if such failure is a result of a labor
dispute, act of God, or any other event which is beyond the reasonable control
of Medical Management.
12. License of Intellectual Property. During the term of this Agreement
and any extension or renewals thereof, each of the party's hereto hereby grants
royalty free to the other party hereto the non-exclusive right and license to
use any and all trademarks, trade names, service marks, logos, and other
intellectual property rights owned by the granting party. The licensed
intellectual property and any goodwill associated therewith are and shall at all
times remain the property of the granting party.
13. Doctor's Care Patient Grievances. Medical Management agrees to comply
with the complaint, grievance and disenrollment policies of Payors in resolving
any Patient grievances related to the provision of medical services by Doctor's
Care. Doctor's Care shall bring to the attention of Medical Management all
applicable complaints or grievances involving Doctor's Care, and Medical
Management shall promptly, in accordance with any applicable Payor procedures,
investigate such complaints and use its best efforts to resolve them in a fair
and equitable manner. Medical Management agrees to notify Doctor's Care monthly
of any complaints from Patients and of actions taken or proposed with respect to
the disposition of such complaints.
14. Professional Training and Licensing Standards.
14.1 Medical Management warrants that any provider that it engages
to provide services to Patients is in compliance with applicable local, state,
and federal laws, regulations and/or licensing requirements relating to the
provision of services that they will provide.
14.2 Doctor's Care shall provide Medical Management with a copy of
credentials requirements and agrees to provide Medical Management with
documentation that each physician providing services to Doctor's Care Patients
is appropriately credentialled. This documentation will include proof of
licensure and specialty certification as applicable. This documentation shall be
maintained on file by Medical Management and reviewed by Doctor's Care and
Medical Management on an annual basis. Doctor's Care will maintain oversight
responsibility to assure that all licensed physicians are credentialled
according to its managed care Quality Assurance Program.
15. Non-Discrimination.
15.1 In the performance of this contract, Doctor's Care and Medical
Management shall not unlawfully discriminate against any employee or applicant
for employment because of race, religion, color, national origin, ancestry,
physical or psychological disability, medical condition, marital status, age,
sex or sexual orientation. Doctor's Care and Medical Management shall insure
that the evaluation and treatment of their employees and applicants for
employment are free of such discrimination and shall comply with all the
provisions of law applicable thereto.
15.2 The applicable regulations of law relating to the treatment and
evaluation of employees and applicants for employment are incorporated into this
Agreement by reference and made a part hereof as if set forth in full. Doctor's
Care and Medical Management shall give written notice of their obligations under
this clause to labor organizations with which they have a collective bargaining
or other agreement.
16. Arbitration. If a dispute or matter in controversy arises between the
parties hereto which they are unable to resolve to their mutual satisfaction
within ten (10) days of written notice from one to the other of the existence of
such dispute, then either party may notify the other party in writing (the
"Notice") that the dispute be submitted to binding arbitration as provided
herein. The arbitration panel shall consist of three (3) arbitrators, one of
whom shall be selected by Medical Management, one of which shall be selected by
Doctor's Care, each within 10 days of the Notice, and the third shall be
selected by the first two within ten (10) days of their selection. If either
party shall fail to make a selection within ten (10) days, the first arbitrator
shall select the remaining two (2). In the event that any arbitrator shall
resign or otherwise fail to perform his duties, his successor shall immediately
be selected by the party who selected such arbitrator in the first instance. The
arbitration panel shall have the authority to assess costs and shall award
attorneys' fees. Either party may have recourse
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to the courts for enforcement of the award of the arbitration panel.
Notwithstanding any provision of this Section 16, the arbitration panel shall
have no authority to override Medical Management's exclusive authority over the
ongoing major or central operations of Doctor's Care, as specifically set forth
in Subsection 3.17 and as otherwise set forth in this Agreement. With respect to
any dispute brought by Doctor's Care, the arbitration panel and any court of
competent jurisdiction may order termination of this Agreement only upon a
finding beyond a reasonable doubt that Medical Management (a) was grossly
negligent, (b) committed a fraudulent act, or (c) committed illegal acts.
17. Waiver of Violation. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach thereof.
18. Miscellaneous.
18.1 Enforceability. If any provision of this Agreement shall be for
any reason invalid or unenforceable, the remaining provisions shall be
nevertheless effective.
18.2 Amendments. This Agreement constitutes the entire written
understanding between the parties and may only be amended by Medical Management
providing notice to Doctor's Care of such amendment.
18.3 Independent Relationship.
In the performance of this Agreement, it is mutually understood and
agreed that all physicians practicing medicine at any of the Offices are at all
times acting and performing as employees of Doctor's Care or as independent
contractors with Doctor's Care ("Doctor's Care's Physicians") and not employees
or agents of Medical Management. Medical Management shall neither have nor
exercise any control or direction over the methods by which Doctor's Care or
Doctor's Care's Physicians shall practice medicine. The function of Medical
Management is to provide Doctor's Care with all non-medical services in a
competent, efficient, and satisfactory manner. Doctor's Care and Doctor's Care's
Physicians shall have no claim under this Agreement or otherwise against Medical
Management for workers' compensation, unemployment compensation, sick leave,
vacation pay, retirement benefits, Social Security benefits, or any other
employee benefits, all of which shall be the sole responsibility of Doctor's
Care. Since Doctor's Care's Physicians are not employees of Medical Management,
it shall not withhold on behalf of Doctor's Care's Physicians pursuant to this
Agreement any sums for income tax, unemployment insurance, Social Security, or
otherwise pursuant to any law or requirement of any governmental agency, and all
such withholding, if any is required, shall be the sole responsibility of
Doctor's Care. Doctor's Care shall indemnify and hold harmless Medical
Management from any and all loss or liability arising with respect to any of the
foregoing benefits or withholding requirements.
18.4 Assignability. This Agreement and all rights and obligations
hereunder may not be assigned by Doctor's Care without the prior written consent
of Medical Management. Medical Management may assign this Agreement or any or
all rights and obligations hereunder at any time upon notice to Doctor's Care.
18.5 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of South Carolina.
[SIGNATURE PAGE ATTACHED]
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IN WITNESS WHEREOF, the parties hereto have caused this
Administrative Services Agreement to be executed by their duly authorized
representatives as of the date first above written.
UCI MEDICAL AFFILIATES OF GEORGIA, INC.
By: /S/ M. F. MCFARLAND, III, M.D.
- ----------------------------------
M.F. McFarland, III, M.D.
Title: President and Chief Executive Officer
Address:
1901 Main Street
Suite 1200
Columbia, SC 29201
DOCTOR'S CARE OF TENNESSEE, P.C.
By: /S/ JERRY F. WELLS, JR.
- ----------------------------
Jerry F. Wells, Jr.
Title: Secretary and Treasurer
Address:
1901 Main Street
Suite 1200
Columbia, SC 29201
39
Exhibit 99.1
News Release
dated May 14, 1998
announcing the acquisition of
Atlanta based MainStreet Healthcare Corporation, the
acquisition of the Columbia, SC, practice of Allan M. Weldon, M.D.
and the second quarter fiscal year 1998 results
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Exhibit 99.1
NEWS RELEASE
UCI MEDICAL AFFILIATES, INC. COMPLETES THE ACQUISITION OF
ATLANTA BASED MAINSTREET HEALTHCARE CORPORATION
Company Acquires the Columbia, SC, practice of
Allan M. Weldon, M.D.
Company Reports Second Quarter Fiscal Year 1998 Results
Columbia, S.C. - May 14, 1998 - UCI Medical Affiliates, Inc. (NASDAQ: UCIA)
announced today that it has acquired the assets of MainStreet Healthcare
Corporation of Atlanta, Georgia for a combination of cash, debt, UCI stock and
debt assumption, effective May 1, 1998. MainStreet, with annualized revenues of
approximately $7 million and with approximately 100 employees, owns and operates
nine primary care medical offices in the Atlanta, Georgia area and two primary
care medical offices in Knoxville, Tennessee. The issuance of the UCI stock is
subject to the approval of the UCI shareholders at the forthcoming annual
meeting.
"UCI's continuing growth through practice acquisitions in both its home state of
South Carolina and in neighboring southeastern states should result in UCI being
recognized nationally as a significant regional player in the physician practice
management industry and thereby further enhance shareholder value," said M.F.
McFarland, III, M.D., UCI's President and Chief Executive Officer. With the
MainStreet acquisition, UCI and its affiliated Doctor's Care, P.A. will employ
approximately 120 full and part time primary care providers.
Concurrent with the acquisition of MainStreet, UCI completed a $1.2 million
private placement of its common stock through Allen & Company, Incorporated, a
New York based investment banking firm. The proceeds will be used for working
capital needs and for the cash portion of the MainStreet acquisition.
UCI additionally completed the acquisition of substantially all the assets of
the medical practice of Allan M. Weldon, M.D., effective March 1, 1998. Dr.
Weldon's primary care practice was merged into Midtown Family Practice in
Columbia, SC, one of UCI's Family Medicine Division existing locations.
The Company also announced that revenue for the second quarter of the fiscal
year ending September 30, 1998 increased by 28% to $8,615,000 from $6,715,000
for the first quarter of the fiscal year ended September 30, 1997. Revenue
growth is attributed to both same center increases in patient visits and patient
charges at established centers and to the expansion in the number of centers UCI
operates.
Patient encounters increased to 119,000 in the second quarter of fiscal year
1998 from 95,000 in the second quarter of fiscal year 1997.
(Over)
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The Company reported a net loss of $174,000 or $.03 per share for the second
quarter of fiscal year 1998, as compared to a profit of $192,000 or $.04 per
share for the second quarter of fiscal year 1997. "Acquisitions such as
MainStreet, where UCI can take over many of the administrative functions such as
billing and collection activities, should allow UCI to more fully utilize the
corporate infrastructure that it has invested in over the past few years. This
will allow UCI and its acquirees to operate more profitably overall," said Jerry
F. Wells, Jr., CPA, UCI's Executive Vice President of Finance and Chief
Financial Officer.
The Company's March 31, 1998 balance sheet reflects an increase in total assets
to $23,234,000, as compared to $20,864,000 at September 30, 1997, while
stockholders' equity at March 31, 1998 decreased to $9,342,000 from $9,488,000
at September 30, 1997.
UCI Medical Affiliates, Inc. provides non-medical management and administrative
services for freestanding medical centers which operate as Doctor's Care urgent
care centers, Doctor's Surgical Group, Doctor's Orthopedic Group, the UCI
Division of Family Medicine and Progressive Therapy Services.
This press release contains forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this press release that such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from those expressed or implied by such
forward-looking statements. Although the Company's management believes that
their expectations of future performance are based on reasonable assumptions
within the bounds of their knowledge of their business and operations, there can
be no assurance that actual results will not differ materially from their
expectations. Factors which could cause actual results to differ from
expectations include, among other things, the difficulty in controlling the
Company's cost of providing healthcare and administering its network of Centers;
the possible negative effects from changes in reimbursement and capitation
payment levels and payment practices by insurance companies, healthcare plans,
government payors and other payment sources; the difficulty of attracting
primary care physicians; the increasing competition for patients among
healthcare providers; possible government regulations in multiple jurisdictions
negatively impacting the existing organizational structure of the Company; the
possible negative effects of prospective healthcare reform; the challenges and
uncertainties in the implementation of the Company's expansion and development
strategy; the dependence on key personnel, and other factors described in other
reports filed by the Company with the Securities and Exchange Commission.
# # #
Contact: Jerry F. Wells, Jr., CPA
Executive Vice President of Finance
and Chief Financial Officer
UCI Medical Affiliates, Inc.
(803) 252-3661
42
