UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 1-8865
SIERRA HEALTH SERVICES, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 88-0200415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
2724 NORTH TENAYA WAY
LAS VEGAS, NEVADA 89128
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 242-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each
Common Stock, par value $.005 exchange on
which registered
American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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. YES [ X ] NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K/A-2 or any amendment to this
Form 10-K/A-2. [ X ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant on March 18, 1994 was
$270,604,000.
The number of shares of the registrant's common stock outstanding
on March 18, 1994 was 12,512,446.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
Portions of the registrant's definitive Part III
proxy statement for its 1994 annual
meeting to be filed by April 30, 1994.
SIERRA HEALTH SERVICES, INC.
1993 FORM 10-K/A ANNUAL REPORT
TABLE OF CONTENTS
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 3
Signature 8
Exhibit Index 9
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a)(1) The following consolidated financial statements are
included in Part II, Item 8 of this Report:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1993 and 1992
Statements of Consolidated Operations for the years ended
December 31, 1993, 1992 and 1991
Statements of Changes in Consolidated Stockholders' Equity
for the years ended December 31, 1993, 1992 and 1991
Statements of Consolidated Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules:
Schedule I - Marketable Securities
and Other Investments
Schedule III - Condensed Financial Information of Registrant
Schedule V - Land, Building and Equipment
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Building and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule X - Supplementary Income Statement Information
All other schedules are omitted because they are not
applicable, not required, or because the required information
is in the financial statements or notes thereto.
(a)(3) and (c)The following exhibits are filed as part of this
Report as required by Item 601 of Regulation S-K:
* (3.1) Certificate of Incorporation of the Registrant as
amended to date. Incorporated by reference to Exhibit 3 to
the Registrant's Form 10-K filed for the fiscal year ended
December 31, 1990.
* (3.2) Amended and Restated Bylaws of the Registrant.***
* (3.3) Certificate of Division of Shares into Smaller
Denominations of Sierra Health Services, Inc. dated
November 11, 1992 and filed with the Nevada Secretary of State
on November 13, 1992. Incorporated by Reference to Exhibit
3.3 to the Registrant's Form 10-K for the fiscal year ended
December 31, 1992.
<PAGE>
* (10.1) Agreement between Sierra Health Services, Inc. and
Macess Paperless Systems for claims processing software dated
March 25, 1993. Incorporated by reference to Exhibit 10.2 to
Registrant's 10-Q for the three month period ended March 31,
1993.
** (10.2)Hospital Services Agreement with Sunrise Hospital and
Medical Center dated April 29, 1988, together with amendments
thereto to date.
* (10.3) Pension Plan Administration Sale Agreement between
Sierra Health Services, Inc. and E.A. Edberg Associates, Inc.
dated January 4, 1994.
* (10.4) Loan Agreement with Compensation Management Programs,
Inc., as amended to date. Incorporated by reference to
Exhibit 10.5 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
* (10.5) Acquisition Term Note in the principal aggregate
amount of $635,000 dated December 30, 1992 payable to the
order of Sierra Health Services, Inc. Incorporated by
reference to Exhibit 10.6 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.6) Promissory Note for Revolving Line in the aggregate
principal amount of $1,365,000 dated December 30, 1992 payable
to the order of Sierra Health Services, Inc. Incorporated by
reference to Exhibit 10.7 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.7) Excess Medical Professional and General Liability
Insurance policy dated June 11, 1991 with Reliance Insurance
Company of Illinois covering SMA. Incorporated by reference
to Exhibit 10.8 to Registrant's Form 10-K filed for the fiscal
year ended December 31, 1991.
* (10.8) Reinsurance agreement between Sierra Health and Life
Insurance Company, Inc. and Lincoln National Life Insurance
Company effective December 31, 1991. Incorporated by
reference to Exhibit 10.9 to Registrant's Form 10-K filed for
the fiscal year ended December 31, 1991.
* (10.9) Reinsurance agreements between Sierra Health and Life
Insurance Company, Inc. and Allianz Life Insurance Company
dated October 1, 1993.
* (10.10)Reinsurance agreement between Health Plan of Nevada,
Inc. and Allianz Life Insurance Company dated June 1, 1993.
* (10.11)Reinsurance agreement between Sierra Health and Life
Insurance Company, Inc. and Connecticut General Life Insurance
Company dated September 14, 1992. Incorporated by reference
to Exhibit 10.21 to Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
.
* (10.12)Administrative Services agreement between Health Plan
of Nevada, Inc. and Sierra Health Services, Inc. dated
December 1, 1987. Incorporated by reference to Exhibit 10.17
to Registrant's Form 10-K filed for the fiscal year ended
December 31, 1991.
* (10.13)Administrative Services agreement between Sierra
Health and Life Insurance Company, Inc. and Sierra Health
Services, Inc. dated April 1, 1989. Incorporated by reference
to Exhibit 10.18 to Registrant's Form 10-K filed for the
fiscal year ended December 31, 1991.
* (10.14)Design and Construction Agreement between Sierra
Health Services, Inc. and Marshall Erdman & Associates dated
October 5, 1993.
* (10.15)Promissory Note payable to the City of Las Vegas in
the principal amount of $2,789,000 dated December 18, 1992.
Incorporated by reference to Exhibit 10.17 to the Registrant's
Form 10-K filed for the fiscal year ended December 31, 1992.
* (10.16)Agreement between Health Plan of Nevada, Inc. and the
United States Health Care Financing Administration dated
July 24, 1992. Incorporated by reference to Exhibit 10.18 to
the Registrant's Form 10-K filed for the fiscal year ended
December 31, 1992.
* (10.17)Lease Agreement with Norstan Financial Services for
telephone equipment dated July 20, 1993.
* (10.18)Agreement between Sierra Health Services, Inc. and
Primerit Bank for $5,000,000 Line of Credit dated May 14,
1993. Incorporated by reference to Exhibit 10.2 to the
Registrant's Form 10-Q filed for the three month period ended
March 31, 1993.
* (10.19)Loan Agreement between Bank of America, Nevada,
Sierra Health Services, Inc., Health Plan of Nevada, Inc. and
Sierra Health and Life Insurance Company, Inc. dated
November 30, 1993 in the principal amount the $14,000,000.
* (10.20)Loan Agreement between Home Federal Savings and Loan
Association and 2314 West Charleston Partnership dated
September 15, 1989 in the principal amount of $3,400,000.
Incorporated by reference to Exhibit 10.22 to the Registrant's
Form 10-K filed for the fiscal year ended December 31, 1992.
* (10.21)Lease Agreement with Digital Equipment Corporation
for computer hardware dated June 16, 1992 together with
Digital Master Lease Agreement dated May 8, 1989.
Incorporated by reference to Exhibit 10.23 to the Registrant's
Form 10-K filed for the fiscal year ended December 31, 1992.
* (10.22)Promissory notes assumed by Southwest Medical
Associates, Inc. payable to Key Bank of Washington, formerly
Savings Bank of Puget Sound, with the principal amounts
totaling $7,500,000.
* (10.23)Assumption and Reaffirmation Agreements dated March
25, 1994.
* (10.24)Unconditional Guarantees dated March 25, 1994.
* (10.25)Compensatory Plans, Contracts and Arrangements.
(1) Employment Agreements with Anthony M. Marlon, M.D.;
Robert A. Mayer; Erin E. MacDonald; Jerry D. Reeves, M.D.,
John A. Nanson, M.D., Frank E. Collins, Marie H. Soldo and
William R. Godfrey with various dates. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
(2) Sierra Health Services, Inc. Second Amended and Restated
1986 Stock Option Plan as amended to date. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
(3) Sierra Health Services, Inc. Second Restated Capital
Accumulation Plan, as amended to date. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
(4) Sierra Health Services, Inc. Supplemental Retirement
Plan, as amended to date. Incorporated by reference to
Exhibit 10.24 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
(5) 1992 Cash Bonus Incentive Plan. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.26)Construction Agreement with TKCC Inc. (dba Koll
Construction) dated December 10, 1992. Incorporated by
reference to Exhibit 10.15 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.27)Construction Management Agreement with Chanen
Construction dated January 5, 1993. Incorporated by reference
to Exhibit 10.16 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
* (10.28)Agreement with IDX Corporation for purchase of
medical group software dated June 29, 1992. Incorporated by
reference to Exhibit 10.19 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.29)Aircraft purchase documentation between Sierra Health
Services, Inc. and Great Planes Sales, Inc. with various
dates. Incorporated by reference to Exhibit 10.20 to the
Registrant's Form 10-K filed for the fiscal year ended
December 31, 1992.
* (11) Computation of earnings per share.
* (22) Subsidiaries of the registrant (listed herein):
Health Plan of Nevada, Inc., a Nevada corporation.
Southwest Medical Associates, Inc., a Nevada
corporation.
Sierra Health and Life Insurance Company, Inc., a
Nevada corporation.
Family Health Care Services, a Nevada corporation.
Southwest Realty, Inc., a Nevada corporation.
Family Home Hospice, Inc., a Nevada corporation.
Sierra Healthcare Options, Inc. , a Nevada
Corporation.
Behavioral Healthcare Options, Inc., a Nevada
Corporation
* (23) Consent of Deloitte & Touche.
All other Exhibits are omitted because they are not
applicable.
(b) Reports on Form 8-K
None.
(d) Financial Statement Schedules
The Exhibits set forth in Item 14(a)(2) are filed
herewith.
- ----------------
* Previously filed.
** Revised copy of Letter of Agreement Amendment previously
filed. Confidential treatment has been requested and approved
for portions of this exhibit. The confidential portions have
been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
*** Approved by the Board of Directors, subject to
stockholder approval of Article VII thereof at the Annual
Meeting of Stockholders set for June 14, 1994. Unless and
until said stockholder approval is obtained, Article VII of
the Bylaws of the Registrant, as incorporated by reference to
Exhibit 99 to Registrants Form 10-Q of the period ended
March 31, 1993, shall remain in full force and effect.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned
thereto duly authorized.
SIERRA HEALTH SERVICES, INC.
(Registrant)
By: JAMES L. STARR
(Signature)
James L. Starr, Vice President,
Chief Financial Officer
(Principal Accounting Officer)
and Treasurer
Date: March 23, 1995
<PAGE>
<PAGE>
EXHIBIT INDEX
Page
(a)(3) and (c)The following exhibits are filed as part of this
Report as required by Item 601 of Regulation S-K:
* (3.1)Certificate of Incorporation of the Registrant as
amended to date. Incorporated by reference to Exhibit 3 to
the Registrant's Form 10-K filed for the fiscal year ended
December 31, 1990.
* (3.2) Amended and Restated Bylaws of the Registrant. ***
* (3.3)Certificate of Division of Shares into Smaller
Denominations of Sierra Health Services, Inc. dated
November 11, 1992 and filed with the Nevada Secretary of
State on November 13, 1992. Incorporated by Reference to
Exhibit 3.3 to the Registrant's Form 10-K for the fiscal
year ended December 31, 1992.
** (10.1)Agreement between Sierra Health Services, Inc.
and Macess Paperless Systems for claims processing software
dated March 25, 1993. Incorporated by reference to Exhibit
10.2 to Registrant's 10-Q for the three month period ended
March 31, 1993.
* (10.2)Hospital Services Agreement with Sunrise Hospital 14
and Medical Center dated April 29, 1988, together with amendments
thereto to date.
* (10.3)Pension Plan Administration Sale Agreement between
Sierra Health Services, Inc. and E.A. Edberg Associates, Inc.
dated January 4, 1994.
* (10.4)Loan Agreement with Compensation Management Programs,
Inc., as amended to date. Incorporated by reference to Exhibit
10.5 to the Registrant's Form 10-K filed for the fiscal year ended
December 31, 1992.
* (10.5)Acquisition Term Note in the principal aggregate
amount of $635,000 dated December 30, 1992 payable to the order
of Sierra Health Services, Inc. Incorporated by reference to
Exhibit 10.6 to the Registrant's Form 10-K filed for the fiscal
year ended December 31, 1992.
* (10.6)Promissory Note for Revolving Line in the aggregate
principal amount of $1,365,000 dated December 30, 1992 payable to
the order of Sierra Health Services, Inc. Incorporated by reference
to Exhibit 10.7 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
* (10.7)Excess Medical Professional and General Liability
Insurance policy dated June 11, 1991 with Reliance Insurance
Company of Illinois covering SMA. Incorporated by reference
to Exhibit 10.8 to Registrant's Form 10-K filed for the fiscal
year ended December 31, 1991.
* (10.8)Reinsurance agreement between Sierra Health and Life
Insurance Company, Inc. and Lincoln National Life Insurance
Company effective December 31, 1991. Incorporated by reference
to Exhibit 10.9 to Registrant's Form 10-K filed for the fiscal
year ended December 31, 1991.
* (10.9)Reinsurance agreements between Sierra Health and Life
Insurance Company, Inc. and Allianz Life Insurance Company dated
October 1, 1993.
* (10.10)Reinsurance agreement between Health Plan of Nevada,
Inc. and Allianz Life Insurance Company dated June 1, 1993.
* (10.11)Reinsurance agreement between Sierra Health and Life
Insurance Company, Inc. and Connecticut General Life Insurance
Company dated September 14, 1992. Incorporated by reference to
Exhibit 10.21 to Registrant's Form 10-K filed for the fiscal
year ended December 31, 1992.
.
* (10.12)Administrative Services agreement between Health Plan
of Nevada, Inc. and Sierra Health Services, Inc. dated December 1,
1987. Incorporated by reference to Exhibit 10.17 to Registrant's
Form 10-K filed for the fiscal year ended December 31, 1991.
* (10.13)Administrative Services agreement between Sierra Health
and Life Insurance Company, Inc. and Sierra Health Services, Inc.
dated April 1, 1989. Incorporated by reference to Exhibit 10.18 to
Registrant's Form 10-K filed for the fiscal year ended
December 31, 1991.
* (10.14)Design and Construction Agreement between Sierra Health
Services, Inc. and Marshall Erdman & Associates dated
October 5, 1993.
* (10.15)Promissory Note payable to the City of Las Vegas in the
principal amount of $2,789,000 dated December 18, 1992. Incorporated
by reference to Exhibit 10.17 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.16)Agreement between Health Plan of Nevada, Inc. and the
United States Health Care Financing Administration dated July 24, 1992.
Incorporated by reference to Exhibit 10.18 to the Registrant's
Form 10-K filed for the fiscal year ended December 31, 1992.
* (10.17)Lease Agreement with Norstan Financial Services for telephone
equipment dated July 20, 1993.
* (10.18)Agreement between Sierra Health Services, Inc. and Primerit
Bank for $5,000,000 Line of Credit dated May 14, 1993.
Incorporated by reference to Exhibit 10.2 to the Registrant's
Form 10-Q filed for the three month period ended March 31,
1993.
* (10.19)Loan Agreement between Bank of America, Nevada, Sierra Health
Services, Inc., Health Plan of Nevada, Inc. and Sierra Health
and Life Insurance Company, Inc. dated November 30, 1993 in
the principal amount the $14,000,000.
* (10.20)Loan Agreement between Home Federal Savings and Loan Association
and 2314 West Charleston Partnership dated September 15, 1989
in the principal amount of $3,400,000. Incorporated by
reference to Exhibit 10.22 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.21)Lease Agreement with Digital Equipment Corporation for computer
hardware dated June 16, 1992 together with Digital Master
Lease Agreement dated May 8, 1989. Incorporated by reference
to Exhibit 10.23 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
* (10.22)Promissory notes assumed by Southwest Medical Associates, Inc.
payable to Key Bank of Washington, formerly Savings Bank of
Puget Sound, with the principal amounts totaling $7,500,000.
* (10.23)Assumption and Reaffirmation Agreements dated March 25, 1994.
* (10.24) Unconditional Guarantees dated March 25, 1994.
* (10.25) Compensatory Plans, Contracts and Arrangements.
(1)Employment Agreements with Anthony M. Marlon,
M.D.; Robert A. Mayer; Erin E. MacDonald; Jerry D. Reeves,
M.D., John A. Nanson, M.D., Frank E. Collins, Marie H. Soldo
and William R. Godfrey with various dates. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
(2)Sierra Health Services, Inc. Second Amended and
Restated 1986 Stock Option Plan as amended to date.
Incorporated by reference to Exhibit 10.24 to the Registrant's
Form 10-K filed for the fiscal year ended December 31, 1992.
(3)Sierra Health Services, Inc. Second Restated
Capital Accumulation Plan, as amended to date. Incorporated
by reference to Exhibit 10.24 to the Registrant's Form 10-K
filed for the fiscal year ended December 31, 1992.
(4)Sierra Health Services, Inc. Supplemental
Retirement Plan, as amended to date. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
(5)1992 Cash Bonus Incentive Plan. Incorporated by
reference to Exhibit 10.24 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.26) Construction Agreement with TKCC Inc. (dba Koll
Construction) dated December 10, 1992. Incorporated by
reference to Exhibit 10.15 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.27) Construction Management Agreement with Chanen
Construction dated January 5, 1993. Incorporated by reference
to Exhibit 10.16 to the Registrant's Form 10-K filed for the
fiscal year ended December 31, 1992.
* (10.28) Agreement with IDX Corporation for purchase of
medical group software dated June 29, 1992. Incorporated by
reference to Exhibit 10.19 to the Registrant's Form 10-K filed
for the fiscal year ended December 31, 1992.
* (10.29) Aircraft purchase documentation between Sierra
Health Services, Inc. and Great Planes Sales, Inc. with
various dates. Incorporated by reference to Exhibit 10.20 to
the Registrant's Form 10-K filed for the fiscal year ended
December 31, 1992.
* (11) Computation of earnings per share.
* (22) Subsidiaries of the registrant (listed herein):
Health Plan of Nevada, Inc., a Nevada corporation.
Southwest Medical Associates, Inc., a Nevada
corporation.
Sierra Health and Life Insurance Company, Inc., a
Nevada corporation.
Family Health Care Services, a Nevada corporation.
Southwest Realty, Inc., a Nevada corporation.
Family Home Hospice, Inc., a Nevada corporation.
Sierra Healthcare Options, Inc. , a Nevada
corporation.
Behavioral Healthcare Options, Inc., a Nevada
Corporation
* (23) Consent of Deloitte & Touche.
All other Exhibits are omitted because they are not
applicable.
(b) Reports on Form 8-K
None.
(d) Financial Statement Schedules
The Exhibits set forth in Item 14(a)(2) are filed
herewith.
- ----------------
* Previously filed.
** Revised copy of Letter of Agreement Amendment previously
filed. Confidential treatment has been requested and approved
for portions of this exhibit. The confidential portions have
been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
*** Approved by the Board of Directors, subject to
stockholder approval of Article VII thereof at the Annual
Meeting of Stockholders set for June 14, 1994. Unless and
until said stockholder approval is obtained, Article VII of
the Bylaws of the Registrant, as incorporated by reference to
Exhibit 99 to Registrants Form 10-Q of the period ended
March 31, 1993, shall remain in full force and effect.
EXHIBIT 10.2
October 19, 1993
Mr. A. Allan Stipe
Sunrise Hospital and Medical Center
3186 So. Maryland Pkwy.
Las Vegas, NV 89109
Re: Letter of Agreement Amendment
to Sierra Health Services', Inc. ("Sierra")
Sunrise Hospital Services Agreement
Dear Allan:
Sierra makes the following offer to amend the existing
Hospital Services Agreement:
1. For the period of August 1, 1993 through December 31,
1993, Health Plan of Nevada, Inc. ("HPN") agrees to pay
Sunrise Hospital and Medical Center ("Sunrise") a hospital per
diem of [*] for each day of inpatient hospital
utilization by its HPN Medicare members.
2. For the period of January 1, 1994 through December 31,
1994, HPN agrees to pay Sunrise a hospital per diem of [*] for
each day of inpatient hospital utilization by its Health Plan
of Nevada, Inc. Medicare members. If Medicare DRG payment is
reduced by more than [*], HPN may elect the option of
converting to DRG payment with six(6) months prior written
notice.
3. For the period of August 1, 1993 through December 31,
1993, HPN and SHL agree to pay Sunrise for each day of
inpatient hospital utilization by HPN's Non-Medicare members.
Sierra Health & Life Insurance Company's fully-insureds the
following rates:
OB $ [*] per day
Boarder Baby [*] per day
All Others [*] per day
Open Heart Surgery[*] for the first seven(7)
days;
applicable per diem
thereafter
Cardiac Cath [*] in addition to the per
diem
Angioplasty [*] in addition to the per
diem
4. For the period of October 15, 1993 through December 31,
1993, Sierra Healthcare Options, Inc. ("SHO") agrees to pay
Sunrise for each day of inpatient hospital utilization by
SHO's Non-Medicare members, the following rates, except as
noted in paragraph seven(7):
OB $ [*] per day
Boarder Baby [*] per day
All Others [*] per day
Open Heart Surgery[*] for the first seven(7)
days;
applicable per diem
thereafter
Cardiac Cath [*] in addition to the per
diem
Angioplasty [*] in addition to the per
diem
5. For the period of January 1, 1994 through December 31,
1994, HPN, SHL and SHO agree to pay Sunrise for each day of
inpatient hospital utilization by HPN's Non-medicare members,
Sierra Health & Life Insurance Company insureds and SHO's
members the following rates, except as noted in Paragraphs
Six(6) and Eight(8) below:
OB $ [*] per day
Boarder Baby [*] per day
All Others [*] per day
Open Heart Surgery[*] for the first seven(7)
days;
applicable per diem
thereafter
Cardiac Cath [*] in addition to the per
diem
Angioplasty [*] in addition to the per
diem
6. For the period of May 1, 1994 through December 31, 1994,
the Sunrise Hospital per diem for OB Admission will be reduced
to $ [*] per day for HPN and SHL members.
7. For the period of August 1, 1993 through December 31,
1993, the State of Nevada through SHO, shall be entitled to
the following inpatient rates from Sunrise:
OB $ [*] per day
Boarder Baby [*] per day
All Others [*] per day
Open Heart Surgery[*] for the first seven(7)
days;
applicable per diem
thereafter
Cardiac Cath [*] in addition to the per
diem
Angioplasty [*] in addition to the per
diem
8. For the period of January 1, 1994 through December 31,
1994, the State of Nevada through its SHO contract shall be
entitled to the following inpatient rates from Sunrise:
OB $ [*] per day
Boarder Baby [*] per day
All Others $ [*] per day
Open Heart Surgery[*] for the first seven(7) days;
applicable per diem thereafter
Cardiac Cath [*] in addition to the per diem
Angioplasty [*] in addition to the per diem
Thereafter the regular SHO rates will apply.
9. The discount for outpatient services will be increased from [*]
effective August 1, 1993 for HPN and SHL and October 15, 1993 for SHO
clients.
10. Guarantee of minimum percentages of HPN bed day utilization - HPN
will direct business to Sunrise, and will guarantee the following minimum
percentages of HPN's Las Vegas market inpatient utilization days for the
aggregate period of October 1, 1993 through April 30, 1994:
HPN - Medicare [*]
HPN - Non-Medicare [*]
11. Guarantee of minimum percentages of HPN bed day utilization -
HPN will direct business to Sunrise and will guarantee the following
minimum percentages of HPN's Las Vegas market inpatient days for all
quarters beginning on or after May 1, 1994 through the term of the
Agreement:
HPN - Medicare [*]
HPN - Non-Medicare [*]
12. To the extent HPN Medicare bed day utilization exceeds [*] ,
the Non- Medicare bed day utilization guarantee shall be credited with
the number of Medicare bed days which exceed [*] . To the extent that HPN
Non-Medicare bed day utilization exceeds [*] through April 30, 1994 and
[*] after May 1, 1994, the HPN Medicare bed day utilization guarantee shall
be credited with the number of HPN Non-Medicare bed days which exceed the
applicable percentage.
13. To the extent SHL and SHO bed day utilization at Sunrise exceeds 1000
days quarterly, HPN shall receive credit against its quarterly bed day
utilization guarantee for HPN Non-Medicare days.
14. HPN shall also receive credit against its quarterly bed day utilization
guarantee in an amount equal to the number of days associated with divert
admissions from Sunrise.
15. In the event HPN fails to satisfy the quarterly percentage of market
share utilization guarantee at Sunrise, HPN shall pay in the following quarter
an amount equal to the bed day guarantee short fall multiplied by $ [*] ,
except as noted in this paragraph. In the event HPN fails to satisfy the
percentage of market share utilization guarantee at Sunrise for the period of
October 1, 1993 through April 30, 1994, HPN shall pay in the following quarter
an amount equal to the bed day guarantee short fall multiplied by $ [*] .
16. For purposes of calculating the percentage of bed day utilization by HPN,
the Las Vegas market area shall include all of Las Vegas, Boulder City and
Henderson hospital facilities utilized by Sierra. It shall also include
Bullhead City and Laughlin, but only to the extent that the percentage of HPN's
inpatient days in the Laughlin/Bullhead City area does not exceed [*] of the
inpatient days in HPN's Las Vegas Market area. Any inpatient days above the
[*] amount will be excluded from both the numerator and denominator in
determining HPN's satisfaction of its percentage of bedday utilization guarantee
at Sunrise. For these purposes, the Las Vegas market area excludes patient
days in Kingman, AZ and Lake Havasu, AZ areas.
17. For purposes of auditing HPN's satisfaction of this quarterly percentage
of bed day utilization at Sunrise, HPN shall provide Sunrise mutually agreed
upon reports within thirty (30) days after the close of any quarter, or
applicable period. Annually, Sierra's outside CPA auditing firm will attest
as to the accuracy of these quarterly or applicable period, reports.
18. Sunrise will be the exclusive provider for HPN in the Las Vegas market
for pediatric open heart surgery and elective pediatric intensive care, elective
heart caths, elective angioplasty and elective adult open heart surgery.
19. HPN Obstetrics providers will be limited to Sunrise, St. Rose (and UMC
for county employees only) plus up to fifty (50) admissions at other Las Vegas
hospitals for every twelve (12) month period by SMA Nurse Midwives. This
paragraph shall not apply to deliveries at an alternative birthing center.
20. Annual rate increases after December 31, 1994 for all Sunrise services
shall be equal to the all urban national consumer CPI increase subject to a
minimum increase of [*] and a maximum increase of [*] subject to the
provisions of paragraph 26.
21. The term of this Agreement will begin August 1, 1993 and end September
30, 1998. Thereafter, it may be extended by mutual consent.
22. It is understood that any Medicaid Managed Care Agreements, any
Agreements resulting solely from new governmental regulations adopted
pursuant to a health care reform initiative, and any Medicare Risk HMO
Agreements paid at one hundred percent (100%) of the Medicare DRG rates
plus the appropriate pass throughs are exempt from the favored nations
provisions of this Agreement.
23. If Sierra should subsequently contract for Medicaid managed care
business, Sunrise Hospital will be a preferred provider hospital subject to the
parties agreeing to mutually acceptable rates.
24. If SHO should subsequently contract for Workers' Compensation managed
care business, Sunrise Hospital will be a provider hospital and will be paid at
the rates established by the State Industrial Insurance System ("SIIS") for
workers' compensation patients unless Sunrise contracts with any other third-
party payor, employer, or any other type of entity at a rate lower than the
rates established by SIIS. In the event Sunrise contracts with any such
parties at a rate lower than SIIS, SHO shall be automatically entitled to
such lower workers' compensation rates on the same date any such party has
become entitled to such lower rates.
25. If after August 1, 1993, Sierra should establish new lines of business
which are materially different in both its commercial and contract medicare
business (except as provided for in paragraph 22) from existing lines of
business and not specifically addressed in this Agreement, then both parties
agree to negotiate terms and conditions for the new lines of business.
26. a. Sunrise hereby agrees that for the term of this Agreement that the
per diem rates charged to HPN, SHL and SHO shall at all times during the term
of this Agreement be [*] less than that charged to any third party payor,
employer, benefit plan or program, or any other payment source of any nature
("payors") which has less than the combined annual aggregate bed patient
volume at Sunrise of HPN, SHL and SHO. For purposes of this favored nations
provision, a coalition or association of payors shall not be considered a single
payor for purposes of aggregating bed patient volume at Sunrise and thereby
being allowed more favorable rates.
b. For purposes of determining on a prospective payment basis whether
the rates of payment in a contract with a particular payor are [*] greater
than the rates under this Agreement, Sunrise will calculate the average per
diem for such alternate payor by assuming such payor will have the same annual
percentage of inpatient utilization by category of service as HPN does for its
non-Medicare or Medicare business, whichever is applicable. The categories of
service are identified in Attachment A, hereto. The parties further agree that
HPN's annual percentage of utilization by category of service shall be adjusted
on a quarterly basis. The calculated prospective (Non-Medicare/Medicare)
average per diem will be compared to HPN's calculated (non-
Medicare/Medicare) average per diem when determining compliance with this
favored nations provision. The effective date of the payor's contract must be
within one hundred twenty (120) days of the prospective analysis, otherwise
Sunrise shall recalculate the proposed rates using the methodology described
in this paragraph. Sunrise agrees to notify Sierra within thirty days of the
execution of any contract whose rates are not at least [*] greater than
HPN's, SHL's, and SHO's rates.
c. If Sunrise enters into a Capitation Agreement for inpatient
services, Sunrise will use the following calculations in prospectively
determining the capitation rate:
Capitation PMPM = (Days per 1000/12,000) x alternate payor's
calculated average per diem. Sunrise will use the same methodology identified
in paragraph 26.b and Attachment A., in determining the calculated average per
diem for HPN. HPN's average per diem will be compared to the alternate
payor's average per diem used in the above capitation calculation to determine
compliance with the favored nations provision.
Sunrise will use the following rate per 1000 depending upon which
services are included in the capitation:
For the period of October 1, 1993 through September 30, 1995.
(1) All services (inclusive of in area, out of area and
mental health/substance abuse)
Non Medicare 260 days per 1000
Medicare 1523 days per 1000
(2) In area services (excluding out of area and mental
health/substance abuse)
Non Medicare 223 days per 1000
Medicare 1313 days per 1000
For the period of October 1, 1995 through September 30, 1996,
Sunrise will use HPN's prior year rate per thousand inflated by [*] in
determining the appropriate rate per 1000 to use in calculating a capitation
rate.
For the period of October 1, 1996 through September 30, 1998,
Sunrise will use HPN's prior year rate per thousand inflated by 1 in determining
the appropriate rate per 1000 to use in calculating a capitation rate.
d. Sunrise hereby agrees that it shall not contract with any payor for
a single category service capitation arrangement(i.e. neonatology, orthopaedic
surgery, obstetrics etc) until after Sunrise has provided prior written notice
to Sierra and Sierra has agreed to the methodology used in calculating the
single category of service capitation. Such agreement by Sierra for a single
capitation arrangement shall not be unreasonably withheld.
e. Sunrise shall engage an independent firm of Certified Public
Accountants ("CPAs") in conjunction with the annual audit of
Sunrise's financial statements to certify that the contracts with
all other such payors with less bed patient volume than HPN, SHL
and SHO are [*] greater than the rates of payment under this
Agreement. The costs for the independent certified public
accounting firm shall be borne by Sunrise. Within ten (10) working
days of the completion of its review, the CPAs shall issue a
letter to Sierra confirming that no other payor with less bed
patient volume has rates which are not at least [*] greater than
those charged to HPN, SHL and SHO for the prior calendar year
except as otherwise allowed by paragraph 22.
f. In the event Sunrise has provided rates to any payor which are not
at least [*] greater than Sierra's and such payor has not
generated bed patient day volume at Sunrise equal to that
generated by HPN, SHL and SHO, then HPN, SHL and SHO shall be
entitled to a reduction in their per diem rates for the period in
question. In addition, the reduction shall be applied on a
prospective basis and shall be equal to the difference between the
percentage amount under such other payor's contract by which such
contract failed to maintain the [*] pricing differential
provided for in this favored nations clause.
If a dispute arises relative to the favored nations provisions, a
meeting will be arranged within ten (10) days between the CPAs of both
Companies. The CPAs for both companies will work in good faith to
resolve the issue. If they can resolve the issue, no further action
will be necessary; if the parties are unable to resolve the issue,
arbitration in accordance with Nevada law will be used.
If you are in agreement with the proposed terms of this Letter of Agreement,
please sign below.
Sincerely,
Frank Collins
(Signature)
cc: Larry Howard
SUNRISE HOSPITAL AND SIERRA HEALTH SERVICES, INC.
MEDICAL CENTER
By: A. Allan Stipe By: Anthony Marlon
(Signature) (Signature)
A. Allan Stipe Anthony Marlon
President and CEO President and CEO
[*] Confidential treatment has been requested for portions of this exhibit.
The confidential portions have been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.
