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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15846
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HealthCare COMPARE Corp.
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(Exact name of registrant as specified in its charter)
Delaware 36-3307583
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3200 Highland Avenue
Downers Grove, Illinois 60515
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (708) 241-7900
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par value
(Title of Class)
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
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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 or any amendment to
this Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
registrant on March 18 was approximately $1,519,385,302. On that date, there
were 31,327,532 shares of Common Stock issued and outstanding. For the
purposes of the foregoing calculation only, all directors, executive officers
and five percent stockholders of the registrant have been deemed to be
affiliates.
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<S> <C>
1995 Annual Report to Stockholders . . . . . . . . . . Parts I, II and IV
Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on
May 21, 1996 . . . . . . . . . . . . . . . . . . . . . Parts I and III
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
HealthCare COMPARE Corp. (together with its subsidiaries hereinafter
collectively referred to as the "Company" or "COMPARE") is one of the nation's
leading independent providers of medical cost management services. The Company
believes it offers the broadest selection of group health and workers'
compensation medical cost management services in the marketplace. The
Company's strategy in helping clients manage medical costs is to target the
segments of opportunity in the medical care marketplace which management
believes offer the greatest opportunities for savings.
By identifying medical costs that provide savings opportunities for group
health clients, COMPARE provides cost-effective programs that facilitate the
delivery of quality medical care, coupled with convenience and freedom of
choice for benefit plan participants. By also identifying comparable
opportunities for workers' compensation clients, COMPARE provides cost
management services that focus on early return to work, while helping to
control the medical, indemnity and administrative expenses associated with
work-related injuries and illnesses.
The Company's services include:
THE AFFORDABLE MEDICAL NETWORKS--The Company's national network of
hospitals, physicians and outpatient care providers facilitate the delivery of
quality care at fixed, negotiated rates.
COMPARE MEDICAL REVIEW PROGRAMS--Clinical management programs that
facilitate the delivery of medically necessary care and identify cost-effective
treatment alternatives.
OUCH SYSTEMS--Provides computer-assisted bill review and audit, fee
schedule review, and claims pricing services to maximize savings on workers'
compensation claims and integrates both the AFFORDABLE Medical Networks and the
COMPARE Medical Review Programs for workers' compensation payors.
The Company, which is a Delaware corporation, was organized in 1982. The
Company's principal executive offices are located at 3200 Highland Avenue,
Downers Grove, Illinois 60515 and its telephone number is (708) 241-7900.
RECENT DEVELOPMENTS
In February 1996, the Company acquired American Life and Health Insurance
Company and a subsidiary insurance company. American is a small medical
indemnity insurer with licenses in 26 states and approximately $8 million in
annual premiums in 1995. The maximum purchase price will be approximately
$11.5 million, subject to the satisfaction of certain contingencies.
In January 1996, the Seventh Circuit Court of Appeals reversed the United
States District Court and dismissed all counts of a consolidated class action
complaint filed against the Company, James C. Smith, its Chief Executive
Officer, and Joseph E. Whitters, its Chief Financial Officer. The dismissed
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complaint, which alleged violations of the federal securities laws, was
filed in April 1993, purportedly on behalf of all persons who purchased the
Company's common stock between December 28, 1992 and March 30, 1993. The
plaintiffs may appeal the Court of Appeals' decision.
STRATEGY
COMPARE assists its clients with medical cost management through an array
of programs designed to manage specific cost elements. Its various medical
review programs help COMPARE's clients manage the number of units of medical
services (volume) while its PPO products help COMPARE's clients manage the cost
of those units of service (price). Through its OUCH Systems capabilities, the
Company provides workers' compensation bill review services nationally. These
services are coupled with the Company's review programs and PPO networks in
order to provide a comprehensive product offering in the workers' compensation
arenas where, in recent years, medical costs have been rising faster than in
the group health arenas.
COMPARE seeks to develop medical management programs designed to control
the number of health care units, such as its hospital review program. COMPARE
offers additional cost management programs which are also intended to control
the number of health care units provided, including programs concentrating on
mental health services, physical therapy and chiropractic services. COMPARE's
management believes that the continuous offering of new and improved programs
is important to the expansion of its business.
Through the AFFORDABLE Medical Network ("AFFORDABLE"), COMPARE also offers
its clients services designed to control the price of a health care unit of
service. AFFORDABLE specializes in the development of PPOs and the collection
and analysis of health care cost data. AFFORDABLE's capability to analyze
health care cost data allows it to use a client's actual history of health care
usage to structure networks of providers tailored to client needs.
With the Company's recent acquisition of a small indemnity insurance
company (see "Recent Developments" page 3 and "Insurance Company Acquisition"
page 21), the Company will expand its product offering to leverage its managed
care assets of The AFFORDABLE Medical Network and its clinical management
services. This expansion of its product offering will allow the Company to
provide HMO-like services to multi-sited employers. The Company will be
rolling out these services during 1996.
HEALTH CARE REFORM, EXPENDITURES AND MANAGED CARE
In recent years, political, economic and regulatory influences have
subjected the health care industry to fundamental change and consolidation.
Since 1993, the Clinton Administration has proposed various programs to reform
the health care system and expressed its commitment to (i) increasing
health care coverage for the uninsured, (ii) controlling the continued
escalation of health care expenditures, and (iii) using health care
reimbursement policy to help control the federal deficit. Even though Congress
rejected the Clinton Administration's proposals, several potential approaches
remain under consideration, including broad insurance reform proposals, tax
incentives for individuals and the self-employed to purchase insurance,
controls on the growth of Medicare and Medicaid spending, the creation of
insurance purchasing groups for small businesses and individuals, and
market-based changes to the health care delivery system. Proposals under
consideration on the federal level would also
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provide incentives for the provision of cost-effective, quality health care
through encouraging managed care systems. In addition, many states are
considering various health care reform proposals. At both the federal and
state level, there is growing interest in legislation to regulate how managed
care companies interact with providers and health plan members. The Company
anticipates that Congress and state legislatures will continue to review and
assess alternative health care delivery systems and payment methodologies, and
that the public debate of these issues will likely continue in the future.
Although the Company believes it is well-positioned to respond to the stated
concerns, the Company cannot predict what impact the proposed measures may have
on its business. Concern about the proposed reform measures and their
potential effect has been reflected in the volatility of the stock prices of
companies in health care and related industries, including the Company.
The Company is monitoring developments concerning health care reform and
preparing strategic responses to the different reform scenarios. In response
to pending legislation and market pressures and in anticipation of future
health care reform, the Company is in the process of broadening and
diversifying its services so it will be less affected if health care reform
proposals are enacted.
Independent managed care firms, such as COMPARE, offer numerous programs
designed to help payors for health care control their medical costs. Unlike
HMOs, clinical management and PPO companies typically do not underwrite health
insurance or assume related risks. Clinical management and PPO services have
been offered on a commercially significant scale during approximately the last
ten years by independent firms which are engaged primarily in providing these
types of services. The industry is currently highly fragmented with numerous
independent firms providing medical utilization review and PPO services,
primarily on a regional or local level. In addition, a growing number of
health insurance carriers, HMOs and third party administrators have established
internal clinical management and PPO departments. However, due to the
tremendous resources required to develop a PPO network, these organizations
have not had nearly the same success in establishing a national PPO network as
the Company.
The emergence of independent medical cost management firms providing
clinical management and PPO services demonstrates the increased recognition of
these services as effective cost containment techniques. For self-insured
employers, these services provide an objective oversight function that enables
them to directly monitor, manage and control their health care expenditures.
In the case of health insurance carriers, the cost savings resulting from
clinical management and PPO services enable them to offer more competitively
priced indemnity products. For third party administrators, medical utilization
review and PPO services are other services which may be offered to clients.
For HMOs, PPO services provide multi-site employers with a medical network
outside of the area covered by the HMO.
In workers' compensation, medical costs are rising at almost twice the
rate of general medical inflation. While medical costs are significantly less
in size, representing only about 4% of total health care expenditures, the
increase in costs are significant for employers and insurance carriers and have
risen more than 1000% since 1970. COMPARE and certain other cost management
firms offer numerous programs designed to control escalating medical expenses,
indemnity payments for lost time, reduce litigation and allow injured employees
to return to work as soon as possible. Many of the services used in group
health are also applied to the workers' compensation market. PPOs are utilized
to manage price. Clinical management services are targeted toward managing the
number of units of service, the quality of that service, and helping the
injured employee in returning to productive
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employment. In addition, bill review services are applied on a national basis
in the 40 states that have a medical fee schedule and in the remaining
states which allow a usual and customary review. Additionally, at least 36
states have adopted legislation that allows for workers' compensation managed
care services, and legislation has been proposed in other states. The
combination of these services offers workers' compensation insurance carriers
and employers significant cost savings.
PPO SERVICES - THE AFFORDABLE MEDICAL NETWORKS
Established in 1983, AFFORDABLE develops and manages payor-based PPO
networks throughout the country that incorporate both group health and workers'
compensation medical providers. This area of the Company's business has been
its fastest growing and is principally responsible for the significant growth
in revenue and earnings since 1989. The PPO networks developed and managed by
AFFORDABLE consist of hospitals, physicians and other health care providers who
offer their services to AFFORDABLE clients at negotiated rates in order to gain
access to AFFORDABLE's growing national client base.
AFFORDABLE's hospital network currently includes approximately 2,100
hospitals in 49 states. In each case, rates are individually negotiated for
the full range of hospital services, including hospital inpatient and
outpatient services. In addition, AFFORDABLE has established outpatient care
networks (OCN) comprising approximately 181,000 physicians, clinical
laboratories, surgery centers, radiology facilities and other providers in 49
states and the District of Columbia.
Since COMPARE's acquisition of AFFORDABLE in June 1988, AFFORDABLE has
incurred substantial expense in expanding its PPO networks. The expansion has
occurred in the number of health care providers within existing areas and in
the number of networks throughout the country. AFFORDABLE has expanded the
number of hospital networks not only in major metropolitan markets, but also
has targeted secondary and tertiary markets; many of the hospitals and OCN
providers that have been added during the past year have been in these areas.
In 1988, the Company operated in states representing approximately 15% of the
nation's population. AFFORDABLE currently maintains hospital networks in
states which represent over 95% of the nation's population. The Company has
contracted with hospital and OCN providers in all states and is filling out
these networks primarily in secondary and tertiary markets. Management expects
to continue to incur significant expenses to further expand its hospital and
outpatient care networks, particularly in secondary and tertiary markets.
The following table sets forth information with respect to the approximate
number of participating providers at the end of the following years in The
AFFORDABLE Medical Network:
<TABLE>
<CAPTION>
December 31,
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1991 1992 1993 1994 1995
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<S> <C> <C> <C> <C> <C>
Number of Hospitals in Network 860 1,250 1,550 1,900 2,100
Outpatient Care Network
Providers 42,000 85,000 107,000 150,000 181,000
</TABLE>
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The AFFORDABLE networks have been developed in response to the needs of
COMPARE's national client base. These clients provide the leverage necessary
to enable AFFORDABLE to negotiate favorable rates with providers throughout the
country. The AFFORDABLE client base includes a diverse group of health care
payors, such as group health and workers' compensation insurance carriers,
third party administrators, HMOs, self-insured employers, union trusts and
government employee plans. The Company estimates that its PPO clients spent
over $27 billion on health care expenditures in 1995. The amalgamated buying
leverage of these clients, the Company believes, provides it with unique
strength in negotiating PPO contracts with current and prospective health care
providers.
As a fee for developing and managing PPO networks, in virtually all cases,
AFFORDABLE charges a percentage of savings realized by its clients. The amount
of this fee varies depending on a number of factors including number of
enrollees, networks selected, length of contract, and out-of-pocket benefit
co-payments.
AFFORDABLE competes with national and local firms which develop PPOs and
with major insurance carriers, third party administrators and utilization
review firms which have implemented their own preferred provider networks as
well as with firms which specialize in the collection and analysis of health
care cost data.
APPROACH TO NETWORK DEVELOPMENT
The strategy of The AFFORDABLE Medical Networks is to create a selective
network of individual providers which will meet the medical, financial,
geographic and quality needs of its clients and their beneficiaries.
AFFORDABLE contracts directly with each individual hospital and does not
contract with groups of hospitals or provider networks established by other
organizations. Management believes this provides the maximum control over the
composition and rates in the network and ensures provider stability in the
AFFORDABLE network. To further promote stability and savings in the network,
when possible, AFFORDABLE enters into multi-year agreements with its providers
with nominal annual rate increases.
The selected providers benefit from their participation in the AFFORDABLE
network through increased patient volume as patients are directed to them
through health benefit plans maintained by AFFORDABLE's clients and other
channeling mechanisms, such as COMPARE's clinical management services and PPO
InfoLine.
The network development process begins with an in-depth analysis of the
provider supply and demand in a targeted geographic area. Extensive data
analysis is performed with proprietary software on public and client data bases
to identify the utilization and cost experience of payors by hospital and
service area; to develop profiles of average lengths of stay and costs per day
and per discharge by type of service and to measure the providers performance
against established quality standards. This assessment allows AFFORDABLE to
determine and negotiate favorable rates which will result in effective savings
to clients. It also establishes the service and geographic needs of clients
which direct the selection of network providers.
Other demographic and environmental information gathered in the assessment
process such as the economic condition of the area, major businesses in the
community and applicable legal and
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regulatory requirements, assists in identifying key factors which can impact
the network negotiating process. Site visits to all key hospitals are also
conducted by negotiators to gain a greater understanding of the geography of
the area, the hospital physical plant and the competitive environment.
When developing a PPO network, the AFFORDABLE strategy is to initially
establish a hospital network since approximately 50% of all health care
expenditures occur in the hospital setting. Once the hospital network is
established, AFFORDABLE develops a network of outpatient providers of health
care services. This network consists of the full array of providers including
physicians, laboratories, radiological facilities, outpatient surgical centers,
mental health providers, physical therapists, chiropractors, and other
ancillary providers. By establishing contractual relationships with the
complete range of providers, AFFORDABLE is able to impact most of the client's
health costs and to facilitate referrals within the network for all needed
care.
The rate structure negotiated by AFFORDABLE maximizes the savings for the
client and gives incentives to providers to deliver cost effective care.
Unlike many other PPOs which negotiate price discounts or separate rates for
intensive care and other specialty units, AFFORDABLE strives to negotiate a
single all inclusive per diem for medical/surgical and intensive care unit days
in hospitals. The majority of the Company's hospital PPO contracts are
negotiated with an all-inclusive rate structure. The charges for hospital
outpatient care are controlled as well through reimbursement caps. Fees for
physicians and other outpatient providers are set by fee schedules established
by AFFORDABLE. The negotiated rates have resulted in typical savings of over
40% on inpatient hospital costs and 20-30% for physicians costs.
Potential providers are invited to become preferred providers by
submitting proposed rates for services in a competitive bidding process.
AFFORDABLE evaluates these proposals based on price, range of services,
geographic location, community reputation, historical utilization patterns and
indications of provider quality. AFFORDABLE negotiates with the providers and
selects those which meet the clients' objectives. After a network has been
established, AFFORDABLE provides ongoing consulting services to clients,
renegotiates contracts with providers and prepares annual evaluations which
profile for its clients the effectiveness of the network. The networks are
continuously undergoing refinements with active redevelopment activity to
expand geographic coverage.
In order to promote an ongoing and long term positive business
relationship with network providers, AFFORDABLE has established an extensive
provider relations program. Dedicated staff perform a variety of activities
including responding to hospital claims inquiries, conducting site visits,
preparing provider newsletters and participating in joint hospital/AFFORDABLE
functions which are intended to promote goodwill and increased utilization of
network providers. The Company's retention rate for hospitals has been more
than 97% and over 95% for physicians and other outpatient providers.
PPO QUALITY ASSESSMENT
Quality assessment of network providers is a critical component in the
selection and retention process. The Company has established an intensive
program which evaluates each individual provider against standards set for
various quality indicators. Provider evaluation occurs prior to the selection
of the provider and continues while they are in the network. Providers who do
not meet standards will not be selected or invited to remain in the network.
COMPARE has made significant investment in the
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development of data bases to maintain and improve the quality of the
AFFORDABLE Medical Network. Physicians employed by COMPARE are active
participants in the quality assessment process. There is an established
committee of physicians which meet regularly to act on provider selection and
retention decisions based on quality issues. The clinical expertise available
through the COMPARE medical staff is a key ingredient to the effectiveness of
the quality assessment activities.
INFORMATION SYSTEMS
AFFORDABLE utilizes a broad range of proprietary information systems
applications to support its PPO business. Present information systems support
management of all aspects of provider recruitment, including maintenance of a
comprehensive data base of information about members of each PPO network.
Additional information systems are utilized to develop rate and fee objectives
and strategies prior to initiating contract negotiations with providers. The
Company has invested substantially in its information systems and anticipates
continuing these investments in the future. Currently the Company has major
upgrades underway within the Company's medical provider and claims pricing
systems for its PPO business.
CLAIMS PRICING
AFFORDABLE also maintains an array of information systems to re-price
health care claims to the contracted rate for its clients. Most clients rely
on AFFORDABLE to determine PPO contractual payments for claims submitted from
PPO providers. Hospital claims are sent from the client's claims administrator
or directly from the PPO provider to AFFORDABLE for pricing at the negotiated
rates. In most cases, Outpatient Care Network claims are sent directly to the
claims administrator and are priced using AFFORDABLE's fee schedules. These
schedules are provided to the claims administrator on tape and are updated on a
regular basis.
ANALYTIC SERVICES
Health care cost data analysis services are available to the Company's
clients for a fee on a stand-alone basis. These services provide clients with
in-depth customized information concerning their health care cost and
utilization experience. Using its internally developed proprietary software,
the Company analyzes its clients' health care claims information and benefit
plans in order to profile each client's specific health care cost problems and
evaluate appropriate cost management programs. This software also allows the
Company to simulate how changes in a benefit plan's structure will change the
overall cost of a benefit program. The Company also provides clients with
customized software products to allow further analysis of health care cost
issues.
CLINICAL MANAGEMENT SERVICES - COMPARE MEDICAL REVIEW PROGRAMS
COMPARE provides centralized clinical management programs (utilization
review and medical case management services) from its headquarters in Downers
Grove, Illinois, through an internal staff consisting primarily of allied
health professionals, licensed practical and registered nurses and physicians.
COMPARE also has a nationwide network of consulting physicians in various
specialties. For many of its programs, COMPARE charges its clients a
"capitated fee," i.e., a fixed monthly fee for each participant (excluding
covered dependents) in a client-sponsored health care plan.
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The amount of this fee varies depending on the size of the client and the
number and type of review programs selected by the client. For other services,
including case management, COMPARE charges fees on an hourly basis rather than
a capitated basis.
COMPARE's approach to medical management is based on the development of
clinically valid review criteria and procedures using the resources of its
professional staff as well as resources external to COMPARE. Review criteria
are structured so that a review coordinator or case manager can review the
majority of cases presented. If a proposed hospital admission or outpatient
service fails to meet established criteria, a COMPARE-employed or retained
physician (or other doctoral level practitioner such as a Doctor of
Chiropractic or Doctor of Psychology) reviews the case and may contact the
patient's provider to obtain additional information.
Clients who purchase COMPARE's clinical management programs advise their
participants and dependents of review requirements. A participant or his or
her attending physician utilizes a clinical management program by calling one
of COMPARE's toll free numbers prior to the proposed hospitalization or
outpatient service or within two business days of an emergency admission or
outpatient service. The telephone lines at COMPARE's headquarters are
currently staffed five days a week, eleven and one-half hours a day (calls
placed at other hours are answered by a recorded message with the opportunity,
in some circumstances, for the caller to leave recorded information.) From
these calls, COMPARE's clinical management staff gathers the demographic and
medical information necessary to enable it to perform review and enters this
information into COMPARE's proprietary review system. Based on this
information and using COMPARE's clinically valid and proprietary review
criteria, COMPARE determines whether it can recommend certification for the
proposed hospitalization or outpatient service as medically necessary under the
participant's health care plan.
Upon completion of the review, COMPARE notifies the participant, the
attending physician and other affected providers of the outcome of the review.
It also notifies its client as to whether the proposed hospitalization and
length of stay or outpatient service can be certified as medically necessary
and appropriate under the terms of the benefit plan. COMPARE does not practice
medicine and its services are advisory in nature. All decisions as to the
payment or denial of benefits and about eligibility or coverage under the
benefit plan are made only by the claims administrator, not by COMPARE. All
decisions as to the patient's medical treatment are made by the patient and the
attending physician, not by COMPARE.
COMPARE provides standard educational materials which can be used by its
clients for advising participants of the utilization management services.
COMPARE also works with clients in developing customized materials for this
purpose. Participants can call COMPARE on a toll-free line if they have
questions regarding its services. Clients and their claim administrators can
also obtain additional information from the Client Services staff.
COMPARE provides its clients with standardized reports, on a regular
basis, which contain information that enables them to analyze the effectiveness
of COMPARE's services.
CLINICAL MANAGEMENT PROGRAMS
COMPARE offers several clinical management programs from which its clients
may select. Most of COMPARE's clients subscribe to its Hospital Review
Program, which serves as the base to
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which COMPARE's other programs may be added. Approximately 90% of COMPARE's
clients subscribe to at least one additional COMPARE program. COMPARE also
offers its programs on a stand-alone basis, without requiring participation in
its Hospital Review Program. The following is a summary of the Company's
principal programs currently being offered.
HOSPITAL REVIEW. COMPARE's Hospital Review Program is designed to reduce
a client's hospitalization costs by identifying (for the purposes of benefit
plan coverage only) hospital admissions and lengths of stay which can be
considered medically unnecessary or excessive compared to established national
criteria. COMPARE's Hospital Review Program involves a review by COMPARE
personnel of the medical necessity of proposed hospital admissions under the
participant's benefit plan, as well as the proposed length of a patient's stay.
Additionally, COMPARE remains actively involved during the hospitalization in
reviewing and monitoring the patient's length of stay. This same process is
applied to workers' compensation admissions.
CASE MANAGEMENT. The medical Case Management Program is designed to
provide clients with a careful review of all cases which involve complex high
cost or chronic diseases, conditions or catastrophic illnesses. Through
periodic reviews, COMPARE's nurse case managers and physicians identify and
inform benefit plan administrators of potentially large claim cases. If
requested to do so by the plan administrator, COMPARE renders ongoing case
management services for an hourly fee. These services consist primarily of
conferring with the attending physician and other providers to identify
cost-effective treatment alternatives. Such alternatives may include moving a
patient from an acute care hospital to less expensive settings -- often the
home -- as soon as the patient's physician determines that it is safe and
medically feasible. If such a move requires a home nursing service or medical
equipment, COMPARE serves as a referral for alternative available services,
provides recommendations regarding continued usage of these services and
negotiates discounts with the providers where network providers are not
appropriate or not available. In all cases, the decision as to whether to
proceed with the course of treatment initially prescribed by the attending
physician or the more cost-efficient alternative identified by COMPARE is made
by the patient and his physician. Clients which select stand-alone case
management independently identify those cases which involve potentially high
cost diseases, conditions or procedures and refer such cases to COMPARE to
identify cost-effective treatment alternatives.
There are three levels of intensity for case management intervention. Each
level changes to coincide with the patient's medical condition and service
needs:
- PRIMARY CASE MANAGEMENT: These interventions focus on
short-term outcomes and episodic health care services and are driven
by specific guidelines and criteria. This level of case management
is appropriate when minimal involvement will achieve optimal cost,
quality and clinical outcomes. At this level, COMPARE performs an
initial case assessment and then either makes a certification
recommendation or refers the case to another level based upon the
intervention required for positive outcome.
- SECONDARY CASE MANAGEMENT: Focuses on medical situations with
moderate variations in cost, quality and/or clinical outcomes that
can be positively influenced by greater case management involvement.
Anticipated outcomes that benefit from this level of service can
include: one-time negotiations for medical services, assessing the
patient's return to work potential, or home health evaluation.
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- TERTIARY CASE MANAGEMENT: This involves complex, long-term
clinical scenarios with a wide range of possible quality, cost
and/or clinical outcomes and is driven by utilization management and
quality assessment actions. The cases that benefit from tertiary
case management include those situations that involve multiple
providers and/or deal with significant patient and family issues.
The factors considered in determining the appropriate level of clinical
management include:
- The anticipated degree of case complexity.
- The intensity of resources needed to manage the case.
- The potential variability in cost, quality and/or clinical
outcomes.
The Medical Management process for Workers' Compensation keeps track of an
injured worker's care and identifies opportunities for cost-effective
alternative care and treatment with the goal of returning the worker to the
client's work force or to reach Maximum Medical Improvement (MMI) as soon as
medically feasible. The Medical Manager is responsible for the overall
coordination of the many comprehensive services that may be needed, such as
review of rehabilitation and chiropractic care, home health services and
others, with a constant focus on the injured worker's ability to return to
productivity.
PPO REDIRECTION AND INFOLINE. For clients who prescribe to COMPARE's
clinical management program and the AFFORDABLE Medical Network, COMPARE will
attempt to redirect the patient to a PPO hospital or outpatient provider
located near the patient. Additionally, the clients' participants can call PPO
InfoLine to ascertain a network provider of their choosing who is within a
reasonable proximity to their place of residence or work. By utilizing a PPO
network hospital or outpatient provider, the payor and the patient will achieve
savings from what the billed charges would otherwise be.
OTHER CLINICAL MANAGEMENT PROGRAMS:
- Managed Surgical Opiniono - Prospective Chiropractic Review
- Mental Health Review Services - Maternity Line
- CareLine - Outpatient Review
- Disability Management - CHAMPUS Select
PHYSICIAN RESOURCES
COMPARE believes that its full-time in-house physician staff is an
invaluable resource in its clinical management programs. The staff now
includes experienced board certified physicians in such specialties as family
practice, internal medicine, cardiology, gynecology, urology, orthopedics,
psychiatry, pediatrics, and surgery as well as other doctoral level
practitioners such as clinical psychology and chiropractic medicine. In
addition, COMPARE has a nationwide network of consulting physicians in the
significant specialties. This physician staff is crucial to the development
and maintenance of up-to-date clinically valid review criteria and protocols
and the network quality assessment efforts. This staff consults with first
level reviewers, reviews cases which fail to meet criteria and discusses those
and other complex cases with participants' attending physicians.
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INFORMATION SYSTEM
Management of COMPARE believes that COMPARE's interactive, on-line
computer-based information system has been a major factor in its ability to
provide clients with healthcare cost management services. This information
system is comprised of four parts: proprietary software, a database of hospital
utilization norms, a database of patient-specific information and an automated
data reporting and transmission capability.
COMPARE's proprietary software programs record and access patient and
provider information. This allows COMPARE personnel to access utilization
norms and standards as part of the review process or to analyze cost data in
negotiating reimbursement rates with health care providers. COMPARE's
proprietary software generates extensive internal reports to supplement the
review process by informing reviewers when specific follow-up activities, such
as case management screening, are required to be performed by COMPARE
personnel. In addition, COMPARE's proprietary software also generates
extensive reports for its clients. These reports typically itemize all cases
reviewed or cases involving PPO services and detail the effectiveness of the
services provided. If so requested, COMPARE will customize these reports to
fit the needs of a particular client.
The hospital utilization norms database consists of information against
which COMPARE analyzes a participant's proposed treatment plan in order to
determine whether the proposed length can be certified as medically necessary.
This data base has been compiled from commercially available information.
COMPARE has enhanced this database to include proprietary information derived
from its experience in performing utilization management services.
The patient-specific database consists of data that has been collected
concerning each proposed hospital admission, including patient demographics,
medical history and diagnostic and procedural information. COMPARE's review
personnel can access the current status of the patient's case to identify more
cost-effective treatment alternatives. Currently the Company is in the midst
of a major system rewrite and enhancement to its utilization management
information systems.
COMPARE's information system also has the capability of sending
machine-readable computer tapes or information by electronic transfer directly
to the computers of third party payors and/or clients in order to expedite
claims administration. All correspondence confirming COMPARE's recommendations
with respect to a prescribed treatment plan is automatically generated and sent
to the attending physician, participant and plan administrator by the system.
OUCH SYSTEMS
The Company provides comprehensive workers' compensation medical bill
review services through a sophisticated computer system that enforces
administration policies, applies state specific workers' compensation fee
schedules, checks for billing infractions and applies provider contract
discounts. Since all of these functions are consolidated and automated, the
Company believes it reduces paperwork and costs associated with claims
processing. Since these system capabilities are integrated with its
utilization management and PPO services, the Company believes it offers one of
the most comprehensive workers' compensation medical cost management programs
in the industry.
13
<PAGE> 14
WORKERS' COMPENSATION. OUCH's workers' compensation program was
introduced in California in 1986. COMPARE management believes it offers the
most comprehensive workers' compensation cost management program available
which has been integrated into the Company's utilization management and PPO
operations.
MARKETING. COMPARE markets the OUCH programs to insurance carriers, third
party administrators, and self-insured, self-administered companies. The
Company's payor clients include at least some offices of six of the ten largest
workers' compensation insurers and the largest industrial company in the world.
Worksite posters, provider directories, benefit plan design and other
materials provided by its payor clients encourage injured employees to utilize
The AFFORDABLE provider network.
OUCH SYSTEMS BILL REVIEW. Services offered by the Company include a
computer assisted review of medical provider billings to ensure accuracy and
adherence to established rates and billing rules. In 40 states, including
California, Texas, Arizona, Michigan, Ohio and Florida, a schedule of presumed
maximum fees (fee schedule) has been established for workers' compensation
medical claims. The review process corrects errors a provider makes in
applying these fee schedules. OUCH Systems also reviews whether the appropriate
level of service was billed. Provider network discounts are applied as well
during the review.
An agreement was entered into with Electronic Data Systems Corporation
("EDS") primarily for the purpose of developing and jointly marketing medical
and administrative cost management services to workers' compensation payors and
those group health payors agreed to by the parties. EDS, utilizing its
extensive data processing and communications networks, provides data
processing, electronic claims transmission and marketing support services to
OUCH Systems.
EDS modified its comprehensive bill review and audit processing system to
handle workers' compensation claims and integrated the system with COMPARE'S
clinical management programs. The system also utilizes EDS' communications
network which provides the opportunity to review claims in multiple locations,
including client offices and direct data transmission between COMPARE and its
clients. Systems development occurred throughout the latter half of 1989, with
operations beginning in the first quarter of 1990.
COMPARE, in conjunction with EDS, offers the OUCH Systems Bill Review
software product to those clients who wish to internalize the bill review
process which has been a major source of new sales leads. COMPARE and EDS
provide all system updates, all loading of fee schedules, and any enhancements
made to the system for systems users. COMPARE also maintains a Systems User
Group which assists the Company in determining how the bill review product can
continually be improved. The advantages of the OUCH Bill Review System, in
addition to internalization for clients, is the advantage of unlimited
processing from multiple locations.
COMPENSATION. The Company generally receives an agreed upon percentage of
total savings generated for clients through bill reviews, including provider
network discounts, adjustments to applicable billing rules and regulations and
utilization reviews. Savings are generally calculated as the difference
between the amount medical providers bill OUCH Systems' payor clients and the
amount COMPARE recommends for payment. Other fees are computed at an agreed
upon fee per covered participant, bill processed or service performed.
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<PAGE> 15
CUSTOMERS AND MARKETING
COMPARE primarily markets its services to national multi-sited direct
accounts, including self-insured employers, government employee groups and
multi-employer trusts. In addition, COMPARE markets its services to and
through group health and workers' compensation insurance carriers and third
party administrators. The following are representative customers of COMPARE:
<TABLE>
<S> <C>
Arthur J. Gallagher & Co. National Association of Letter Carriers
American Postal Workers Union Health Plan National Health Laboratories, Inc.
American Chambers Insurance Company Norwest Corporation
Boilermakers National Trust and Welfare Pacific Telesis Group
Fund R. E. Harrington, Inc.
Celtic Life Insurance Company RETA Trust
CNA Insurance Companies Sedgwick James
ConAgra, Inc. State Farm Mutual Automobile Insurance
First Data Corp. Company
First Health Strategies, Inc. (ALTA) Texas Instruments
General Motors Corporation The Sherwin-Williams Company
Government Employees Hospital Association United Airlines, Inc.
Kemper National Insurance Company Walgreen Company
Liberty Mutual Insurance Company Wausau Insurance Companies
McDonald's Corporation WellPoint Life Insurance Company
NALCO Chemical Company The Williams Companies, Inc.
</TABLE>
The following table sets forth information with respect to the approximate
percentage of COMPARE's revenues represented by each client category for each
period presented:
REVENUE CONTRIBUTION
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
Category of Client 1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Direct accounts 56% 58% 60%
Insurance carriers and
third party administrators 44% 42% 40%
--- --- ---
Total 100% 100% 100%
=== === ===
</TABLE>
COMPARE presently has more than 50 group health and workers'
compensation insurance carrier clients. Typically, COMPARE enters into a master
service agreement with an insurance carrier under which COMPARE agrees to
provide its cost management services to health care plans maintained by the
carrier's policyholders. COMPARE's services are offered not only to new
policyholders, but also to existing policyholders at the time their policies are
renewed. The insurance carrier's sales and marketing staff ordinarily has the
responsibility for offering COMPARE's services to its policyholders, thus
relieving COMPARE of a significant marketing expense.
15
<PAGE> 16
COMPARE typically enters into standardized service contracts with its
direct accounts and master service agreements with its insurance carrier and
third party administrator clients. These contracts and agreements have
automatically renewable successive terms of between one and three years, and
are generally terminable upon one to six months' notice prior to their
expiration. These contracts are generally non-exclusive and permit the client
to provide medical review services on an in-house basis; however, these
contracts are generally exclusive as to the client's ability to use other PPO
firms during their term.
During 1993, 1994 and 1995, the Company's contract with Government
Employees Hospital Association (a plan covering certain government employees)
accounted for 16%, 14% and 13% of revenues, respectively.
Additionally, during 1995 the Company had a contract with the National
Association of Letter Carriers (a plan covering certain federal government
employees) which accounted for 10% of revenue in 1995.
1996 REVENUE OUTLOOK
- PPO Services--The Company currently expects that PPO revenue growth
will continue in 1996 as the result of continuing:
1) increased utilization of services by
existing clients;
2) expansion and development of the
Company's PPO networks, particularly in secondary and
tertiary markets; and
3) new client additions.
- Fee Schedule Services are expected to increase in 1996 as a
result of new contracts with Liberty Mutual Insurance Company (the
nation's largest workers' compensation insurer), Louisiana Workers'
Compensation Corp. and others who will be utilizing the Company's fee
schedule services.
- Clinical Management Services are expected to decline in 1995 as a
result of the loss of business resulting from clients electing to
perform these services in-house and, in other cases, the Company's
refusal to lower its prices to compete with companies which have fewer
clinical professionals involved in the services.
- Government Contract Services declined from 1994 to 1995 as a
result of the successful completion of the review portion of the
Company's contract with the Department of Defense, and it is expected
that revenue from this contract will decline further in 1996. Unless
this contract is extended beyond its June 1996 expiration date, it is
anticipated that no additional revenue from this contract will be
received by the Company in the latter half of 1996.
COMPETITION
COMPARE competes in a highly fragmented market with national and local
firms specializing in utilization review and PPO cost management services and
with major insurance carriers and third party administrators which have
implemented their own internal cost management services. In addition,
16
<PAGE> 17
other health care programs sponsored by COMPARE's clients, such as HMOs,
compete for the enrollment of benefit plan participants. COMPARE is subject to
intense competition in each market segment in which it competes. Many of
COMPARE's competitors are significantly larger and have greater financial and
marketing resources than COMPARE.
COMPARE competes on the basis of the quality and cost-effectiveness of its
programs, its proprietary computer-based information system and its emphasis on
commitment to service and high degree of physician involvement. Due to the
quality of the services offered, COMPARE tends to charge more for its services
than many of its competitors.
The insurer market for workers' compensation programs is somewhat
concentrated with the top ten insurers controlling over 50% of the insured
market. The loss or addition of any one of these insurers could have a
material impact on revenues. OUCH currently has as clients at least some
offices of six of the top ten insurers. While experience differs with various
clients, obtaining a new client can require extended discussions.
EMPLOYEES
As of December 31, 1995, COMPARE had approximately 1,525 employees,
including approximately 350 in information systems, sales and marketing; 300
employees in various review and quality assessment activities; 290 employees
involved in PPO negotiations and development; 280 involved with bill review and
claims pricing activities and the remainder involved with accounting, human
resources, client services, and other administrative, support and executive
functions. COMPARE also has a nationwide network of conferring physicians in
various specialties, most of whom are compensated on an hourly or per visit
basis when requested by COMPARE to render consulting services.
INTEGRATED PRODUCTS
The Company has introduced a number of new services during the course of
the last few years that will continue its product evolution. These new
services will incorporate various features of COMPARE's clinical management and
PPO services in order to provide clients increased opportunities for medical
cost savings. Common characteristics of these new services include:
- More aggressively managed and more selective provider networks.
- More aggressive risk sharing financial arrangements with providers.
- Improved communication and linkage with members and participants.
- Longer term contracts with providers.
- Intensive medical case management intervention.
MANAGED TRANSPLANT SYSTEM. As medical technology advances, new and more
complicated procedures, such as transplants, have been developed. In an
attempt to assist the Company's clients in meeting these technological advances
and their related costs, COMPARE has developed The Managed Transplant System.
This program has been designed to facilitate the cost-effective use of
high quality transplant services through an integrated system whereby case
management staff assists in the coordination of the
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<PAGE> 18
process from the determination of the need for a transplant through follow up
care for one year after the transplant is performed.
The goals of The Managed Transplant System include:
- Enhancing quality of care and favorable outcomes through case
management and direction of patients to a selected number of transplant
programs that meet stringent quality and performance standards;
- Reducing health care costs by contracting a cost-effective package
rate with high quality transplant centers that have a proven
performance record of desirable outcomes;
- Improving predictability of transplant costs by establishing fixed
fees that share risk with the providers and spread payment out over a
one-year period.
This program requires clients to implement special benefit plan provisions
designed to enhance participation in the system.
The Managed Transplant System enables clients to consider covering their
insureds for transplant procedures of proven medical value. The program
includes a coordination by case managers to assist patients, their families and
our clients throughout the process. Furthermore, by using network facilities
and providers, the patient is treated by providers with a proven track record
for quality care. A case manager is involved in the case from the time the
need for a transplant has been identified through one year following the
surgery. The intensity of case management involvement varies, depending on the
complexity of the case.
Transplants included in the program include: heart, lung, heart/lung,
liver, kidney, kidney/pancreas and bone marrow (both allogenic and autologous).
MANAGED PHARMACY PROGRAM. COMPARE has developed a Managed Pharmacy
Program designed to assist clients in reducing health care costs through
negotiated pricing for pharmaceutical products, a drug formulary, and case
management services. Pharmacy related costs are one of the fastest growing
components of medical care.
As part of developing this program, the Company has integrated the Managed
Pharmacy Program with its Hospital Networks and Outpatient Care Networks. This
blending of networks provides additional benefits by increasing the cost
effectiveness of physician prescribing habits and encouraging patients to
purchase medications from network providers.
To provide a more complete and effective medical cost management system,
the Company has linked the Managed Pharmacy Program with COMPARE's case
management services to identify high utilizers of prescription drugs, to
intervene where appropriate for case management services and to encourage the
adoption of cost effective treatment plans. This approach identifies
alternatives which enable our clients and their members to control potentially
unnecessary medical costs not only for pharmacy expenses, but also for other
medical and behavioral health treatment services.
COMPARE POINT OF SERVICE PROGRAM. The Point of Service Program is
comparable to a "gatekeeper" approach whereby primary care physician (PCP)
coordinates his/her patients' use of the
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<PAGE> 19
health care system. The traditional gatekeeper approach has been set up to
attain two major objectives: (1) to coordinate and manage a patient's course
of treatment and (2) to control costs and utilization.
The Company has developed a program to more effectively address both
client objectives for, and drawbacks to, current approaches. In addition to
coordinating the course of treatment and controlling costs and utilization, the
objectives of the Company's Point of Service Program are to:
- Support primary care physicians in their role as patient advocate
while enhancing their expertise through COMPARE's extensive clinical
resources.
- Reward primary care physicians with a reimbursement program that
fairly compensates them for the time which they invest in managing
cost-effective patient treatment;
- Encourage the use of primary care network providers as the first
course of treatment and network providers, in general, as required;
- Provide early case identification of complex or chronic patients who
could benefit from case management intervention; and,
- Maintain the element of choice for the patient's selection of their
physician.
MANAGED MATERNITY SYSTEM. The Managed Maternity System is designed to
reduce the high incidence of premature labor and to achieve high quality,
cost-effective prenatal care through the integration of maternity case
management with a special network of providers. The program encompasses all
expectant mothers--patients expected to have a normal delivery as well as
mothers at high risk for maternal and/or fetal complications (premature birth).
The goals of the program are to:
- Encourage patients' use of cost effective, high quality network
providers;
- Work cooperatively with network physicians so that quality care is
provided in the most appropriate and least costly manner;
- Monitor maternity care provided from the first trimester through
delivery and continuing with identified infant services through the
first year of life;
- Identify mothers who may be at high risk for pregnancy complications
and/or pre-term birth for early maternity management services;
- Promote positive outcomes for mothers and infants through patient and
physician education and reimbursement incentives.
The maternity case management component of the program includes: initial
and follow-up risk assessments; ongoing patient and physician education; case
management coordination of services for mothers with pregnancy complications;
provision of ongoing support to high risk patients and for infants with serious
medical complications and/or conditions during the first year of life.
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<PAGE> 20
The network is composed of: obstetricians who have agreed to accept
packaged rates and have met special credentialing criteria, including adherence
to the American College of Obstetrics and Gynecology (ACOG) guidelines;
neonatologists; perinatologists; home health agencies which can provide high
tech home care; and hospitals with obstetrical services and level 2 and 3
nurseries. The package rates include two types of payment: one is a blend of
C-section/normal delivery rate, and the other is a high risk rate for cases
that demand intensive oversight by the patient's obstetrician. The
obstetricians contract for these set rates, and COMPARE determines on a
case-by-case basis which rate is appropriate.
ULTIMA(SM). Ultima is a flexible way to manage the health care needs of
employees and the health care costs of employers. This program has been
designed to seamlessly handle every aspect and includes utilization management,
case management, analytic services, reporting, claims administration and access
to our provider networks.
Under this program, the Company guarantees the effectiveness of its
managed care services for controlling the medical benefit costs of large
clients (over 5,000 covered lives). The Company will guarantee that the annual
medical benefit costs per member for employees over a period of up to three
years will not exceed a specified amount if the client is willing to implement
the following:
- - The AFFORDABLE SELECT(SM) Medical Network which is a subset of existing
network providers, and
- - Significant financial benefit plan incentives to encourage maximum use
of the network hospitals, physicians and other providers.
The guarantee only covers medical services affected by the managed care
products provided by COMPARE. The effectiveness of the Company's services will
be determined by comparing the actual cost per enrolled member with a target
cost per enrolled member. The target cost per member is calculated annually
using the actual cost per member from the prior year and a guaranteed cost
trend factor that is based on guaranteed level of network usage and effective
savings rates. Since the program is not insured, the amount of savings
guaranteed by the Company is adjusted from time to time for factors impacting a
group's medical benefit costs that are normally associated with underwriting,
catastrophic losses and environmental changes.
Consistent with COMPARE's fee structure, which is based on actual savings,
the guarantee is established on sharing equally in the additional cost or
savings resulting from the use of our services. The Company's base fee will be
adjusted annually within a fixed range if:
- - Actual costs are higher than the target, COMPARE's fees will be lowered
to limit the adverse impact on the client; or
- - Actual costs are lower than the target, COMPARE's fees will be higher to
share in the additional savings resulting from the Company's products.
The approach used to adjust fees is comparable with the managed care
performance guarantees provided by other national managed care companies for
their point of service products.
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<PAGE> 21
Additionally, we are partnering with an insurance carrier to package
stop loss insurance with the Ultima product. This insurance provides protection
to the client for claims cost above and beyond the fixed range where the
performance guarantee is in effect.
INSURANCE COMPANY ACQUISITION
As an extension of the Company's cost management services, in February
1996 the Company acquired American Life and Health Insurance Company and a
subsidiary insurance company (collectively, "American"). American is a small
medical indemnity insurer with licenses in 26 states and approximately $8
million in annual premiums in 1995. The maximum purchase price will be
approximately $11.5 million, subject to the satisfaction of certain
contingencies. The acquisition was accounted for as a purchase.
The Company acquired American in order to obtain the infrastructure and
licenses to enable the Company to leverage its managed care assets into hybrid
medical plans for multi-sited employers. The hybrid medical plans will provide
employers HMO-like performance due to the effect of COMPARE'S provider networks
and medical management expertise which have been developed over the last
decade. These plans include:
Guaranteed performance Point Of Service plans
Employer medical cost trend guarantees
Fully underwritten plans for pre-Medicare retirees
Episode based performance guarantees for specialty services (transplant,
cardiac, orthopedic)
The Company also is seeking to acquire a broadly licensed inactive
insurance company in order to expand the states in which the Company can do
business.
GOVERNMENT REGULATIONS AND RISK MANAGEMENT
The Company believes that its methods of operation are in compliance with
applicable laws, including statutes and regulations relating to PPO operations.
Although COMPARE believes that its level of insurance coverage is
appropriate, no assurance can be given that insurance coverage would protect it
from loss in the event of any litigation or adverse interpretation of statutes
and regulations by governmental or other bodies. Further, there is no
assurance that such insurance will be available at all times in the future.
ITEM 2. PROPERTIES
COMPARE owns two office buildings consisting of approximately 230,000
square feet of space. One is in Downers Grove, Illinois where the Company is
headquartered, and the other is in West Sacramento, California. These location
house the majority of the Company's colleagues. Additionally, the Company
leases facilities in the Phoenix, Detroit, Dallas and New York City areas. The
Phoenix facility occupies 80,000 square feet and expires in 1997. The
remaining locations leases represent less than 25,000 square feet.
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<PAGE> 22
ITEM 3. LEGAL PROCEEDINGS
COMPARE is subject to various legal proceedings arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
these pending suits will not have a material adverse effect on the business or
financial condition of COMPARE.
In January 1996, the Seventh Circuit Court of Appeals reversed the United
States District Court and dismissed all counts of a consolidated class action
complaint filed against the Company and two of its executive officers. The
dismissed complaint, which alleged violations of the federal securities laws,
was filed in April 1993, purportedly on behalf of all persons who purchased the
Company's common stock between December 28, 1992 and March 30, 1993. The
plaintiffs may appeal the Circuit Court's decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1995.
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<PAGE> 23
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- --------------------------------------------
<S> <C> <C>
James C. Smith 55 President and Chief Executive Officer
Daniel Brunner 52 Executive Vice President,
Government Affairs
Ronald H. Galowich 60 Secretary and General Counsel
Mary Anne Carpenter 50 Executive Vice President, Service Products
A. Lee Dickerson 46 Senior Vice President, Provider Networks and
OUCH Systems Administration
Patrick G. Dills 42 Executive Vice President, Managed Care Sales
Lottie A. Kurcz 41 Senior Vice President, Risk Products
Joseph E. Whitters 37 Vice President, Finance
Chief Financial Officer
Edward L. Wristen 44 Executive Vice President, Risk Products
</TABLE>
James C. Smith has served as President and Chief Executive Officer and
director of COMPARE since January, 1984.
Daniel Brunner, a director of the Company, has been Executive Vice
President, Government Affairs since January, 1994. Prior to that, he was
Corporate Operating Officer in charge of government affairs since February,
1992. Mr. Brunner has served as President of AFFORDABLE since April, 1983.
Ronald H. Galowich has served as Secretary and General Counsel of the
Company since 1983, Executive Vice President of the Company from 1983 to May
1994 and Chairman of the Board of Madison Group Holdings, Inc., a multipurpose
business and investment company since 1990.
Mary Anne Carpenter has held various senior management positions in the
Company. In March, 1994, she became Executive Vice President, Clinical
Operations and Claims Repricing. Prior to joining the Company, Ms. Carpenter
held various positions in the health care industry.
A. Lee Dickerson joined HealthCare COMPARE Corp. in 1988 as Regional
Director, Hospital Contracting. Mr. Dickerson was promoted into his current
position in November 1995. Previously he held various senior level positions
in the Company's Provider Networks area. Mr. Dickerson has over 20 years
experience in the health care industry.
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<PAGE> 24
Patrick G. Dills joined HealthCare COMPARE Corp. in 1988 as Senior
National Director, Sales and Marketing. Mr. Dills was promoted to Executive
Vice President, Managed Care Sales in January, 1994. Prior to joining COMPARE,
Mr. Dills held various senior sales positions at M&M/Mars, and various
divisions of Mars, Inc. for the prior six years.
Lottie A. Kurcz joined HealthCare COMPARE Corp. in 1986 as Manager of
National Accounts. Since joining COMPARE, Ms. Kurcz has held various senior
sales and marketing positions; and prior to her promotion in January, 1994 to
Senior Vice President, Risk Products and Product Management, she was Vice
President, Marketing. Prior to joining COMPARE, Ms. Kurcz held various senior
positions in private industry.
Joseph E. Whitters joined the Company as Controller in October, 1986 and
has served as its Vice President, Finance since August, 1987 and its Chief
Financial Officer since March, 1988.
Edward L. Wristen joined COMPARE in November, 1990 as Director of
Strategic Planning and was promoted to Vice President, Managed Outpatient Care
Programs, in April, 1991. In February, 1992, he became Executive Vice
President and Corporate Operating Officer in charge of Provider Networks. In
January, 1994, Mr. Wristen became Executive Vice President, Risk Products.
Prior to joining COMPARE, Mr. Wristen was President of Parkside Data Services,
a subsidiary of Parkside Health Management Corporation, a firm engaged in data
and analytic services, from March, 1989 to November, 1990. From February, 1987
to February, 1989 Mr. Wristen was Chief Operating Officer and Executive Vice
President of Addiction Recovery Corporation, a regional chain of chemical
dependency hospitals. Mr. Wristen has over 18 years experience in the health
care industry.
The Company's officers serve at the discretion of the Board of Directors.
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<PAGE> 25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been on the Nasdaq National Market under
the symbol "HCCC" since the Company's initial public offering on May 29, 1987.
Information concerning the range of high and low sales prices of the Company's
Common Stock on the Nasdaq National Market and the approximate number of
stockholders of record of the Common Stock is set forth under "Common Stock" in
the Company's 1995 Annual Report to Stockholders. Information concerning the
Company's dividend policy is set forth under "Dividend Policy" in the Company's
1995 Annual Report to Stockholders. All of such information is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data of the Company for each of its last five fiscal
years is set forth under "Selected Financial Data" in the Company's 1995 Annual
Report to Stockholders. Such information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The information required by this item is set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Company's 1995 Annual Report to Stockholders and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this item are contained in the
Company's 1995 Annual Report to Stockholders (a copy of which is filed
separately from this report) on the pages indicated below and are incorporated
herein by reference.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE NO.
--------
<S> <C>
Report of Independent Auditors 28
Consolidated Balance Sheets as of
December 31, 1994 and 1995 30
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 31
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1993, 1994 and 1994 32-33
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1993, 1994 and 1995 34-35
Notes to Consolidated Financial Statements 36-44
</TABLE>
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<PAGE> 26
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers of the Company" in Part
I. Other information respecting executive officers, as well as the required
information regarding directors, will be included in the Proxy Statement for
the Company's Annual meeting of Stockholders to be held on May 21, 1996 (the
"Proxy Statement"), and such information is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference provided, however, that
neither the Report of the Compensation Committee of the Board of Directors on
Executive Compensation nor the Performance Graph set forth therein shall be
incorporated by reference herein, in any of the Company's previous filings
under either the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, or in any of the Company's future filings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be included in the Proxy
Statement and is incorporated herein by reference.
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<PAGE> 27
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
a) The following documents are filed as part of this report:
(1) The Index to Financial Statements is set forth on page 25 of this
report.
(2) Financial Statements Schedule:
Schedule II - Valuation and Qualifying Accounts and Reserves.
(3) Exhibits
(b) Report on Form 8-K:
The Company did not file a current report on Form 8-K during the last
quarter of fiscal 1995.
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<PAGE> 28
HEALTHCARE COMPARE CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additions
Balance at Charged to Adjustments Balance at
Beginning Costs and and End of
Description of Period Expenses Charge-offs Period
- --------------------------------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1995:
Allowance for Doubtful Accounts $3,874,000 $ (620,000) $ (447,000) $2,807,000
========== ========== ============ ==========
Accrued Restructuring Expenses $2,570,000 $ (100,000) $ (1,034,000) $1,436,000
========== ========== ============ ==========
Year Ended December 31, 1994:
Allowance for Doubtful Accounts $4,106,000 $ 505,000 $ (737,000) $3,874,000
========== ========== ============ ==========
Accrued Restructuring Expenses $2,906,000 $ 700,000 $ (1,036,000) $2,570,000
========== ========== ============ ==========
Year Ended December 31, 1993:
Allowance for Doubtful Accounts $3,723,000 $4,406,000 $ (4,023,000) $4,106,000
========== ========== ============ ==========
Accrued Restructuring Expenses $3,508,000 $1,200,000 $ (1,802,000) $2,906,000
========== ========== ============ ==========
</TABLE>
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HEALTHCARE COMPARE CORP.
By: /s/James C. Smith
---------------------------
James C. Smith, President
and Chief Executive Officer
Date: March 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 26, 1996:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------- ---------------------------------------------
<S> <C>
/s/Thomas J. Pritzker Chairman of the Board
- -------------------------
Thomas J. Pritzker
/s/James C. Smith President, Chief Executive Officer,
- ------------------------- Director (Principal Executive Officer)
James C. Smith
/s/Robert J. Becker, M.D. Chairman Emeritus
- -------------------------
Robert J. Becker, M.D.
/s/Joseph E. Whitters Chief Financial Officer
- ------------------------- (Principal Financial and Accounting Officer)
Joseph E. Whitters
/s/Ronald H. Galowich Secretary, General Counsel,
- ------------------------- Director
Ronald H. Galowich
/s/Michael J. Boskin Director
- -------------------------
Michael J. Boskin
/s/Burton W. Kanter Director
- -------------------------
Burton W. Kanter
Director
- -------------------------
David Simon
/s/Daniel Brunner Executive Vice President, Government Affairs,
- ------------------------- Director
Daniel Brunner
/s/Robert S. Colman Director
- -------------------------
Robert S. Colman
</TABLE>
29
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1. Omitted
3.1. Restated Certificate of Incorporation of the Company. {3.1} (1)
3.2. Amendment to Restated Certificate of Incorporation of the
Company. {3.2} (9)
3.3. Restated Certificate of Designation of Preferences, Rights and
Limitations. {3.2} (1)
3.4. Amended and Restated By-Laws of the Company. {3.3} (1)
3.5. Amendment, dated as of May 20, 1987, to Amended and Restated
By-Laws of the Company {3.4} (2)
3.6. Amendment to Amended and Restated By-Laws of the Company.{3.5}
(6)
3.7. Amendment to Amended and Restated By-Laws of the Company.{3.6}
(6)
4. Specimen of Stock Certificate for Common Stock. {4} (2)
9. Omitted
9.1. Omitted
9.2. Omitted
10.1 to 10.10. Omitted
10.11. HealthCare COMPARE Corp. 1987 Stock Option Plan, as amended and
restated. {4} (5)
10.12. Amendment No. 1 to HealthCare COMPARE Corp. Stock Option Plan,
as amended and restated {10.12} (6)
10.13.-10.24 Omitted
10.25. Form of Consulting Physician Agreement, {10.20} (2)
10.26. Form of Consulting Specialist Agreement. {10.21} (2)
10.27-10.35. Omitted
10.36. HealthCare COMPARE Corp. 1989 Employee Stock Purchase Plan.
{10.36} (7)
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ -----------
<S> <C>
10.37-10.45. Omitted
10.46. Employment Agreement dated as of May 23, 1991 by and between COMPARE and
Joseph E. Whitters {10.46} (10)
10.47.-10.53 Omitted
10.54. Form of Indemnification Agreement entered dated June 19, 1989 between
OUCH and executive officers and directors of OUCH (Incorporated by
reference to Exhibit B of definitive proxy materials filed by OUCH with
the SEC on April 7, 1989) {10.54} (11)
10.55-10.60. Omitted
10.61. Lease - 1215 Howe Avenue, Sacramento, California dated as of June 1,
1986 between OUCH and James W. Cameron, Jr. (Incorporated by reference to
Exhibit 10.5.5 of Annual Report on Form 10-K for the fiscal year ended
December 31, 1986 filed by OUCH with the SEC on March 26, 1987) {10.61}
(11)
10.62. Omitted
10.63. Agreement dated as of May 26, 1989 between OUCH and Electronic Data
Systems Corporation (Incorporated by reference of Exhibit 10.17 of Annual
Report on Form 10-K for the fiscal year ended December 31, 1989 filed by
OUCH with the SEC on March 16, 1990) {10.63} (11)
10.64.-10.66 Omitted
10.67. Employment Agreement dated as of April 3, 1991 by and between COMPARE
and Edward L. Wristen. (13)
10.68. Omitted
10.69. Second Restatement of the HealthCare COMPARE Corp. Retirement Savings
Plan. {10.69} (14)
10.70. HealthCare COMPARE Corp. Director's Option Plan dated May 23, 1991.
{10.70} (14)
10.71. HealthCare COMPARE Corp. Stock Option Plan (for employees of OUCH).
{10.71} (14)
10.72. Employment Agreement dated as of July 1, 1993 by and between COMPARE and
James C. Smith. {10.72} (15)
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ -----------
<S> <C>
10.73. Option Agreement dated as of July 1, 1993 by and between the Company and
James C. Smith. {10.73} (15)
10.74. Option Agreement dated as of July 1, 1993 by and between the Company and
James C. Smith. {10.74} (15)
10.75. Option Agreement dated as of July 1, 1993 by and between the Company and
James C. Smith. {10.75} (15)
10.76. Employment Agreement dated as of July 1, 1993 by and between COMPARE and
Daniel S. Brunner. {10.76} (15)
10.77.-10.79 Omitted
10.80. PPO Agreement dated January 1, 1996 between the Company and Government
Employees Hospital Associations, Inc.
10.81. PPO Agreement dated October 1, 1990 between the Company and National
Association of Letter Carriers.
10.82 First Combined Amendment to the PPO Agreement, each dated October 1,
1990, between AFFORDABLE HealthCare Concept and National Association of
Letter Carriers Health Benefit Plan.
10.83 Second Amendment to the PPO Agreement, each dated October 1, 1990, as
amended between AFFORDABLE HealthCare Concept and National Association of
Letter Carriers Health Benefit Plan.
10.84 Utilization Management Agreement dated January 1, 1989 between
healthCare COMPARE Corp. and National Association of Letter Carriers.
10.85 First Amendment to the Utilization Management Agreement dated January 1,
1989 between healthCare COMPARE Corp. and National Association of Letter
Carriers.
10.86 Second Amendment to the Utilization Management Agreement dated January
1, 1989 between healthCare COMPARE Corp. and National Association of
Letter Carriers.
10.87 Third Amendment to the Utilization Management Agreement dated January 1,
1989 between healthCare COMPARE Corp. and National Association
of Letter Carriers.
10.88 Fourth Amendment to the Utilization Management Agreement dated January
1, 1989 between healthCare COMPARE Corp. and National Association of
Letter Carriers.
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ -----------
<S> <C>
10.89 Fifth Amendment to the Utilization Management Agreement dated January 1,
1989 between healthCare COMPARE Corp. and National Association of Letter
Carriers.
10.90 Retainer Agreement dated January 1, 1994 between HealthCare COMPARE
Corp. and Ronald H. Galowich.
10.91 Employment Agreement dated July 1, 1992 between HealthCare COMPARE Corp.
and Lottie A. Kurcz.
10.92 Employment Agreement dated May 23, 1991 between HealthCare COMPARE Corp.
and Mary Anne Carpenter.
10.93 Employment Agreement dated August 21, 1990 between HealthCare COMPARE
Corp. and Patrick G. Dills.
10.94 HealthCare COMPARE Corp. 1995 Employee Stock Option Plan. (4.1) {18}
11. Statement of computation of earnings per share.
13. 1995 Annual Report to Stockholders.
22. Subsidiaries of the Company.
23. Consent of Deloitte & Touche LLP
24. Powers of Attorney of certain officers and directors of the Company.
27. Financial data schedules of the Company.
{ } Exhibits so marked have been previously filed with the Securities and
Exchange Commission as exhibits to the filings shown below under the
exhibit number indicated following the respective document description and
are incorporated herein by reference.
(1) Registration Statement on Form S-1 ("Registration Statement"), as filed
with the Securities and Exchange Commission on April 17, 1987.
(2) Amendment No. 2 to Registration Statement, as filed with the Securities
and Exchange Commission on May 22, 1987.
(3) Amendment No. 3 to Registration Statement, as filed with the Securities
and Exchange Commission on May 29, 1987.
(4) Annual Report on Form 10-K for the fiscal year ended August 31, 1987, as
filed with the Securities and Exchange Commission on November 27, 1987.
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ -----------
<S> <C>
(5) Registration Statement on Form S-8, as filed with the Securities and
Exchange Commission on January 12, 1988.
(6) Registration Statement on Form S-1, as filed with the Securities and
Exchange Commission on July 12, 1988.
(7) Registration Statement on Form S-8, as filed with the Securities and
Exchange Commission on January 18, 1989.
(8) Annual Report on Form 10-K for the year ended August 31, 1989, as filed
with the Securities and Exchange Commission on November 28, 1989.
(9) Annual Report on Form 10-K for the year ended December 31, 1990, as filed
with the Securities and Exchange Commission on March 30, 1991.
(10) Registration Statement on Form S-8, as filed with the Securities and
Exchange Commission on November 1, 1991.
(11) Registration Statement of Form S-4, as filed with the Securities and
Exchange Commission on January 27, 1992.
(12) Registration Statement on Form S-8, as filed with the Securities and
Exchange Commission on March 4, 1992.
(13) Annual Report on Form 10-K for the year ended December 31, 1991 as filed
with the Securities and Exchange Commission on March 27, 1992.
(14) Annual Report on Form 10-K for the year ended December 31, 1992 as filed
with the Securities and Exchange Commission on March 26, 1993.
(15) Annual Report on Form 10-K for the year ended December 31, 1993 as filed
with the Securities and Exchange Commission on March 25, 1994.
(16) Registration Statement on Form S-8, as filed with the Securities and
Exchange Commission on December 27, 1994.
(17) Annual Report on Form 10-K for the year ended December 31, 1994 as filed
with the Securities and Exchange Commission on March 24, 1995.
(18) Registration Statement on Form S-8 as filed with the Securities and
Exchange Commission on September 20, 1995.
</TABLE>
34
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
HealthCare COMPARE Corp.
Downers Grove, Illinois
We have audited the consolidated financial statements of HealthCare COMPARE
Corp. as of December 31, 1995 and 1994, and for each of the three years in the
period ended December 31, 1995, and have issued our report thereon, dated
February 12, 1996; such consolidated financial statements and report are
included in your 1995 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of HealthCare COMPARE Corp. listed in Item 13. This consolidated
financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based upon our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Chicago, Illinois
February 12, 1996
35
<PAGE> 1
EXHIBIT 10.80
Page 1 of 13
HEALTHCARE COMPARE CORP.
PPO AGREEMENT
FOR
GOVERNMENT EMPLOYEES HOSPITAL ASSOCIATION, INC.
THIS AGREEMENT is to be effective for GEHA Health Plan year commencing January
1, 1996 between HealthCare COMPARE Corp., a Delaware corporation ("HCCC"), and
Government Employees Hospital Association, Inc., a Missouri corporation
("GEHA").
WHEREAS, HCCC provides preferred provider organization ("PPO") networks and
managed transplant services to employers, insurance companies, and other payors
on a national basis;
WHEREAS, GEHA sponsors federal employee health benefit plans under Contract
Number CS-1063 with the federal Office of Personnel Management ("OPM"); and
WHEREAS, HCCC desires to provide its PPO networks and managed transplant
services to GEHA pursuant to GEHA's contract with OPM and GEHA desires to
receive such services from HCCC.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS
1.1 AFFORDABLE MEDICAL NETWORKS ("AMN") SERVICES means the AFFORDABLE Medical
Networks, including the AFFORDABLE Select Network, and related services offered
by HCCC to Covered Persons pursuant to this Agreement and described in
Supplement A, attached hereto and incorporated herein. The AMNs are those
networks of Contract Providers including but not limited to hospital networks
and outpatient care networks ("OCN"). AMN Services do not include the Managed
Transplant System Services.
1.2 AFFORDABLE SELECT NETWORK means a subset of AMN which, in comparison to
AMN, offers greater discounts and channeling.
1.3 ATTENDING PRACTITIONER means the physician or other professional provider
of Medical Services responsible for care being provided to a Covered Person.
1.4 CONTRACT PROVIDER means an Attending Practitioner, a hospital, or other
medical provider that has entered into a Provider Agreement.
1.5 CONTRACT RATES means the rates for Medical Services specified in the
Provider Agreement, in the form of per diems, case or procedure rates,
discounts off charges, fee
<PAGE> 2
Page 2 of 13
schedules, or other form of reimbursement.
1.6 COVERED PERSON means a Member or dependent of the Member, including those
dependents eligible for or receiving benefits under Medicare Part B only.
Covered Person does not include persons who are covered under Medicare Part A.
1.7 COVERED PERSON MEDICAL INFORMATION means any information, whether or not
recorded in a tangible media, which relates directly or indirectly to a Covered
Person's health status, medical condition and/or medical treatment.
1.8 COVERED SERVICES means those Medical Services provided to a Covered Person
which are eligible for payment under the provisions of the Health Plan.
1.9 HEALTH PLAN means the contract, certificate, policy, health plan document,
or any other document offered or sponsored by GEHA under which a Covered Person
may be entitled to receive reimbursement for health care services.
1.10 MANAGED TRANSPLANT SYSTEM ("MTS") SERVICES means a system of services
provided pursuant to this Agreement as described in Supplement B, attached
hereto and incorporated herein, by HCCC to GEHA for eligible Covered Persons
for transplant-related Medical Services at specially credentialed Contract
Provider hospitals, which services include eligibility determination and
comprehensive medical case management.
1.11 MEDICAL SERVICES means inpatient or outpatient services provided to a
Covered Person by a Contract Provider.
1.12 MEMBERS means those federal employees or annuitants enrolled in the Health
Plan, including those covered under Medicare Part B only. Member does not
include persons who are covered under Medicare Part A.
1.13 METROPOLITAN STATISTICAL AREA ("MSA") means a geographic region defined by
GEHA, but consistent with HCCC's network market-plan designations, in which
Covered Persons reside and for which GEHA has selected AMN Services
("HCCC-MSA") and/or MTS Services, as identified in Appendix II, attached hereto
and incorporated herein.
1.14 PER MEMBER PER MONTH ("PMPM") means a monthly calculation of those Members
residing in MSAs for whom the AMN Services or MTS Services have been selected.
1.15 PROVIDER AGREEMENT means the agreement between HCCC and a Contract
Provider for the delivery of Medical Services at Contract Rates.
1.16 SCHEDULE OF FEES means the fees for services offered under this Agreement
as set forth in Appendix I, attached hereto and incorporated herein.
<PAGE> 3
Page 3 of 13
ARTICLE 2. HCCC SERVICES
2.1 AMN SERVICES. HCCC shall make AMN Services or, if available and requested
by GEHA, the AFFORDABLE Select Network, available to Covered Persons within the
HCCC-MSAs listed in Appendix II upon the terms and conditions of this
Agreement, including Supplement A and the Appendices hereto.
2.2 MTS SERVICES. HCCC shall make MTS Services available to Covered Persons
within the HCCC-MSAs listed in Appendix II upon the terms and conditions of
this Agreement, including Supplement B and the Appendices hereto. GEHA
acknowledges that HCCC, at GEHA's request, has previously modified its standard
criteria for MTS Services participation.
2.3 OTHER HCCC SERVICES. HCCC shall make the following services available to
GEHA if selected in Section 1.2 of Supplement A, upon the terms and conditions
of this Section 2.3, Supplement A, and Appendix I - Schedule of Fees.
2.3.1 PPO INFOLINE. HCCC shall make available to Covered Persons the
PPO InfoLine. GEHA may terminate its use of the PPO InfoLine at any time
upon no less than one hundred and eighty (180) days prior written notice
to HCCC.
2.3.2 PPO INFOLINE CONFIRMATION. HCCC shall make available, in writing,
to Covered Persons the PPO InfoLine Confirmation.
2.3.3 ANALYTIC AND PROGRAMMING SERVICES. HCCC shall provide GEHA with
up to two hundred (200) hours per year of specialized analytic and
programming services. These services are above and beyond HCCC's
standard reporting package to GEHA, which includes monthly repriced
claims data, monthly Provider InfoLine reports, Contract Provider
bulletins, Provider Fee Schedules.
2.3.4 EDI SERVICES. Upon request, HCCC shall reprice all hospital
claims received from Covered Persons, including non-Contract Provider
hospitals, and shall submit such repriced claims electronically to GEHA.
2.3.5 PRINTED CONTRACT PROVIDER DIRECTORIES. HCCC shall make available
to GEHA applicable printed contract Provider Directories for distribution
to Covered Persons.
2.3.6 MANAGEMENT INFORMATION SYSTEM ("MIS") REPORTS. At no additional
cost to GEHA and based on an agreed-upon production date, HCCC shall
prepare and deliver up to twenty (20) copies of HCCC's standard MIS
Reports.
<PAGE> 4
Page 4 of 13
2.3.7 ADDITIONAL REQUESTED SERVICES. GEHA may request HCCC to provide
certain additional services including but not limited to assistance in
legal or administrative hearings and services related to transition
activities at the time of termination. Within fifteen (15) business days
following receipt of GEHA's request, HCCC will notify GEHA of HCCC's
response to GEHA's request. HCCC shall charge its then customary
consulting fee for the additional services.
2.4 PERFORMANCE STANDARDS. HCCC shall pay GEHA liquidated damages for HCCC's
failure to meet the performance standards set forth in Appendix III, in
accordance with the Schedule set forth in Appendix III.
ARTICLE 3. NETWORK USAGE
3.1 EXCLUSIVE DIRECTED NETWORK. HCCC shall be GEHA's exclusive directed vendor
of medical networks and managed transplant services for the selected MSAs. The
MSAs identified in Appendix III shall represent at least eighty percent (80%)
of GEHA's 1995 Members for 1996. GEHA shall encourage Covered Persons to use
Contract Providers for health care services. Nothing in this Agreement shall
prohibit GEHA from utilizing non-directed managed care or cost-containment
programs within any MSA provided that such use does not interfere directly or
indirectly with the contractual relationships between HCCC and Contract
Providers.
3.2 SELECTION OF AFFORDABLE MEDICAL NETWORKS. GEHA may add or delete the AMN
Services from any HCCC-MSA upon written notice to HCCC no later than June 30th
of each year and to take effect on January 1st of the following year. Such
notice shall identify the PPO vendor or vendors intended to replace HCCC. In
lieu of an AMN, GEHA may select the AFFORDABLE Select Network upon terms and
conditions prescribed by HCCC at the fees set forth in Section I of Appendix I
- - Schedule of Fees.
3.3 DELETION OF CONTRACT PROVIDERS. GEHA may delete the names of Contract
Providers from any AMN-related information communicated to Covered Persons by
providing ninety (90) days prior written notice to HCCC, unless otherwise
obligated by OPM.
3.4 EFFECT OF TERMINATION. GEHA shall not solicit, or direct or allow any
third party to solicit on its behalf, any Contract Provider for the purpose of
providing health care services to Covered Persons during the term of this
Agreement; provided, however, that upon notice of termination of AMN services
from any HCCC-MSA, this provision shall not apply during the period commencing
one hundred and eighty (180) days prior to the effective date of termination.
At all times, GEHA shall comply with the terms of Article 9 with respect to any
Confidential Information acquired under this Agreement, including the provision
of data and information to any PPO vendor for any purpose.
<PAGE> 5
Page 5 of 13
ARTICLE 4. PAYMENT
4.1 SCHEDULE OF FEES. GEHA shall pay HCCC monthly fees for AMN Services and
MTS Services on a PMPM (per Member per month) basis, which fee shall be based
upon the percentage of Members located within the HCCC-MSAs. The fees due will
be determined according to the Schedule of Fees attached as Appendix I. On or
before the twentieth (20th) day of each month, GEHA shall report in writing to
HCCC the number of Members as of the first day of each month and shall include
with such report GEHA's payment to HCCC of the total fee due HCCC for the
reported month. By July 1 of each year, GEHA shall provide HCCC with any
corrections to the number of Members who reside in selected MSAs during the
current calendar year. Such corrections, if any, shall be used to adjust the
PMPM for the preceding months. For those items for which HCCC sends invoices
to GEHA, payment shall be made within twenty (20) days after receipt by GEHA of
monthly invoices from HCCC; provided, however, that if GEHA disputes any
items(s) on HCCC's invoice ("Disputed Invoice"), GEHA shall pay only the
undisputed amounts within twenty (20) days. Each party shall use its best
efforts to resolve the dispute within one hundred and eighty (180) days after
the close of the current monthly period; at which time the reconciled amount,
if any, is due HCCC or, if no resolution is achieved, the unpaid balance of the
Disputed Invoice is due HCCC and the parties shall continue good faith dispute
resolution efforts in a mutually agreed to neutral forum.
4.2 TAXES AND GOVERNMENT CHARGES. HCCC's fees do not include taxes or
governmental charges. GEHA shall reimburse HCCC for any imposed and applicable
sales, use, value-added, or other tax or government- or regulatory-agency
charge based on transactions hereunder, exclusive of net income or corporate
franchise taxes.
4.3 RIGHT TO INSPECT. In addition to each party's rights under Article 5, HCCC
shall have the right to inspect GEHA's books and records to verify the accuracy
of HCCC fees which are calculated on a per capita, per case, or hourly basis
and GEHA shall have the right to inspect HCCC's books and records to verify the
accuracy of liquidated damage payments, if any, to GEHA. Each party may
conduct such inspections, at no charge, during normal business hours and upon
seven (7) days advance written notice.
4.4 LATE PAYMENTS. Payments due under this Agreement which are more than
fifteen (15) days in arrears shall bear interest at the rate of one and
one-half percent (1 1/2%) per month. In addition to interest, the owing party
shall pay all expenses, costs, and charges relating to the collection,
including attorneys' fees incurred, whether or not suit is filed for payment.
4.5 BONUSES. Annually, and no later than ninety (90) days following the end of
the calendar year, GEHA shall pay HCCC any savings incentive bonus and/or
utilization incentive bonus earned by HCCC in accordance with Appendix III,
attached hereto and
<PAGE> 6
Page 6 of 13
incorporated herein.
4.6 EFFECT OF TERMINATION. Termination of this Agreement shall not constitute
a waiver or defense of either party's obligation to make payments due under
this agreement.
ARTICLE 5. AUDITS
5.1 AUDITS. Each party shall maintain records related to the provision of
services under this Agreement. Subject to Article 9, each party shall have the
right to audit the other's records which relate directly to the performance
obligations, services, and calculation of incentives and liquidated damages
provided for under this Agreement. Any such audit may be conducted during
normal business hours and upon not less than thirty (30) days advance notice.
The auditing party shall provide a copy of the final results of such audit to
the audited party. Each party's right to audit the other's records shall
continue for a period of not less than two (2) years after the date of
discharge, end of treatment, or end of HCCC's services in relation to the
specific episode of care. Audited records owned by a party are and shall
remain the property of the that party. The auditing party shall pay the
audited party for the costs of such audits in accordance with the fees set
forth in Appendix I.
5.2 OPM AUDITS. With respect to OPM audits, GEHA shall comply with the notice
and reporting requirements of Section 5.1 to the extent possible. Fees shall
be waived for OPM audits lasting up to three (3) day per calendar year.
Otherwise, GEHA shall pay HCCC's fees in accordance with the fees set forth in
Appendix I.
ARTICLE 6. EXCHANGE OF INFORMATION
6.1 REQUIRED INFORMATION. Upon request from HCCC, GEHA shall provide to HCCC,
at GEHA's expense, information regarding Covered Persons, as well as any other
information reasonably required to implement and operate the AMN Services and
MTS Services ("Required Information"). Required Information includes but is
not limited to paid claims tapes, information on the number and geographic
distribution of Covered Persons, accurate and complete information necessary
for HCCC to resolve issues related to Performance Standards, and information on
the claims adjudication procedures. GEHA shall be solely responsible for the
accuracy and timeliness of the Required Information. Any submission of
Required Information which does not meet the requirements of this Article 6 or
any failure to submit Required Information to HCCC within any reasonable
requested time frames may delay or prevent Covered Persons from receiving
HCCC's AMN Services and MTS Services or, for performance standard issues, shall
delay the start of the time for resolution as provided in Appendix III. HCCC
shall notify GEHA within thirty (30) days after submission of any identified
deficiencies in the Required Information. The parties acknowledge that until
such time as HCCC has received all requested information, HCCC may not be able
to perform services pursuant to this Agreement.
<PAGE> 7
Page 7 of 13
6.2 COMMUNICATION MATERIALS. All communications to Covered Persons and other
third parties concerning services under this Agreement are subject to the terms
of this Section 6.2.
6.2.1 HCCC-APPROVED INFORMATION. HCCC shall provide GEHA with
descriptive information, pre-approved by HCCC, regarding HCCC's
AFFORDABLE Medical Networks and MTS Services and, subject to OPM
approval, GEHA shall use that information in all general communications
regarding these services. GEHA may propose alternative language for
approval by HCCC. Any communications from GEHA which contain information
other than the HCCC pre-approved descriptive information are not
authorized by HCCC.
6.2.2 GEHA-APPROVED INFORMATION. Any written or printed material
prepared for general circulation by HCCC relating to GEHA's services or
obligations under this Agreement which is to be published, disseminated,
released, or prepared for distribution by HCCC to Covered Persons or to
the general public will be released only after consultation with and
approval by GEHA, which approval shall not be unreasonably withheld.
ARTICLE 7. REGULATORY COMPLIANCE
HCCC and GEHA shall comply with all laws and regulations applicable to their
respective business activities and/or their respective obligations under this
Agreement, including laws and regulations governing the confidentiality of
medical information. Further, HCCC shall comply with and be bound by the terms
of GEHA's contract with and the policies of OPM as they relate to
subcontractors of GEHA; provided, however, HCCC's obligation as set forth in
this sentence shall not arise until after GEHA has given HCCC written copies of
those terms and policies and HCCC has agreed in writing to such terms and
policies.
ARTICLE 8. TERM AND TERMINATION
8.1 TERM. The Initial Term of this Agreement shall be for two (2) years
beginning on January 1, 1996 unless earlier terminated under Section 8.2.
Following the Initial Term, this Agreement shall automatically renew for
consecutive one (1) year terms, unless earlier terminated under Section 8.2.
8.2 TERMINATION. This Agreement may be terminated by written notice given by
either party upon the occurrence of any of the following:
8.2.1 Failure of either party to meet any material covenant, agreement,
or obligation provided for in this Agreement ("Default") if the
defaulting party has not cured the Default within forty five (45) days
following receipt of written notice from the non-defaulting party;
provided, however, that if GEHA fails to make any payment due
HCCC under this Agreement, HCCC may terminate the Agreement if GEHA has
not
<PAGE> 8
Page 8 of 13
paid HCCC within twenty (20) days following receipt of HCCC's written
notice of nonpayment.
8.2.2 Either party becomes insolvent, or is adjudicated as a bankrupt,
or its business comes into possession or control of any trustee in
bankruptcy, or a receiver is appointed for it, or it makes a general
assignment for the benefit of creditors.
8.2.3 Either party gives not less than one hundred and eighty (180) days
written notice to the other party prior to the end of the Initial Term or
any renewal term. Termination under this Paragraph 8.2.3 will be
effective on the expiration date of the Initial Term or any renewal term.
8.3 OBLIGATIONS UPON TERMINATION. Upon the effective date of termination of
this Agreement for any reason:
8.3.1 Each party shall promptly pay to the other party all monies due
hereunder;
8.3.2 GEHA shall immediately cease to represent that HCCC is GEHA's
provider of AMN and MTS Services and HCCC shall immediately cease to
represent GEHA as a client of HCCC;
8.3.3 HCCC shall promptly notify Contract Providers, in writing, and
GEHA shall promptly notify Covered Persons, in writing, of such
termination. GEHA shall mail to HCCC a copy of the notice to Covered
Persons at the same time GEHA distributes such notice to Covered Persons;
8.3.4 If either party fails to comply with the terms of this Agreement
("Noncomplying Party"), the Noncomplying Party shall reimburse the other
for printing and mailing costs incurred for initial and final
notifications to Contract Providers or Covered Persons, whichever
applies, in MSAs described in Appendix II;
8.3.5 Each party shall immediately cease to use the other party's
documents, systems, logo-types, service marks, trademarks, trade names,
methods, and techniques in any form;
8.3.6 All covenants, agreements, and obligations of the parties under
this Agreement shall end, except those expressly made to survive
termination in Section 8.4; and
8.3.7 Each party shall immediately return to the other party all
records, reports, and data, including but not limited to Confidential
Information as defined in Section 9.1.
8.4 EFFECT OF TERMINATION. Termination of this Agreement will not affect
any rights or obligations hereunder which accrued prior to the effective date
of the termination. The
<PAGE> 9
Page 9 of 13
provisions of Articles 4, 5, 9, and 11, and Sections 8.3, 8.5, 10.2, 10.3,
and 11.13 shall survive the termination of this Agreement.
8.5 PAYMENTS TO PROVIDERS ON TERMINATION. Upon termination of this Agreement
or termination of any selected MSA(s), GEHA shall immediately cease reimbursing
Contract Providers at the Contract Rates; provided, however, that upon
GEHA's request and for no more than six (6) months, HCCC shall continue to
reprice hospital Contract Provider claims and allow GEHA to reprice OCN claims
to Contract Rates for claims incurred but not reported, in accordance with
Section III of Appendix I - Schedule of Fees.
ARTICLE 9. CONFIDENTIAL AND PROPRIETARY INFORMATION
9.1 CONFIDENTIALITY. All confidential and proprietary information of a party
including but not limited to the terms of this Agreement, information about
fees, computer software, business procedures and manuals, data, review
criteria, Contract Rates, information collected and/or reports prepared
pursuant to this Agreement, and any other information that a party identifies
as confidential and/or proprietary ("Confidential Information"), will not be
disclosed without the prior written consent of the party owning the
Confidential Information. Further, Confidential Information will be disclosed
only to those persons or entities and only to the extent necessary to carry out
the terms of this Agreement. Confidential Information will not be used in any
way not specifically allowed under this Agreement. For purposes of this
Agreement, Confidential Information will not include:
9.1.1 Information generally available to or known to the public or
lawfully obtained from third parties;
9.1.2 Information known to the other party prior to the date of this
Agreement which is not subject to other confidentiality restrictions;
9.1.3 Information independently developed by the other party subsequent
to completion of the term, including any renewals, of this Agreement;
9.1.4 Information provided to the other party with the intention that it
be published, disseminated, released, or distributed by the other party
to Covered Persons, Contract Providers, or the general public; and
9.1.5 Subject to Paragraph 6.2.1, information about fees used in
presenting sales materials and quotations to GEHA's customers and
prospective customers regarding AMN Services and MTS Services.
9.2 REMEDIES. The parties recognize that no remedy at law may be adequate
compensation for a breach of the provisions of this Article 9. Therefore, the
parties agree that each party will be entitled to seek temporary and permanent
injunctive relief against the
<PAGE> 10
Page 10 of 13
other in addition to all other remedies to which either party is entitled. Such
temporary or permanent injunctive relief may be granted without bond, which
each party does hereby waive.
ARTICLE 10. INSURANCE & INDEMNIFICATION
10.1 INSURANCE. Each party shall, so long as coverage is available in the
market and at a reasonable cost within each party's judgment, at all times for
the term of this Agreement maintain in effect professional liability insurance
in an amount not less than $2,000,000. Each party shall provide the other with
a certificate of insurance from the parties respective insurance carriers,
which certificate shall contain a provision that such insurance will remain in
effect until the other party receives not less than thirty (30) days prior
written notice of termination.
10.2 INDEMNIFICATION OF HCCC. Should HCCC incur any costs, expenses,
judgments, damages, liabilities, legal fees, or other reasonable costs of
litigation or defense of any claim (collectively, "costs or liabilities"),
whether in settlement of any cause of action or threatened cause of action,
which settlement GEHA approves, or as a result of an order or judgment of a
court of competent jurisdiction which costs or liabilities shall not result or
arise from any negligence or intentional act of misconduct of HCCC but shall
arise solely from failure or refusal of GEHA to pay health care benefits. GEHA
agrees to indemnify, hold harmless and reimburse HCCC to the extent of any such
costs or liabilities.
10.3 INDEMNIFICATION OF GEHA. Should GEHA incur any costs, expenses,
judgments, damages, liabilities, legal fees, or other reasonable costs of
litigation or defense of any claim (collectively, "costs or liabilities"),
whether in settlement of any cause of action or threatened cause of action,
which settlement HCCC approves, or as a result of an order or judgment of a
court of competent jurisdiction which costs or liabilities shall not result or
arise solely from any negligence or intentional act of misconduct of GEHA but
shall arise solely from HCCC's negligent credentialing of Contract Providers,
HCCC agrees to indemnify, hold harmless and reimburse GEHA to the extent of any
such costs or liabilities.
ARTICLE 11. GENERAL PROVISIONS
11.1 LIMITED ROLE OF HCCC.
11.1.1 MEDICAL SERVICES. HCCC does not provide, direct, control, or
assume liability for the provision of Medical Services to Covered
Persons. All decisions regarding Medical Services are made solely by the
Attending Practitioner and the Covered Person. The rendering of Medical
Services to a Covered Person and the results thereof are solely within
the control of the Attending Practitioner and the Covered Person.
Execution of this Agreement and the performance of its obligations shall
not constitute an undertaking by HCCC to render any Medical Services, or
to
<PAGE> 11
Page 11 of 13
assume or guarantee the results thereof to Covered Persons or that
Medical Services will be rendered in accordance with generally accepted
standards or procedures.
11.1.2 PAYMENT. HCCC does not make compensability or payment
determinations. The parties understand and agree that all decisions
regarding the payment or denial of payment of medical benefits to Covered
Persons is the responsibility of GEHA. HCCC is not responsible for
payment of any benefits for Medical Services rendered to Covered Persons.
HCCC is not responsible for reimbursement to GEHA for any reason,
including but not limited to such services provided to a Covered Person
by a former Contract Provider, whether or not HCCC has given notice to
the GEHA of the termination of the Contract Provider.
11.2 INDEPENDENT CONTRACTORS. The relationship between the parties is that of
independent contractors. Nothing herein is intended or will be construed to
establish any employment, partnership, joint venture, or, except as provided
herein, agency relationship between the parties. Each party will be solely
responsible for the direction, control, and management of its subcontractors,
agents, and employees.
11.3 THIRD PARTY RIGHTS. Unless otherwise stated herein, this Agreement is
entered into by and between the parties hereto solely for their benefit. The
parties have not created or established any third party beneficiary status or
rights in any person or entity not a party hereto including but not limited to
any Covered Person, subcontractor, or other third party, and no such third
party shall have any right to enforce any right or enjoy any benefit created or
established under this Agreement.
11.4 FORCE MAJEURE. Neither party will be responsible for, nor deemed in
Default under this Agreement on account of any failure or delay in performance
hereunder (except for failure to make payment when due) due to acts of God or
governmental authority, strikes or labor disputes, fires, or any other cause
beyond the control of the party.
11.5 AMENDMENT. This Agreement may be amended only upon written agreement of
both parties.
11.6 GOVERNING LAW. This Agreement is made in and shall be governed by and
construed in accordance with the laws of the State of Illinois.
11.7 NONASSIGNMENT. Neither party shall have the right or power to assign any
rights or obligations hereunder without the express written consent of the
other party.
11.8 SUCCESSORS. This Agreement will be binding upon and inure to the benefit
of the respective parties hereto, their successors, and permitted assigns.
11.9 ENTIRE AGREEMENT. This Agreement, including all exhibits, attachments,
and
<PAGE> 12
Page 12 of 13
amendments hereto, constitutes the entire agreement between the parties
regarding HCCC's provision of AFFORDABLE Medical Networks and MTS Services and
supersedes any prior agreement or understandings, whether oral or written,
related to the services hereunder.
11.10 HEADINGS. The article, section, and paragraph headings, if any, are for
convenience only and shall not be deemed to limit, define, or restrict the
meaning or contents thereof.
11.11 TRADEMARKS. Neither party will in any way infringe upon or harm the
rights of the other in its service marks, trademarks, copyrights, and other
proprietary marks ("Trademarks"). Neither party will, without the prior
written approval of the other, use any Trademark of the other party in
conjunction with the use or provision of AFFORDABLE Medical Networks and MTS
Services pursuant to this Agreement and, upon termination of this Agreement,
each party will immediately cease any approved use of the Trademarks of the
other party.
11.12 ILLEGALITY. If any provision of this Agreement conflicts with laws
applicable hereto or under which this Agreement is construed, or if any
provision of this Agreement shall be held partially or fully illegal or
unenforceable by a court with jurisdiction over the parties to this Agreement,
then this Agreement will be modified to conform with such laws or judicial
determination and such provision will be construed and enforced only to such
extent as it may be a legal and enforceable provision and all other provisions
of this Agreement will be given full effect separately therefrom and shall not
be affected thereby.
11.13 HIRING RESTRICTIONS. Except with the other party's written consent, for
the term of this Agreement and for a period of twelve (12) months thereafter,
neither party shall hire as an employee or consultant any employee of the other
party. For the purpose of this Section 11.13, an "employee of the other party"
is any current employee or any former employee whose employment terminated
within the last twelve (12) month period.
11.14 NOTICES. Any notice required pursuant to this Agreement will be in
writing and sent by registered or certified mail, return receipt requested, by
fax with proof of delivery, or by nationally recognized private overnight
carrier with proof of delivery, to the addresses of the parties set forth below
in this Agreement. The date of notice shall be the date on which the recipient
receives notice or refuses delivery. All notices shall be addressed as
follows:
to HCCC: HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
Attn: Edward L. Wristen
Executive Vice President, Risk Products
CC: Legal Department
to GEHA: Government Employees Hospital Association, Inc.
<PAGE> 13
Page 13 of 13
17306 East 24 Highway
Independence, Missouri 64056
Attn: President
CC: Vice President, PPO Operations
11.15 EXECUTION. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement the day and date
last written below by their duly authorized officers for and on behalf of said
corporation.
Government Employees Hospital Association, Inc.
By: Richard G. Miles
Richard G. Miles
---------------------------------
President
Date: 7-26-95
---------------------------------
HealthCare COMPARE Corp.
By: Edward L. Wristen
---------------------------------
Edward L. Wristen
---------------------------------
Executive Vice President, Risk Products
Date: 7-31-95
---------------------------------
<PAGE> 14
SUPPLEMENT A
AFFORDABLE MEDICAL NETWORKS
This Supplement A to the Agreement between HCCC and GEHA contains the terms and
conditions under which HCCC has agreed to provide the AFFORDABLE Medical
Networks and related services.
1. AMN SERVICES
1.1 CONTRACT PROVIDERS. HCCC establishes and maintains various AFFORDABLE
Medical Networks through Provider Agreements with Contract Providers for the
delivery of Medical Services at negotiated rates. HCCC may at any time and in
its sole discretion add or delete any Contract Provider(s) from any of its
AFFORDABLE Medical Networks.
1.2 SELECTION OF SERVICES. HCCC shall make the following AFFORDABLE Medical
Networks and information services available to Covered Persons at the fees, if
any, set forth in the Schedule of Fees (indicate each selection with an "X"):
[X] HOSPITAL NETWORK: A network of general acute care hospitals,
psychiatric hospitals, chemical dependency facilities, and other
facilities.
[X] OUTPATIENT CARE NETWORK: A network of physicians and certain
individual and institutional nonphysician providers, such as
free-standing clinical laboratories and magnetic resonance imaging
centers.
[ ] PPO INFOLINE: A toll-free number service available to GEHA and
Covered Persons offering current information on Contract Providers,
including their names and addresses.
[ ] PPO INFOLINE CONFIRMATION: A written confirmation of information
communicated to callers on the PPO Infoline.
[X] ANALYTIC AND PROGRAMMING SERVICES: Specialized services as
determined by GEHA.
[ ] EDI SERVICES: Electronic submission of repriced hospital claims
from Covered Persons, including non-Contract Provider hospitals.
[X] PRINTED CONTRACT PROVIDER DIRECTORIES: Bound directories listing the
geographic locations of Contract Providers for each AFFORDABLE Network
identified in Appendix II.
A-1
<PAGE> 15
[X] MANAGEMENT INFORMATION SYSTEM REPORTS: HCCC's standard reports which
summarize the annual utilization and cost of medical services provided to
Covered Persons, as well as the savings achieved as a direct result of
the use of hospital Contract Providers.
2. CONTRACT PROVIDERS
2.1 CREDENTIALING OF CONTRACT PROVIDERS. HCCC certifies that its Contract
Providers meet the criteria established under HCCC's credentialing,
recredentialing, and quality assurance procedures (for the purposes of this
Section 2.1 only, "Credentialing Procedures"). If HCCC makes any material
changes to its Credentialing Procedures, HCCC will notify GEHA within thirty
(30) days of the change. GEHA acknowledges that HCCC has previously modified
its Credentialing Procedures at GEHA's request for certain Contract Providers
that did not meet HCCC's standard criteria. Upon request, HCCC shall provide
GEHA a copy of the description of HCCC's hospital and OCN quality assessment
program.
2.2 PROVIDER AGREEMENTS. HCCC represents that Provider Agreements require
Contract Providers to accept Contract Rates as payment in full for Covered
Services and that Covered Persons shall only be billed for copayments and
deductible amounts required by the Health Plan or for Medical Services which
are not Covered Services.
2.3 BULLETIN OF CONTRACT PROVIDERS. HCCC shall furnish GEHA with a bulletin of
all hospital network Contract Providers (monthly, on hard copy and, if
available during the term of this Agreement, on magnetic tape) and HCCC shall
continue to furnish GEHA with a bulletin of all OCN Contract Providers
(monthly, on magnetic tape as previously provided) as applicable to each
AFFORDABLE Medical Network identified in Appendix II. HCCC shall continue to
furnish GEHA with a transmission of provider demographic data (quarterly, as
previously provided and, if available during the term of this Agreement,
monthly, at a fee to be determined in accordance with Appendix I, Schedule of
Fees, if and when monthly service is made available). Any changes in Contract
Providers, OCN Contract Rates, and/or procedure code listings shall be included
on each bulletin. GEHA shall advise Covered Persons that Contract Providers
may change without notice and that the Covered Person must confirm with the
Contract Provider the Contract Provider's status.
2.4 NOTICE TO CONTRACT PROVIDERS. Periodically, HCCC shall notify Contract
Providers of GEHA's selection of AFFORDABLE Medical Networks.
3. PAYMENT TO CONTRACT PROVIDER
3.1 CLAIMS ADMINISTRATION. GEHA acknowledges that in the event that outcomes
from third party utilization review services, which include certifications of
medical necessity,
A-2
<PAGE> 16
("Review Services") result in reduced or denied payments for Medical Services
to any Contract Provider, the Contract Provider will not be obligated to
accept the reduced or denied amount as payment in full. GEHA shall administer
claims, including determining the compensability and amount of payments for
Medical Services under the terms of the Health Plan. Specific claims
administration duties which GEHA shall perform under this Agreement include all
of the following:
3.1.1 TIMELINESS OF PAYMENT. GEHA shall use its best efforts to pay
each Contract Provider at the Contract Rates for all Covered Services
within thirty (30) days of receipt of an accurate and complete bill.
GEHA acknowledges that under the Provider Agreement, a Contract Provider
may refuse to accept the Contract Rates as payment for Covered Services
if payment of accurate and complete bills is not made within thirty (30)
days.
3.1.2 EXPLANATION OF PAYMENT. GEHA shall include on the explanation of
payment to the Contract Provider the balance, if any, owed by Covered
Person and a statement that reimbursement is subject to the Provider
Agreement and GEHA shall provide HCCC with a copy of the proposed
explanations of payment for review.
3.1.3 DISPUTE RESOLUTION. Each party shall fully cooperate with the
other in resolving disputes with Contract Providers by providing
information and assistance as reasonably requested.
3.2 NOTICE OF NON-PAYMENT. GEHA shall promptly notify HCCC of its inability to
meet its payment obligations to HCCC and Contract Providers, in which case,
Contract Providers may cease providing services to Covered Persons at Contract
Rates. Nothing within this Section 3.2 shall prohibit HCCC from deeming such
failure to pay a Default under Paragraph 8.2.1. of the main body of this
Agreement.
4. CLAIMS REPRICING
4.1 HOSPITAL CLAIMS REPRICING. HCCC shall reprice each hospital Contract
Provider claim submitted for Medical Services rendered to each Covered Person.
GEHA shall identify and timely redirect to HCCC all hospital Contract Provider
claims which have been submitted to GEHA instead of HCCC. HCCC shall reprice
claims based upon the Contract Rates for Covered Services at each hospital
Contract Provider and return each claim to GEHA either by a transmittal sheet
or electronically, identifying the Contract Rate. At the end of each calendar
month, HCCC shall generate a listing of hospital claims repriced during the
month.
4.2 OCN CLAIMS REPRICING. GEHA shall perform OCN claims repricing. HCCC shall
A-3
<PAGE> 17
provide all necessary OCN Contract Provider data to GEHA for GEHA's repricing
of OCN claims. GEHA shall incorporate OCN Contract Rate and procedure code
changes within thirty (30) days of receipt of such information from HCCC. HCCC
shall have the right to inspect GEHA's records subject to Article 5 of the main
body of this Agreement to verify that OCN claims are appropriately priced and
savings appropriately calculated for purposes of the Utilization Incentive
Bonus identified in Appendix III. HCCC shall provide GEHA with any consulting
services necessary to correct any errors; provided that GEHA shall pay HCCC its
then-customary consulting fee for such services.
5. HEALTH PLAN AND COMMUNICATIONS
5.1 FINANCIAL INCENTIVES. The Health Plan shall include financial incentives
to Covered Persons to encourage the use of the AFFORDABLE Medical Networks for
health care services covered by the Health Plan. GEHA acknowledges that under
the Provider Agreement, a Contract Provider may refuse to accept patients at
Contract Rates if the Health Plan does not include such financial incentives.
GEHA shall provide HCCC with copies of its Health Plan at least thirty (30)
days before any AMN becomes effective. Further, any revision to the Health
Plan affecting the services provided under this Agreement shall be provided to
HCCC at least fifteen (15) days before the revisions take effect.
5.2 COVERED PERSON ELIGIBILITY. GEHA shall use its best efforts to promptly
verify a Covered Person's eligibility for Medical Services under the Health
Plan, which verification shall be provided to Contract Providers during normal
working hours, upon request. GEHA shall provide each Covered Person with a
Health Plan identification card which contains information confirming Covered
Person's eligibility to receive Contract Rates. GEHA acknowledges that Covered
Person's failure to use the Health Plan identification card or to advise
Contract Providers of AMN participation will cause an increased number of
performance issues and may result in HCCC's not meeting certain Performance
Standards set forth in Appendix III.
5.3 INFORMATION TO COVERED PERSONS. Subject to Section 6.2 of the main body of
the Agreement, GEHA shall provide Covered Persons with information relative to
the provision of AFFORDABLE Medical Networks and MTS Services and Covered
Persons' obligations with respect thereto, unless prohibited by applicable law.
Such information shall include the identification of all Contract Providers
which are part of AMNs listed in Appendix II.
5.4 RESPONSE TO COVERED PERSON INQUIRIES. HCCC shall be responsible for
responding to Covered Persons' questions concerning the services provided under
this Agreement only so long as GEHA is receiving PPO InfoLine services. GEHA
and not HCCC shall be responsible for responding to Covered Persons' questions
concerning benefits and medical claims.
A-4
<PAGE> 18
6. MEDICAL REVIEW PROGRAM
6.1 NECESSITY. GEHA acknowledges that a medical review program is necessary to
avoid furnishing of unnecessary services or days of inpatient care (cost
shifting), and therefore shall agree to include Review Services, as defined in
Section 3.1 of this Supplement A, in the Health Plan. However, except as may
be specifically provided for in this Agreement, HCCC shall have no
responsibility for the delivery or results of such medical review program. If
outcomes from Review Services result in noncertifications for Medical Services,
the Health Plan may reduce or deny payments to Contract Providers; provided,
however, that the Contract Provider may bill the Covered Person for the balance
due. GEHA agrees that its Review Services shall not interfere with the
relationships between HCCC and its Contract Providers.
6.2 NOTICE OF UTILIZATION REVIEW FIRM. GEHA shall provide written notice to
HCCC of the name, address, and telephone number of the utilization review firm
designated to provide services under the Health Plan. GEHA shall provide
written notice to HCCC of any change in the designation of the utilization
review firm and any material changes to the utilization review program at least
ninety (90) days prior to the effective date of any such change.
A-5
<PAGE> 19
SUPPLEMENT B
MANAGED TRANSPLANT SYSTEM SERVICES
This Supplement B to the Agreement between HCCC and GEHA contains the terms and
conditions under which HCCC shall provide MTS Services.
1. MANAGED TRANSPLANT SYSTEMS (MTS)
1.1 PERFORMANCE. HCCC shall provide MTS Services for transplant-related
Medical Services provided to Covered Persons within the fifty (50) United
States or Puerto Rico at the fees set forth in Appendix I. HCCC case managers
shall verify the appropriateness of the patient for the proposed procedure,
coordinate care during the waiting period, review care arrangements and related
services for the procedure and coordinate follow-up care for up to one year
after the procedure. GEHA acknowledges that HCCC has previously modified its
Credentialling Procedures at GEHA's request for certain Contract Providers that
did not meet HCCC standard criteria.
1.2 NOTICE. HCCC shall notify GEHA in writing of its MTS-related activities.
As appropriate, HCCC may also notify the Covered Person, the Attending
Practitioner, and/or the hospital.
2. HEALTH PLAN
2.1 REQUIREMENTS. GEHA understands and agrees that in order for HCCC to
provide its MTS Services, and subject to OPM approval, the Health Plan must
include at least the following:
2.1.1 A provision that coverage extends only to medically necessary
transplant-related Medical Services.
2.1.2 A provision that GEHA may obtain the services of an outside entity
to provide MTS Services, including the evaluation of the medical
necessity of and/or the appropriate setting for Medical Services.
Further, the Health Plan must state that GEHA has the right to determine
for payment purposes whether the Medical Services for which reimbursement
is sought meet the Health Plan's definition of medical necessity.
2.1.3 A provision that GEHA may, in its sole judgment and without waiver
of any Health Plan provision, pay for services not otherwise covered
under the terms of the Health Plan.
B-1
<PAGE> 20
2.1.4 A clear identification of the transplant procedures covered
under and excluded from the MTS. Covered transplants may include any
combination of the following transplant procedures: heart, heart/lung,
lung, liver, kidney, kidney/pancreas, allogenic bone marrow and
autologous bone marrow.
2.1.5 A clear identification of the covered services for transplant
patients in the MTS. Covered services should include at least the
medically necessary costs associated with the following: a)
pre-transplant evaluation; b) organ procurement including donor expenses;
c) the transplant procedure; d) transplant-related follow-up care for up
to one year; and e) pharmacy costs for immunosuppressant and other
transplant-related medications.
2.1.6 A clear description of the process the patient must follow to be
eligible for the full level of benefits associated with the MTS
including, at least, the following: a) the patient must contact HCCC
prior to pre-transplant evaluation to enroll in the program and to
arrange for redirection to a designated provider; b) coverage of the
transplant must be authorized by GEHA or GEHA's designee in advance of
the actual procedure being performed; and c) the patient must use one of
the designated MTS providers.
2.2 FINANCIAL RESOURCES AND INCENTIVES. GEHA's MTS program shall include
benefit incentives equal to or stronger (more incentive) than those contained
in GEHA's 1995 Benefit Plan (FEHB, RI 71-6). If GEHA modifies any of the MTS
benefit incentives it shall notify HCCC as soon as reasonably possible prior to
such change and obtain HCCC's written acknowledgement that the benefit
incentives are sufficient for GEHA to continue MTS services, as determined in
HCCC's sole discretion.
3. CONFIDENTIALITY OF MEDICAL INFORMATION
3.1 COVERED PERSON AUTHORIZATION. The parties acknowledge that in order for
HCCC to perform services under this Agreement, Attending Practitioners may be
required to furnish HCCC with Covered Person Medical Information. GEHA shall
provide Covered Person with an authorization form for delivery to Attending
Practitioners. The authorization form shall authorize the release to HCCC of
Covered Person Medical Information and authorize HCCC to release Covered Person
Medical Information to GEHA. If GEHA requests medical information from HCCC,
such request shall constitute GEHA's representation and warranty that it has a
valid authorization for HCCC to release the requested information.
3.2 CONFIDENTIALITY AND INDEMNIFICATION. HCCC and GEHA each shall maintain the
confidentiality of Covered Person Medical Information in accordance with all
applicable laws and regulations. Each party shall indemnify, defend and hold
the other harmless from and
B-2
<PAGE> 21
against any and all liabilities, damages, claims, actions and costs (including,
without limitation, attorneys' fees and expert witnesses' fees) which may arise
out of the wrongful disclosure of any Covered Person Medical Information.
3.3 AUTHORIZATION FORM TO HCCC. Notwithstanding any other provision of this
Agreement, HCCC may require CLIENT to provide a copy of a valid authorization
form for the Covered Person whose medical information is sought or may require
Covered Person to execute and deliver to HCCC a valid authorization prior to
the release of the requested medical information.
B-3
<PAGE> 22
APPENDIX I
SCHEDULE OF FEES
I. AFFORDABLE MEDICAL NETWORKS ACCESS FEES(1)
Percentage of Members within all HCCC-MSAs(2) PMPM
(dollars)
96% and over .................................... 6.80
91-95%(3)........................................ 7.00
86-90% ......................................... 7.20
81-85% ......................................... 7.60
76-80% ......................................... 7.90
71-75% ......................................... 8.50
66-70% ......................................... 8.80
61-65% ......................................... 9.10
56-60% ......................................... 9.40
51-55% ......................................... 9.70
under 50% ...................................... 10.00
II. MTS SERVICES $0.18 PMPM
III. FEES FOR REPRICING TO CONTRACT RATES
FOLLOWING TERMINATION OF ANY OR ALL MSAs(4)
<TABLE>
<CAPTION>
Duration since termination Percent of Base Month Fees
- -------------------------- --------------------------
<S> <C>
First month 100%
Second month 60%
Third month 20%
Forth month 10%
Fifth month 5%
Sixth month 5%
</TABLE>
(1) The AMN Access Fees listed apply to OCN and hospital AMNs, and
AFFORDABLE Select Network.
(2) The Percentage is calculated by dividing the total number of
Members in HCCC-MSAs by the total number of GEHA enrolled members in all MSAs.
(3) Fractions of a percent will be rounded down to the next whole number.
(4) All fees in this Section III are percentages of the total HCCC fees
charged for the last full calendar month of the terminated MSA(s)(Base Month").
I-1
<PAGE> 23
IV. ADDITIONAL FEES(5)
<TABLE>
<CAPTION>
HCCC Service PMPM
------------ ----
(in dollars)
<S> <C>
Printed Contract Provider Directories 0.40(6)
PPO InfoLine 0.35
Written InfoLine Confirmation 0.06
EDI Services 0.19(7)
Analytic and Programming Services (200 hours only) 0.01
Management Information Reports 0.00
Provider Demographic Data Transmission Fee to be determined
Additional Requested Services Fee to be determined
</TABLE>
V. AUDIT FEES
<TABLE>
<S> <C>
HCCC Audit Fees $1,200.00 per day or partial day
GEHA Audit Fees $1,200.00 per day or partial day
</TABLE>
(5) Unless otherwise provided in this Agreement, the Additional Fees are
limited to those services specified in this Agreement and the prices are
applicable only if selected by September 30, 1995 for 1996, except for PPO
InfoLine and Written InfoLine Confirmation which must be selected by
August 1, 1995.
(6) GEHA shall pay HCCC, upon receipt of invoice, all direct and
indirect costs of printing and mailing Contract Provider directories not
covered by the monthly payment and HCCC shall reimburse GEHA, upon receipt of
all complete and final invoices, for any PMPM payment that exceeds HCCC's cost
of printing and mailing; provided, however, that if the PMPM payment from GEHA
is insufficient to cover such costs as incurred by HCCC, GEHA shall immediately
advance amounts sufficient to cover such costs. GEHA may produce and print its
own directory upon notice to HCCC, no later than July 1st of each year.
(7) This fee is in addition to the applicable capitated fee listed in
Section I of this Schedule of Fees.
I-2
<PAGE> 24
APPENDIX II: SERVICES PER MSA(1)
<TABLE>
<CAPTION>
Outpatient Hospital Outpatient
MSA Hospital Network Network MTS Services MSA Network Network MTS Services
- --- ---------------- ---------- ------------ --- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AL X X X MT X X X
AK X X X NE X X X
AZ X X X NV X X X
AR X X X NH X X X
CA X X X NJ X X X
CO X X X NM X X X
CT X X X NY X X X
DE X X X NC X X X
DC X X X ND X X X
FL X X X OH X X X
GA X X X OK X X X
HI X X X OR X X X
ID X X X PA X X X
IL(2) X X X PR X X X
IN X X X RI X X X
IA X X X SC X X X
KS X SD X X X
KY X X X TN X X X
LA X X X TX X X X
ME X X X UT X X X
MD X X X VT X X X
MA X X X VA X X X
MI X X X WA X X X
MN X X X WV X X X
MO X WI X X X
MS X X X WY X X X
</TABLE>
(1) For convenience, selected MSAs are identified by state. To the extent the
selected MSAs do not comprise an entire state, the excluded MSAs shall be
identified by footnote.
(2) For purposes of AMN Services only, the following Illinois MSA counties are
excluded: Adams, Alexander, Bond, Brown, Calhoun, Cass, Champaign, Christian,
Clark, Clay, Clinton, Coles, Crawford, Cumberland, DeWitt, Douglas, Edgar,
Edwards, Effingham, Fayette, Ford, Franklin, Fulton, Gallatin, Greene,
Hamilton, Hancock, Hardin, Iroquois, Jackson, Jasper, Jefferson, Jersey,
Johnson, Lawrence, Livingston, Logan, McDonough, McClean, Macon, Macoupin,
Madison, Marlon, Mason, Massac, Menard, Monroe, Montgomery, Morgan, Moultrie,
Perry, Piatt, Pike, Pope, Pulaski, Randolph, Richland, St. Clair, Saline,
Sangamon, Schuyler, Scott, Shelby, Union, Vermillion, Wabash, Washington,
Wayne, White, and Williamson.
II-1
<PAGE> 25
APPENDIX III: INCENTIVES AND STANDARDS
I. UTILIZATION INCENTIVE BONUS
GEHA shall pay HCCC an incentive bonus ("Utilization Bonus") equal to one
percent (1%) of the total AMN Services fees (as set forth in Appendix I) for
each full five percent (5%) increase in AMN utilization. The formula for
determining the amount, if any, of the Utilization Bonus is as follows:
A. To determine a baseline, HCCC shall divide the 1995 number of dollars paid
by GEHA to Contract Providers in HCCC-MSAs by the number of dollars paid by
GEHA in 1995 to all providers within the HCCC-MSAs. The result shall be deemed
the 1995 Percentage.
B. HCCC shall then apply the same formula in Paragraph A, except that HCCC
shall replace 1995 dollars with 1996 dollars. The result shall be deemed the
1996 Percentage.
C. GEHA shall subtract the 1995 Percentage from the 1996 Percentage to arrive
at the percent of increase or decrease in utilization, which result shall
determine the amount, if any, of Utilization Bonus.
The above formula shall be applied to subsequent consecutive years by replacing
"1995" in Paragraph A with the earlier, and "1996" in Paragraph B with the
later, of two consecutive years. Utilization Bonuses may be earned only if
GEHA has a positive membership growth during Open Season which becomes
effective the following year within those HCCC-MCAs designated areas.
II. SAVINGS INCENTIVE BONUS
A. PMPM SAVINGS. If PMPM Savings (as calculated below) in one calendar year
("Measuring Year") exceed PMPM Savings in the calendar year two years earlier
("Comparison Year"), GEHA shall pay HCCC a bonus ("Savings Bonus") based on a
percentage of the increase in PMPM Savings. 1996 shall be the first Measuring
Year and the Savings Bonus shall be calculated annually thereafter.
III-1
<PAGE> 26
B. CALCULATION. PMPM Savings are calculated for any Measuring Year and
Comparison Year using the following formula:
(X + Y) x .90
--------------
Z x 12
Where: X = Annual hospital savings(1) in HCCC-MSAs;
Y = Annual OCN savings in HCCC-MSAs; and
Z = Average number of Members per month in HCCC-MSAs.
PMPM Savings for the Measuring Year shall be compared to the PMPM Savings in
the Comparison Year (for example, 1996 PMPM Savings shall be compared to 1994
PMPM Savings); provided, however, that if HCCC-MSA differ between the two
years, the X, Y, and Z figures for each Measuring Year or Comparison Year shall
be derived from only those HCCC-MSAs which are common to both years.
C. SAVINGS BONUS. Subtract the PMPM Savings in the Comparison Year from the
PMPM Savings in the Measuring Year. Any resulting positive number represents
the Savings Increase. Multiply the Savings Increase, if any, by the total
number of Members in the Measuring Year's HCCC-MSAs to arrive at Total Savings.
Then, calculate the percentage of Members as calculated in Appendix I,
Schedule of Fees, footnote 2. Apply that percentage to the table below to
arrive at the corresponding Savings Bonus Factor.
<TABLE>
<CAPTION>
Percentage of GEHA Savings Bonus
Members in HCCC Networks Factor
- ------------------------ ------
<S> <C>
96 - 100 0.5%
91 - 95 1%
86 - 89 1.5%
81 - 85 2%
76 - 80 3%
71 - 75 4%
66 - 70 5%
61 - 65 6%
56 - 60 7%
51 - 55 8%
Below 50 10%
</TABLE>
Multiply the Savings Bonus Factor by the Total Savings to arrive at the Savings
Bonus.
- --------------------
(1) Hospital and OCN savings are the difference between Contract Providers'
billed charges and the Contract Rates.
III-2
<PAGE> 27
III. PERFORMANCE STANDARDS
A. PROCESSING TIMES AND ERROR RATES. HCCC will provide GEHA a monthly written
report of processing times relating to the repricing and adjustment of hospital
Contract Provider claims. The report will also include a repricing error
analysis in a mutually agreeable form.
The following performance standards and liquidated damages shall apply:
1. Ninety percent (90%) of accurate and complete hospital Contract
Provider claims and adjustments will be priced and mailed within five
(5) business days of receipt by HCCC. This standard is applicable
only to a maximum volume of 20,000 repriced claims per month. For
the remaining ten percent (10%) of such claims, HCCC will use its
best efforts to price and mail such claims within eight (8)
business days of receipt.
For each one percent (1%) below the ninety percent (90%) performance
standard, HCCC will apply a credit of $10,000 against the subsequent
month's AMN fee, up to a maximum of one quarter of two percent (1/4 of
2%) of that month's AMN fee.
2. HCCC shall not exceed a five percent (5%) error rate for
claims for which a repricing or adjustment error by HCCC could have
a negative financial impact on GEHA. For the purpose of this
paragraph, an error with a negative financial impact shall mean any
error which requires a pricing adjustment following delivery to
GEHA.
For each one percent (1%) above the five percent (5%) performance
standard, HCCC will apply a credit of $10,000 against the subsequent
month's AMN fee, up to a maximum of one quarter of two percent (1/4 of
2%) of that month's AMN fee.
B. NETWORK SERVICE ISSUES. HCCC will provide GEHA a monthly report of the
preceding calendar month's activity for Network Service Issues as defined
below.
1. Subject to Section 6.1 of the main body of the Agreement and
Section 5.2 of Supplement A, the following standards and liquidated
damages shall apply:
Ninety percent (90%) of all Network Service Issues ("Issue(s)")
will be resolved within ten (10) to thirty (30) business days from
the date of receipt of the Issue by HCCC as set forth by categories
below. This standard applies only to months with an average of no
more than seventy-five (75) Issues per week. Network Service Issues
mean:
III-3
<PAGE> 28
A. ISSUES THAT CAN BE RESOLVED IN 10 BUSINESS DAYS AT THE 90% LEVEL:
<TABLE>
<CAPTION>
ISSUE RESOLUTION
----- ----------
<S> <C>
Contract Status Status determined as follows: if
OCN/Hospital provider - contracted, give effective date; if
terminated, give term date; if non
contracted, so state.
Ancillary OCN/Hospital - Identify surgicenters, labs, others as
(FTIN match, no name match) contracted, non contracted, or non
contracted but contract rates apply to
provider.
Provider Name research/change Complete database change form within 4
required - days of receipt of issue. Issues
received prior to 15th of month will
appear as corrected in Infoline by 1st
of following month.
Provider Address research/change Complete database change form within 4
required- days of receipt of issue. Issues
received prior to 15th of month will
appear as corrected in Infoline by 1st
of following month.
Provider Phone research/change Complete database change form within 4
required - days of receipt of issue. Issues
received prior to 15th of month will
appear as corrected in Infoline by 1st
of following month.
Provider Tax Identification # Complete database change form within 4
research/change required - days of receipt of issue. Issues
received prior to 15th of month will be
loaded into database for inclusion on
next payor tape cycle (production and
distribution requires 45 days).
Network provider education regarding Record of call placed by Provider
participation requirements or to Relations to begin education process,
resolve member concern - issuance of instruction or clarifying
letter to provider.
Correct Directory/Infoline Complete database change form within 4
Information - days of receipt of issue. Issues
received prior to 15th of month will
appear as corrected in Infoline by 1st
of following month.
Provider No Longer in Practice - Complete database change form within 4
days of receipt of issue. Issues
received prior to 15th of month will
appear as corrected in Infoline by 1st
of following month.
</TABLE>
III-4
<PAGE> 29
B. ISSUES THAT CAN BE RESOLVED IN 15 BUSINESS DAYS AT THE 90% LEVEL:
Hospital and OCN Provider Provider agrees to comply with terms of
Contract Disputes - the contract. Where agreement is not
reached, HCCC (with concurrence from
GEHA) will notify provider that GEHA
will no longer be payor for that
provider under the AMN contract. GEHA
to manually remove OCN provider
contract status.(1)
Provider Balance Billing - Provider agrees to refrain from balance
billing, signs and returns agreement to
provider relations. Where agreement is
not reached, HCCC (with concurrence
from GEHA) will notify provider that
GEHA will no longer be a payor for that
provider under the AMN contract. GEHA
to manually remove OCN provider
contract status.(1)
Provider Inappropriately Provider agrees to refrain from
Collecting Fees (prior to rendering charging fees (copayments and unmet
service without proper/clear benefit deductibles, and coinsurance where
plan information) - provider has received information
upfront from GEHA are excluded). Where
agreement is not reached, HCCC (with
concurrence from GEHA) will notify
provider that GEHA will no longer be a
payor for that provider under the AMN
contract. GEHA to manually remove OCN
provider contract status.(1)
OCN provider refuses to Provider agrees to comply with terms of
recognize COB the payment contract. Where agreement is not
requirements - reached, HCCC (with concurrence from
GEHA) will notify provider that GEHA
will no longer be a payor for that
provider under the AMN contract. GEHA
to manually remove OCN provider
contract status.(1)
___________________
(1) Written request to GEHA for concurrence in provider termination to be
forwarded prior to the end of the 15 day period. Provider terminated within 2
days of affirmative response by GEHA. If no affirmative response from GEHA,
HCCC will continue to work the issue until resolved or agreement on termination
received from GEHA.
III-5
<PAGE> 30
C. ISSUES THAT CAN BE RESOLVED IN 30 BUSINESS DAYS AT THE 90% LEVEL:
Hospital provider refuses to Provider agrees to comply with terms of
recognize COB the payment contract. Where agreement is not
requirements - reached, HCCC (with concurrence from
GEHA) will notify provider that GEHA
will no longer be a payor for that
provider under the AMN contract. GEHA
to manually remove OCN provider
contract status.(1)
2. Any Issue resubmitted to HCCC by GEHA will be considered a new Issue,
unless it is resubmitted within five (5) business days following receipt by
GEHA after resolution by HCCC.
3. For each one percent (1%) below the ninety percent (90%) performance
standard, HCCC will apply a credit of $10,000 against the subsequent month's
AMN fee, up to a maximum of one quarter of two percent (1/4 of 2%) of that
month's AMN fee.
4. For the remaining ten percent (10%) of the Issues, HCC will use its best
efforts to resolve the Issues in forty-five (45) business days.
C. UNCOLLECTED OVERPAYMENTS. It is assumed that GEHA's proper use of the AMN
Services will result in uncollected AMN overpayments to Contract Providers of
no more than 1% of the Contract Providers total charges after reduction to
Contract Rates ("Total AMN Charges").
For uncollected overpayments to Contract Providers which are outstanding at
least ninety (90) days after GEHA's notice to HCCC of such overpayments and
which are in excess of one percent (1%) of total AMN charges (the Base), HCCC
will apply a credit of $10,000 against the subsequent month's AMN fee, for each
one percent (1%) that is in excess of the Base up to a total of one quarter of
two percent (1/4 of 2%) of that month's AMN fee.
D. MAXIMUM LIQUIDATED DAMAGES. The total assessed liquidated damages shall not
exceed 2% of the total AMN payment to HCCC.
IV. NONEXCLUSIVITY OF RIGHTS
The bonuses, incentives and liquidated damages provided for in this Appendix
III are not exclusive. The parties are entitled to recover and/or receive all
other amounts due under this Agreement. The parties are also entitled to any
and all legal and equitable remedies which may be available.
III-6
<PAGE> 1
Page 1 of 14
PPO AGREEMENT
THIS AGREEMENT is entered into as of this 1st day of October, 1990, between
AFFORDABLE HEALTH CARE CONCEPTS, a California corporation, (hereinafter
referred to as "AFFORDABLE"), and National Association of Letter Carriers
Health Benefit Plan (Non-Group and Staff), (hereinafter referred to as "PLAN").
WHEREAS, AFFORDABLE has established, and/or intends to establish, various
Health Care Provider Networks by entering into contracts with various hospitals
and other health care providers for the provision of health care services which
PLAN is interested in on behalf of its Health Plans for its Covered Persons.
THEREFORE, in accordance with the terms and conditions contained herein, the
parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Chemical Dependency Network" means all of the providers of inpatient or
outpatient care for treatment of alcohol or other substance abuse who
have entered into contracts with AFFORDABLE to provide substance abuse
services.
1.2 "Claims Administrator" means the entity which the PLAN employs to
administer and process its health plan claims.
1.3 "Contract Provider" means a health care provider included within one of
the networks defined herein such as a hospital, residential facility,
clinic, laboratory or physician, or the like, which has contracted with
AFFORDABLE for the provision of health care services.
1.4 "Contract Rate(s)" means the rate(s) specified in the contract between
AFFORDABLE and a Contract Provider, which may be in the form of per
diems, case or procedure rates, discounts off charges, 1974 California
Relative Value Scale (CRVS) value conversion factors or other
reimbursement methods.
1.5 "Covered Person" means a person who is entitled to benefits for health
care services under the Health Plan.
1.6 "Health Care Provider Networks" means the individual networks defined in
this Article 1.
<PAGE> 2
Page 2 of 14
1.7 "Health Plan" means the contract, certificate, policy, health plan
document or any other document offered or sponsored by PLAN under which
a Covered Person may be entitled to receive reimbursement for health
care services. A Health Plan may include, but is not limited to, an
indemnity plan, a health maintenance organization, an insurance group
health plan, and a Workers' Compensation plan.
1.8 "Hospital Claims Pricing Service" means a service available from
AFFORDABLE to assist PLAN in accurate and timely adjudication of claims
by Covered Persons for health care services obtained from a hospital
which is a Contract Provider.
1.9 "Hospital Network" means all of those general acute care and psychiatric
hospitals which have entered into contracts with AFFORDABLE for the
provision of inpatient and outpatient health care services including
general acute, psychiatric and chemical dependency care services.
1.10 "Implementation Date" means the date on which the Contract Rate(s) became
available to Covered Persons.
1.11 "Outpatient Care Network" means all of those physicians, laboratories,
imaging centers, freestanding outpatient surgery facilities and other
entities who have entered in contracts with AFFORDABLE to provide
outpatient care services.
1.12 "Provider Agreement" means the agreement between AFFORDABLE and a
Contract Provider for the delivery of health care services.
ARTICLE 2
DUTIES OF AFFORDABLE
AFFORDABLE agrees to the following:
2.1 AFFORDABLE establishes and maintains various Health Care Provider
Networks by entering into Provider Agreements with Contract Providers
for the delivery of health care services at negotiated rates for PLAN
and AFFORDABLE's other clients.
2.2 AFFORDABLE agrees to make available to PLAN the Health Care Provider
Networks identified in Appendix A attached hereto upon the terms and
conditions set out in this Agreement.
2.3 AFFORDABLE may at any time, and in its sole discretion, add and/or
delete any Contract Provider(s) from any of its Health Care Provider
Networks.
<PAGE> 3
Page 3 of 14
2.4 Prior to the Implementation Date, AFFORDABLE will furnish PLAN with a
listing of all Contract Providers and Outpatient Care Network Contract
Rate(s) as applicable to each Health Care Provider Network set out in
Appendix A. This will be provided on hard copy for the Hospital Networks
and magnetic tape for the Outpatient Care Net Works.
Periodically AFFORDABLE may furnish PLAN with updates as to rate changes,
changes in identity of Contract Providers, and changes in Procedure Code
listings. Such updates shall be provided not less than quarterly.
2.5 AFFORDABLE shall provide notice to Contract Providers regarding the
PLAN's selection of Health Care Provider Networks in conjunction with
its quarterly provider bulletin, or earlier as determined practical by
AFFORDABLE.
2.6 AFFORDABLE agrees to make available to PLAN, at PLAN's request, its
personnel for assistance in the implementation of the services
hereunder, including but not limited to, consultation regarding the most
appropriate approach to informing Covered Persons about each Health Care
Provider Network and the most effective means of utilizing each Network.
In those cases where such assistance is beyond the scope of AFFORDABLE's
usual services, AFFORDABLE shall be reimbursed by PLAN on a consultant
basis for its personnel, their travel and other expenses at its
customary rates. However, in each case where AFFORDABLE contemplates
reimbursement, it shall so notify PLAN prior to incurring such fees and
costs.
2.7 AFFORDABLE shall provide instruction to PLAN concerning data and claims
processing to describe how payment of claims is to be made pursuant to
this Agreement.
2.8 AFFORDABLE shall perform Hospital Claims Pricing Services for PLAN.
AFFORDABLE shall compute a reimbursement amount payable for each
contract hospital claim submitted to PLAN for a Covered Person. This
amount will be based on the negotiated rates for hospital services at
the Contract Provider, and the amount will not be based on Plan
benefits. To facilitate this function, PLAN agrees to submit all
Hospital Network claims to AFFORDABLE in a timely manner. AFFORDABLE
will compute the contract rates for each contract hospital claim and
return each claim to PLAN with a transmittal sheet indicating the
computed amount. At the end of each calendar month, AFFORDABLE will
generate a listing of claims processed during the month and the amount
of AFFORDABLE's fees in accordance with Appendix A.
<PAGE> 4
Page 4 of 14
2.9 AFFORDABLE shall annually, based on the anniversary date of the Health
Care Provider Network(s) selected by PLAN, prepare and deliver up to 20
copies of its standard management information system (MIS) reports which
shall summarize the utilization, cost of health care services provided
to Covered Persons and savings achieved as a direct result of Health
Care Provider Networks over a one year period.
On written request of PLAN, for matters of special interest to PLAN,
AFFORDABLE will provide such special reports as it is capable of
providing and which are requested in writing by PLAN. If additional
expense will be incurred by AFFORDABLE in preparing such reports,
AFFORDABLE will promptly provide a written cost estimate and production
schedule and obtain PLAN's approval of such costs prior to preparing any
such reports.
2.10 Information and records obtained or prepared by AFFORDABLE in performing
its obligations under this Agreement shall be kept confidential in
accordance with applicable state and federal laws.
2.11 AFFORDABLE certifies that it has contracted with Health Care Providers
that meet its credentialing and recredentialing procedures. AFFORDABLE
will provide PLAN in writing any substantial changes to its current
credentialing and recredentialing procedures.
2.12 Effective January 1, 1992, AFFORDABLE agrees to provide a toll-free
telephonic contract provider directory service for use by PLAN's Covered
Persons.
ARTICLE 3
DUTIES OF PLAN
PLAN agrees to the following:
3.1 PLAN shall identify as its Contract Providers all of the Contract
Providers who are part of the Health Care Provider Network(s) identified
in Appendix A who provide services covered under PLAN's Health Plan.
3.2 PLAN shall reimburse directly each Contract Provider for all covered
services according to the effective Contract Rates. Such payment shall
not include any applicable co-payments or charges for non-covered
services which Provider may charge and/or bill Covered Person directly.
3.3 PLAN shall pay Contract Providers within thirty (30) days of receipt of
claims that are accurate and complete. Failure to comply with this
provision may result in the penalty set out in 3.5 below.
<PAGE> 5
Page 5 of 14
3.4 PLAN's Health Plan shall include financial incentives to Covered Persons
to encourage use of Contract Providers for health care services covered
by the Health Plan. Such Health Plan shall be submitted to AFFORDABLE no
later than 30 days after the Implementation Date.
3.5 In the event that PLAN shall default in its obligations or duties set
out in paragraphs 3.2, 3.3 or 3.4, AFFORDABLE shall have the right to
terminate PLAN's right to Contract Rates from one or more Contract
Providers. Provided, however, such termination shall be effective not
earlier than the 20th day after AFFORDABLE shall have provided PLAN
written notice of the specific default(s) and if PLAN has not cured said
default within said 20 day period.
3.6 PLAN agrees to print and distribute to Covered Persons lists and
instructions for use which include names and addresses of all Contract
Providers. These materials shall advise Covered Persons that the list of
Contract Providers may change from time to time and Covered Person is
obligated to confirm with PLAN the Contract Provider status.
3.7 PLAN acknowledges the validity of AFFORDABLE's and AFFORDABLE's Contract
Providers' service marks, trademarks, copyrights, and other proprietary
marks and that the same are the sole property of AFFORDABLE or
AFFORDABLE's Contract Providers, as the case may be. PLAN shall not in
any way infringe upon or harm the rights of AFFORDABLE or AFFORDABLE's
Contract Providers in their proprietary marks.
PLAN shall protect the integrity of both AFFORDABLE's and AFFORDABLE's
Contract Providers' said service and proprietary marks and copyrights to
the extent they are used by PLAN. PLAN shall not, without the prior
written approval of AFFORDABLE, use any mark or name in connection with
providing services contemplated under this Agreement.
3.8 PLAN shall promptly notify AFFORDABLE of its inability to meet its
payment obligations to AFFORDABLE and Contract Providers. AFFORDABLE
shall have the right, in its sole discretion, to notify Contract
Providers of PLAN's failure to promptly pay its obligations or of its
inability to pay such obligations so that Contract Providers may cease
providing services to PLAN's Covered Persons at Contract Rates.
3.9 PLAN shall follow the reimbursement procedures relative to payment of
Contract Providers established by AFFORDABLE from time to time.
PLAN shall indicate on the Explanation of Payment (EOP) to the Contract
Provider that reimbursement is pursuant to the AFFORDABLE PPO Agreement.
The EOP
<PAGE> 6
Page 6 of 14
shall identify the balance owed by Covered Person, the date of service
and provide sufficient information to allow Contract Providers to
reconcile payment with the billed amount.
3.10 PLAN shall provide Covered Persons with ID cards with the AFFORDABLE
logo or such other means which will identify Covered Persons as eligible
to receive Contract Rates.
3.11 Any written or printed material prepared for general circulation by PLAN
relating to AFFORDABLE's services or obligations under this Agreement
which is to be published, disseminated, released or prepared for
distribution by PLAN to Covered Persons or to the general public will be
released only after consultation with and approval by AFFORDABLE which
shall not be unreasonably withheld.
3.12 PLAN shall be responsible for responding to Covered Persons' questions
concerning benefits, and to provide Covered Persons with information
concerning the current status of Contract Providers.
3.13 Because an effective PPO program requires a utilization review program to
prevent provision of unnecessary services, PLAN has retained the
services of HealthCare COMPARE Corp. ("COMPARE") to perform utilization
review. However, AFFORDABLE shall have no responsibility either to the
Covered Person or to PLAN for the delivery or results of such
utilization review program. PLAN agrees that its health plan will
include a hospital utilization review program which will substantially
conform with the hospital utilization review program described in the
Utilization Review Agreement between PLAN and COMPARE dated as of
January 1, 1989.
3.14 PLAN shall maintain a procedure for prompt verification of a Covered
Person's eligibility under the Health Plan. The procedure shall provide
verification of a Covered Person's eligibility during normal working
hours if requested by a Contract Provider.
3.15 PLAN is solely responsible for compliance with all laws, rules and
regulations that are now or hereafter promulgated by any governmental
authority or agency and that govern or apply to the use of the services
contemplated herein.
3.16 PLAN hereby agrees that within the geographic areas covered by
AFFORDABLE's Health Care Provider Networks set out in Appendix A it will
exclusively offer to its Covered Persons only AFFORDABLE's Contract
Providers and Health Care Provider Networks and it will not enter into
any agreement with any other health care networks or provider of health
care networks to provide health care services to its Covered Persons or
in any way compete with or encourage competition with
<PAGE> 7
Page 7 of 14
AFFORDABLE's Health Care Provider Networks or cause to be provided to
its Covered Persons health care services which are competitive to those
provided in the AFFORDABLE Health Care Provider Network; except that
this shall not prohibit PLAN from independently operating or
participating in an entity which provides the delivery of health care
services or fee-for-service health care insurance business through
non-network type organizations or plans, such as HMOs, which are
noncompetitive to AFFORDABLE's Health Care Network.
3.17 PLAN shall perform OCN Claims Pricing. AFFORDABLE shall review hard copy
outpatient claims from Contract Providers incurred during the initial
three months after the Implementation Date of the Health Care Provider
Network and submitted by PLAN to determine the accuracy of claims
payment pursuant to the Contract Rates. PLAN will indicate what was
paid on the submitted claims. The number of claims subject to this
review will be determined by PLAN and provided at no additional cost.
If it is determined by AFFORDABLE that PLAN is making incorrect
payments, AFFORDABLE will assist PLAN in determining the proper
allowable charge.
ARTICLE 4
DATA REQUIREMENTS
4.1 PLAN shall provide AFFORDABLE with the necessary data and/or
information that is required to process AFFORDABLE's annual Management
Information System (MIS) report for PLAN. The MIS Report shall be based
upon the most current data made available to AFFORDABLE up to a maximum
of the 12 preceding months. All data and/or information must be
submitted to AFFORDABLE in computer readable form and must contain the
data necessary to produce the reports. Data for the MIS Report must be
received and validated no later than 90 days prior to the Health Care
Provider Network anniversary date. AFFORDABLE will, at no cost, make
any initial changes or modifications to its reporting programs to
accept the data and information submitted by the PLAN. All subsequent
changes resulting from PLAN modifying their data format will be
completed, but all services associated with these changes will be
billed to PLAN at AFFORDABLE's standard fees.
4.2 If PLAN elects to submit the above mentioned data and/or information in
non-computer readable format, PLAN will be billed at AFFORDABLE standard
fees for all services and charges associated with the preparation of
submitted data to convert information into a computer readable format.
4.3 Any charge associated with the preparation of the data to be given to
AFFORDABLE shall be the responsibility of the PLAN.
<PAGE> 8
Page 8 of 14
ARTICLE 5
FEES
5.1 PLAN agrees to pay AFFORDABLE, as a fee for services rendered by
AFFORDABLE, those sums which are arrived at by using the fee schedule
set out in Appendix A. AFFORDABLE shall have the right to amend
Appendix A by adding fee schedules for Health Care Provider Networks
which PLAN hereafter elects to add.
5.2 With respect to the Hospital Network services provided by AFFORDABLE in
accordance with Appendix A, PLAN shall pay AFFORDABLE the fees due
within 10 days of receipt by PLAN of a billing by AFFORDABLE showing
the amount due for services rendered during the preceding calendar
month.
5.3 There shall be added to any fees due AFFORDABLE, as described in
Appendix A, amounts equal to any use or sales tax, or any tax in lieu
thereof, imposed by any governmental agency with respect to services
rendered by AFFORDABLE.
5.4 Additional Services
In addition to routine services described in this Agreement, if
requested by PLAN, AFFORDABLE agrees to provide additional services at
the fees described below:
a. For activities performed by AFFORDABLE including its personnel and
computer services, AFFORDABLE's fees will be at its standard rates.
b. For such other services requested by PLAN, AFFORDABLE will provide
such services at fees agreed to by both parties.
5.5 Price Adjustments
For all fees which are charged on an hourly basis, AFFORDABLE shall
have the right to increase such fees upon ninety (90) days advance
written notice.
5.6 For the Outpatient Care Network ("OCN"), PLAN shall provide a monthly
OCN Savings report and along with said report shall pay to AFFORDABLE
the total fee due AFFORDABLE on or before the 20th of the month.
<PAGE> 9
Page 9 of 14
ARTICLE 6
TERM
6.1 This Agreement shall commence upon the execution hereof and shall
terminate on December 31, 1993 and shall automatically renew for
consecutive one (1) year terms thereafter, unless terminated or amended
as hereinafter set forth.
ARTICLE 7
TERMINATION
7.1 This Agreement may be terminated by written notice thereof given by
PLAN to AFFORDABLE if any one of the following occurs, but in no event
shall such termination relieve AFFORDABLE from any of its obligations
incurred under this Agreement:
7.1.1 Failure of AFFORDABLE to meet any material covenant, agreement,
or obligation provided for in this Agreement if it has not
commenced to cure any such default within twenty (20) days
after written notice thereof to AFFORDABLE by PLAN.
7.1.2 AFFORDABLE becomes insolvent, or is adjudicated as a bankrupt,
or its business comes into possession or control, even
temporarily, of any trustee in bankruptcy, or a receiver is
appointed for it, or it makes a general assignment for the
benefit of creditors. If any of these events occurs, no
interest in this Agreement shall be deemed an asset of
creditors. No interest in this Agreement shall be deemed an
asset or liability of AFFORDABLE, nor shall any interest in
this Agreement pass by the operation of law without the consent
of PLAN.
7.1.3 Upon the expiration date of the initial term or any extension
of the term with at least ninety (90) days written notice to
AFFORDABLE prior to the end of the Term of this Agreement or
any extension of the Term.
7.2 This Agreement may be terminated by written notice thereof given by
AFFORDABLE to PLAN if any one of the following occurs, but in no event
shall such termination relieve PLAN from any of its obligations incurred
under this Agreement:
7.2.1 Failure of PLAN to meet any material covenant, agreement, or
obligation provided for in this Agreement if it has not
commenced to cure any such
<PAGE> 10
Page 10 of 14
default within twenty (20) days after written notice thereof to
PLAN by AFFORDABLE.
7.2.2 Failure of PLAN to make payment provided for under this
Agreement when due, and if payment is not made within twenty
(20) days following written notice of non-payment sent by
AFFORDABLE to PLAN.
7.2.3 PLAN becomes insolvent, or is adjudicated as a bankrupt, or its
business comes into possession or control, even temporarily, of
any trustee in bankruptcy, or a receiver is appointed for it,
or it makes a general assignment for the benefit of creditors.
If any of these events occurs, no interest in this Agreement
shall be deemed an asset of creditors. No interest in this
Agreement shall be deemed an asset or liability of PLAN, nor
shall any interest in this Agreement pass by the operation of
law without the consent of AFFORDABLE.
7.2.4 Upon the expiration date of the initial term or any extension
of the term with at least ninety (90) days written notice to
PLAN prior to the end of the Term of this Agreement or any
extension of the Term.
7.3 Upon the effective date of the termination of this Agreement for any
reason:
7.3.1 PLAN shall promptly notify Covered Persons of such termination.
A copy of the Notice to Covered Persons shall be mailed to
AFFORDABLE at the same time it is distributed to Covered
Persons.
7.3.2 PLAN shall immediately cease reimbursing Contract Providers at
the Contract Rates except for those Covered Persons admitted to
a Contract Provider prior to the termination effective date.
7.3.3 Upon termination of this Agreement for PLAN's failure to comply
with the terms of this Agreement, PLAN shall reimburse
AFFORDABLE for the costs incurred in the notification of
Contract Providers as described in Appendix A.
7.3.4 Termination of this Agreement shall not affect any rights or
obligations hereunder which shall have previously accrued, or
shall thereafter arise with respect to any occurrence prior to
termination, and such rights and obligations shall continue to
be governed by the terms of this Agreement.
<PAGE> 11
Page 11 of 14
ARTICLE 8
RECORDS
8.1 AFFORDABLE and PLAN shall maintain such records as shall accurately
reflect the billed charges made for each service rendered and the
difference between such billed charges and the Contract Rate(s). To the
extent practical, such records shall be kept in accordance with
generally accepted accounting principles.
8.2 Subject to Article 9 hereof, AFFORDABLE agrees that at its office,
during normal business hours, and upon not less than seven (7) days
advance notice, or upon reasonable notice in the event of an emergency,
PLAN shall have access to and the right to examine records which
AFFORDABLE has kept which relate directly to PLAN. Such access and right
of examination shall continue to be provided to PLAN for a period of not
less than two (2) years after the date of discharge or the end of the
treatment or other health care service provided to a Covered Person.
Subject to Article 9 hereof, PLAN agrees that at its office, during
normal business hours, and upon not less than seven (7) days advance
notice, or upon reasonable notice in the event of an emergency,
AFFORDABLE shall have access to and the right to examine records which
PLAN has kept which relate directly to AFFORDABLE. Such access and right
of examination shall continue to be provided to AFFORDABLE for a period
of not less than two (2) years after the date of discharge or the end of
the treatment or other health care service provided to a Covered Person.
ARTICLE 9
CONFIDENTIALITY
9.1 The parties agree that the Provider Contract Rates are confidential and
will be kept in strictest confidence. Therefore, PLAN hereby certifies
that such rates shall be disclosed by PLAN only to the extent and only
to such persons or entities as are necessary to carry out the specific
terms of this Agreement. PLAN shall also ensure that each person or
entity to which PLAN discloses Provider Contract rates certifies or
otherwise provides assurance to PLAN that the rates will be treated as
confidential.
9.2 AFFORDABLE agrees to keep in confidence all specific medical patient
information received which by applicable law is deemed confidential.
<PAGE> 12
Page 12 of 14
9.3 In order for AFFORDABLE to effectively provide services to PLAN, it is
necessary and desirable for AFFORDABLE to disclose to PLAN confidential
and proprietary information relating to AFFORDABLE's past, present and
future activities. Since it is difficult to separate confidential and
proprietary information from that which is not, PLAN will regard all
information obtained from AFFORDABLE as a result of services hereunder
as proprietary information. All confidential information will be
permanently safeguarded and kept confidential by PLAN.
9.4 Neither party will be liable for disclosure of any information received
from the other under this Agreement if:
(1) The information is generally available to or known to the
public or is obtained by PLAN from third parties.
(2) The information was known to PLAN prior to the implementation
of this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 This Agreement is entered by and between the parties signing it and for
their benefit. There is no intent by either party to create or establish
third party beneficiary status or rights or their equivalent in any
Covered Person, subcontractor or other third party which may be affected
by the operation of this Agreement, and no such third party shall have
any right to enforce any right or enjoy any benefit created or
established under this Agreement.
10.2 The relationship of the parties is that of Independent Contractors.
Nothing herein is intended or will be construed to establish any agency,
employment, partnership, or joint venture relationship between the
parties. Each party shall be solely responsible for the direction,
control and management of its agents and employees.
10.3 Neither party will be responsible for, nor deemed to be in default under
this Agreement on account of, any failure or delay in performance
hereunder (except for the failure to make any payment when due) due to
acts of God or governmental authority, strikes or labor disputes, fires
or any other cause beyond the control of the party.
10.4 This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, and their successors and assigns. This
Agreement constitutes the entire agreement between the parties and
supersedes any prior agreement or
<PAGE> 13
Page 13 of 14
understandings, whether oral or written.
10.5 This Agreement may be amended only by mutual written agreement between
the parties. Neither party shall have the right or power to assign any
rights or duties pursuant to this Agreement without the express written
consent of the other party.
10.6 The paragraph headings are for convenience only and shall not be deemed
to limit, define, or restrict the meaning or contents thereof.
10.7 The provisions of Articles 2.10, 5, 7.3, 8, 9, and 10 shall survive the
termination of this Agreement.
10.8 This Agreement is executed in and shall be governed by and construed in
accordance with the laws of the State of Illinois.
10.9 In the event any provision of this Agreement conflicts with laws
applicable hereto or under which this Agreement is construed, or if any
provision of this Agreement shall be held illegal or unenforceable or
partially illegal or unenforceable by a court with jurisdiction over the
parties to this Agreement, then this Agreement shall be modified to
conform with said laws or judicial determination and such provision
shall be construed and enforced only to such extent as it may be a legal
and enforceable provision, and all other provisions of this Agreement
shall be given full effect separately therefrom and shall not be
affected thereby.
10.10 Neither the execution of this Agreement nor the performance of its
obligations constitutes an undertaking by AFFORDABLE to guarantee the
results of health care provider services to Covered Persons or that such
will be rendered in accordance with generally accepted medical standards
or procedures; all such services and the results thereof are determined
by the Contract Provider.
10.11 If any legal action is necessary to enforce the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorneys fees and
costs in addition to any other relief to which it may be entitled.
10.12 Notices and Payments: Any notice required pursuant to this Agreement
shall be in writing and sent by registered or certified mail, return
receipt requested, to the addressees of the parties set forth below in
this Agreement. Notice so sent will be deemed effective when delivered
in the mail with postage pre-paid. All notices, payments and other
communications shall be addressed as follows:
to AFFORDABLE:
<PAGE> 14
Page 14 of 14
(1) AFFORDABLE Health Care Concepts
2485 Natomas Park Drive, Suite 600
Sacramento, California 95833
Attn: President
(2) COPY HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
Attn: Vice President of Administration
to PLAN: National Association of Letter PLANs
Health Benefit Plan (Non-Group and Staff)
20547 Waverly Court
Ashburn, VA 22093
Attn: Mr. Harry Boteler
Administrator
10.13 This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and
the same instrument. The Exhibits and Schedules attached hereto are by
reference deemed incorporated herein.
IN WITNESS WHEREOF the parties have executed this Agreement the day and date
first above written by their duly authorized officers for and on behalf of said
corporation.
<TABLE>
<S> <C>
National Association of Letter AFFORDABLE Health Care Concepts
Carriers Health Benefit Plan
(Non-Group and Staff)
By: Robert Vincenze By: James C. Smith
--------------------------------- ---------------------------------------
Authorized Signatory
Title: Director Title: as President, Healthcare COMPARE Corp.
------------------------------- -------------------------------------
Date: March 9, 1992 Date: 4/1/92
-------------------------------- -------------------------------------
</TABLE>
<PAGE> 15
PPO AGREEMENT BETWEEN
AFFORDABLE HEALTH CARE CONCEPTS
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN (NON-GROUP AND STAFF)
APPENDIX A
I. Network(s) Selected:
<TABLE>
<CAPTION>
Health Geo- Implementation % of Fixed Monthly
Plan graphic Date Savings Minimum Fee
---- Area ---- ------- --------------
----
<S> <C> <C> <C> <C> <C>
[x] Hospital Network FEHBP AL 06/01/91 23% N/A
AK 02/01/92 23% N/A
(Includes Chemical AR 05/01/91 23% N/A
Dependency Network) AZ 12/01/90 23% N/A
CA 10/01/90 23% N/A
CO 10/01/90 23% N/A
D.C. 10/01/90 23% N/A
FL 10/01/90 23% N/A
GA 10/01/90 23% N/A
IA 06/01/91 23% N/A
ID 02/01/92 23% N/A
IL 10/01/90 23% N/A
IN 12/01/90 23% N/A
KS 10/01/90 23% N/A
KY 10/01/90 23% N/A
LA 05/01/91 23% N/A
MA 12/01/90 23% N/A
MI 06/01/91 23% N/A
MN 05/01/91 23% N/A
MO 10/01/90 23% N/A
MS 09/01/91 23% N/A
MT 01/01/92 23% N/A
NC 05/01/91 23% N/A
NE 09/01/91 23% N/A
NJ 12/01/91 23% N/A
NM 10/01/90 23% N/A
NV 10/01/90 23% N/A
OH 01/01/91 23% N/A
OK 06/01/91 23% N/A
OR 10/01/90 23% N/A
PA 12/01/90 23% N/A
RI 12/01/91 23% N/A
SC 05/01/91 23% N/A
SD 12/01/91 23% N/A
TN 12/01/90 23% N/A
TX 10/01/90 23% N/A
UT 10/01/90 23% N/A
VA 10/01/90 23% N/A
WA 10/01/90 23% N/A
WI 02/01/91 23% N/A
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C>
[x] Outpatient Care FEHBP AL 01/01/92 23% N/A
Network AZ 01/01/92 23% N/A
CA 01/01/92 23% N/A
CO 01/01/92 23% N/A
D.C. 01/01/92 23% N/A
FL 01/01/92 23% N/A
GA 01/01/92 23% N/A
IL 01/01/92 23% N/A
KS 01/01/92 23% N/A
KY 01/01/92 23% N/A
LA 01/01/92 23% N/A
MA 01/01/92 23% N/A
MD 01/01/92 23% N/A
MN 01/01/92 23% N/A
MO 01/01/92 23% N/A
NM 01/01/92 23% N/A
NV 01/01/92 23% N/A
OH 01/01/92 23% N/A
OK 01/01/92 23% N/A
OR 01/01/92 23% N/A
PA 01/01/92 23% N/A
TN 01/01/92 23Z N/A
TX 01/01/92 23% N/A
UT 01/01/92 23% N/A
VA 01/01/92 23% N/A
WA 01/01/92 23% N/A
WI 01/01/92 23% N/A
</TABLE>
II. Use of Networks
A. AFFORDABLE agrees to make available to PLAN all new Health Care
Provider Networks developed by AFFORDABLE throughout the United States as
of the effective date of implementation of each such network.
B. PLAN agrees to utilize each new AFFORDABLE Health Care Provider
Network within ninety (90) days of receipt of notification of such
network's existence, provided that PLAN does not have a contract with a
competing health care provider network after first offering AFFORDABLE
the right of first refusal to develop a network in such area, which offer
AFFORDABLE has declined.
III. Compensation to AFFORDABLE
For each Health Care Provider Network selected by PLAN and commencing
with the Implementation Date listed in this Appendix A, PLAN agrees to
pay AFFORDABLE an amount equal to the Percentage of Savings listed in
Section I above.
<PAGE> 17
IV. For the Hospital Network, Savings are to be computed as the difference
between Contract Providers' billed charges, net of payments due from
other payors and the Contract Rates at Contract Providers. AFFORDABLE
shall compute the savings by review and pricing of hard copy claims
from Contract Providers and submitted to AFFORDABLE by PLAN in accord
with Article 2.8.
Any adjustments to the savings made by PLAN will be reconciled with
payment on a quarterly basis. When reconciliation performed by
AFFORDABLE or PLAN discloses that adjustment to reimbursement under
this Agreement is appropriate, both parties agree to make the necessary
adjustments under the terms of this Agreement.
For OCN claims incurred during the contract period, PLAN will pay
AFFORDABLE a fee equal to twenty three percent (23%) of OCN Savings
for use of AFFORDABLE's Outpatient Care Networks.
OCN Savings shall be computed as the difference between the 90th
percentile of either HIAA or MDR, or the billed charges at the Contract
Providers, whichever is less, net of payments due from third party
payors and the Contract Rate obligation at Contract Providers.
V. PLAN and AFFORDABLE agree that use of the above-referenced Health Care
Provider Networks is subject to the terms and conditions contained in
this PPO Agreement.
<PAGE> 1
Page 1 of 2
FIRST COMBINED AMENDMENT TO THE PPO AGREEMENTS
EACH DATED OCTOBER 1, 1990, BETWEEN
AFFORDABLE HEALTH CARE CONCEPTS
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH BENEFIT PLAN
THIS AGREEMENT is entered into as of this first day of April, 1994, between
AFFORDABLE Health Care Concepts (hereinafter called "AFFORDABLE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter referred to as
"PLAN").
WITNESSETH
WHEREAS, AFFORDABLE and COMPANY have previously entered into a certain PPO
AGREEMENT, dated October 1, 1990, which provides for provider negotiation (PPO
development and management) services to be rendered to PLAN for group,
non-group and staff,
WHEREAS, AFFORDABLE and COMPANY have previously entered into a certain PPO
AGREEMENT, dated October 1, 1990, which provides for provider negotiation (PPO
development and management) services to be rendered to PLAN for non-group and
staff only,
WHEREAS, AFFORDABLE and PLAN desire to amend each PPO AGREEMENT in the manner
set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
A. Effective April 1, 1994 through December 31, 1994, the following provision
is hereby added to the Appendix A of each PPO AGREEMENT:
For electronic hospital claims submitted to COMPANY, PLAN will pay COMPANY
$.42 per transaction. PLAN agrees to electronically source all claims
initially received by PLAN and forward such claims electronically to
COMPANY.
B. The parties hereby ratify and affirm each PPO AGREEMENT and agree that it
is in full force and effect and valid except as amended herein. This
Amendment shall prevail over any conflict with the PPO AGREEMENT. In all
respects the PPO AGREEMENT shall be construed and interpreted to include
all of the terms of this Amendment as if the same were set out therein. The
execution and delivery of this Amendment by the undersigned has been duly
authorized by all necessary corporate action.
<PAGE> 2
Page 2 of 2
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association of Letter AFFORDABLE Health Care Concepts
Carriers Health Benefit Plan.
By: Harry D. Boteler By: James C. Smith
--------------------------- -----------------------------
Authorized Signatory, as
Title: Administrator President HealthCare
------------------------ COMPARE Corp.
Date: 5/10/94 Date: 5/25/94
------------------------- ---------------------------
<PAGE> 1
Page 1 of 4
SECOND AMENDMENT TO THE PPO AGREEMENT
DATED OCTOBER 1, 1990 AS AMENDED,
BETWEEN
AFFORDABLE HEALTH CARE CONCEPTS
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH BENEFIT PLAN
THIS AGREEMENT is entered as of this 1st day of January, 1992, between
AFFORDABLE Health Care Concepts (hereinafter called "AFFORDABLE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter referred to as
"PLAN").
WITNESSETH
WHEREAS, AFFORDABLE AND PLAN have heretofore entered into a certain PPO
AGREEMENT, dated October 1, 1990, and amended on October 1, 1990, which
provides for provider negotiation (PPO development and management) services to
be rendered to PLAN,
WHEREAS, AFFORDABLE and PLAN desire to amend the PPO AGREEMENT in the manner
set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, one dollar and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
A. Article 2.4 shall be amended to read as follows:
Prior to the Implementation Date, AFFORDABLE will furnish PLAN with a
listing of all Contract Providers and Outpatient Care Network Contract
Rate(s) as applicable to each Health Care Provider Network set out in
Appendix A. This will be provided on either hard copy or magnetic tape if
available from AFFORDABLE at PLAN's option.
Periodically AFFORDABLE may furnish PLAN with updates as to rate changes,
changes in identity of Contract Providers, and changes in Procedure Code
listings.
B. The following paragraph shall be added as Article 2.11:
Effective January 1, 1992, AFFORDABLE agrees to provide a toll-free
telephonic contract provider directory service for use by PLAN's Covered
Persons.
<PAGE> 2
Page 2 of 4
C. The following paragraph shall be added as Article 2.12:
AFFORDABLE certifies that it has contracted with Health Care Providers that
meet its credentialing and recredentialing procedures. AFFORDABLE will
provide PLAN in writing any substantial changes to its current credentialing
and recredentialing procedures.
D. The following paragraph shall be added to Article 3.4:
Effective January 1, 1992, PLAN's Health Plan shall include financial
incentives to Covered Persons for the OCN to encourage use of Contract
Providers for health care services covered by the Health Plan and PLAN shall
communicate such financial incentives to its Covered Persons. Such Health
Plan shall be submitted to AFFORDABLE no later than February 1, 1992.
E. The following paragraph shall be added as Article 3.25:
PLAN shall perform OCN Claims Pricing. AFFORDABLE shall review hard copy
outpatient claims from Contract Providers incurred during the initial three
months after the Implementation Date of the Health Care Provider Network and
submitted by PLAN to determine the accuracy of claims payment pursuant to
the Contract Rates. PLAN will indicate what was paid on the submitted
claims. The number of claims subject to this review will be determined by
PLAN and provided at no additional cost. If it is determined by AFFORDABLE
that PLAN is making incorrect payments, AFFORDABLE will assist PLAN in
determining the proper allowable charge.
F. The following paragraph shall be added as Article 3.26:
PLAN agrees to immediately provide AFFORDABLE with its provider data for all
areas of the United States to assist AFFORDABLE in Contract Provider
negotiation activities. Such negotiation activity will include the
identification of PLAN as a payor client of AFFORDABLE.
G. The following language shall be added as the second sentence of Article 4.1:
This Agreement is further subject to participation by PLAN in FEHBP for 1992
and 1993.
H. Effective January 1, 1992, Article 4.2 and Section III of Appendix A
shall be deleted in their entirety.
<PAGE> 3
Page 3 of 4
I. The following paragraphs shall be added as Article 6.6:
For the Outpatient Care Network ("OCN"), PLAN shall provide a monthly OCN
Savings report and along with said report shall pay to AFFORDABLE the total
fee due AFFORDABLE on or before the 20th of the month.
For OCN claims incurred during the contract period, PLAN will pay AFFORDABLE
a fee equal to twenty three percent (23%) of OCN Savings for use of
AFFORDABLE's Outpatient Care Networks.
OCN Savings shall be computed as the difference between the 90th percentile
of either HIAA or MDR, or the billed charges at the Contract Providers,
whichever is less, net of payments due from third party payors and the
Contract Rate obligation at Contract Providers.
J. Article 7 shall be amended to read as follows:
This Agreement shall commence upon the execution hereof and shall terminate
on December 31, 1993, and shall automatically renew for consecutive one
(1) year terms thereafter, unless terminated or amended as thereafter set
forth.
K. The following language shall be added to the first sentence of each
paragraph in Article 9.2 after the word "notice":
"...,or upon reasonable notice in the event of an emergency..."
L. The following language shall be added to Section II of Appendix A:
Commencing January 1, 1992 and continuing thereafter, PLAN agrees to pay
AFFORDABLE an amount equal to 23% of Savings for services provided by each
Health Care Provider Network.
M. The following language shall be added to the beginning of the first sentence
of Section V of Appendix A:
"For the Hospital Network,..."
N. Parties hereby ratify and affirm the PPO AGREEMENT and agree that it is
in full force and effect and valid except as amended herein. This Amendment
shall prevail over any conflict with the PPO AGREEMENT. In all respects the
PPO AGREEMENT shall be construed and interpreted to include all of the
terms of this Amendment as if the same were set out therein. The execution
and delivery of this
<PAGE> 4
Page 4 of 4
Amendment by the undersigned has been duly authorized by all necessary
corporate action.
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association of Letter AFFORDABLE Health Care Concepts
Carriers Health Benefit Plan
By: Robert W. Vincenze By:James C. Smith, Authorized Signator
--------------------------- ----------------------------
As President, HealthCare
Title: Director COMPARE Corp.
------------------------
Date: March 9, 1992 Date: 4/1/92
------------------------- --------------------------
<PAGE> 1
* Employees and retirees of the NALC, the NALC Health Benefit Plan, the USLC
Mutual Benefit Assocation and Nalcrest and their eligible dependents are also
"Covered Persons" under this agreement.
EXHIBIT 10.84
UTILIZATION REVIEW
AGREEMENT
THIS AGREEMENT is entered into as of this 1st day of January, 1989, between
HealthCare COMPARE Corp., a Delaware corporation (hereinafter "COMPARE"), and
National Association of Letter Carriers Health Benefit Plan (hereinafter
"CARRIER").
WITNESSETH:
WHEREAS, COMPARE provides utilization review (professional evaluation of health
care services on a prospective, concurrent and retrospective basis) and other
health care cost containment consultative services to employers, insurance
companies, third party administrators, and other entities,
WHEREAS, CARRIER desires to contract with COMPARE to provide its services for
implementation and operation of certain of its Utilization Review Services
known as Hospital Review Services and Case Management Services for eligible
enrollees and dependents (hereinafter "Covered Persons") who are provided
health care benefits under the terms of contract #CS-1067 between the CARRIER
and the U.S. Office of Personnel Management (hereinafter "OPM").*
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, one dollar and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. SCOPE OF SERVICES.
A. COMPARE provides a system of Hospital Review, as described in Exhibit
IID-MA, and Case Management, as described in Exhibit IIF-S, for services
rendered in the United States which CARRIER will utilize. Said Hospital
Review services shall be provided with respect to Covered Persons under
group health programs maintained by CARRIER.
B. Based on Hospital Review activities, COMPARE shall provide advice to
CARRIER, and/or to such parties as CARRIER shall direct under CARRIER's
health care benefit plan, and with respect to CARRIER's determination as to
certification for medical necessity and/or appropriateness of hospital
services to be provided in the United States under the group health programs
maintained by CARRIER. COMPARE does not make recommendations as to the
payment or the denial of payment of any claim or the delivery of any health
care services. COMPARE recognizes that the determination as to payment
or denial of payment
<PAGE> 2
of any claim and/or the authorization of payment for any hospital service or
health care service will be made only by CARRIER and that the decision or
determination to obtain or deliver any health care service is always made
only by the Covered Person and/or his or her physician. Any decisions made
by COMPARE or the CARRIER, shall relate only to the obligation for payment
for any such service under the terms of the CARRIER's contract #CS-1067
with OPM.
2. PERFORMANCE.
A. CARRIER hereby agrees that COMPARE shall be CARRIER's provider to
perform, implement and operate its Hospital Review services with respect to
Covered Persons who are hospitalized in the United States. CARRIER
acknowledges that COMPARE and its affiliates, agents and subsidiaries may
provide services similar to those which COMPARE has agreed to provide
hereunder to other firms, companies, entities and persons, indirectly or
directly, as agent, or under COMPARE's name or mark, or the name or mark of
COMPARE's client or principal. Except as provided above, this Agreement
shall not be deemed to limit, restrict or prevent COMPARE from providing to
others services identical or similar to those offered by COMPARE in this
Agreement.
B. COMPARE agrees that during the term hereof, it will provide to CARRIER
Hospital Review Program services and Case Management Services, as described
in Exhibits IID-MA and IIF-s attached hereto and made a part hereof.
C. Covered Persons whose health care services will be covered by Medicare or
by State or Federal Workers' Compensation will not be included in the
category of persons for which review services are performed under this
Agreement.
D. COMPARE will advise CARRIER as to the medical necessity and/or
appropriateness of hospital services to Covered Persons in accordance with
the Section I.B. above.
3. CONDITIONS.
A. CARRIER agrees that this Agreement is subject to the following conditions:
(1) Nothing contained herein shall be construed as constituting CARRIER
as the agent, principal, employee, servant, joint venturer, partner, or
legal representative of COMPARE for any purpose whatsoever.
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Nothing contained herein shall be construed as constituting COMPARE as
the agent, principal, employee, servant, joint venturer, partner, or
legal representative of CARRIER for any purpose whatsoever. This
Agreement does not in any way create the relationship of joint venture,
partnership or agency between COMPARE and CARRIER. COMPARE is an
independent contractor and shall be deemed a contractor performing
services for or on behalf of CARRIER as such.
(2) CARRIER acknowledges the validity of COMPARE's service marks,
trademarks, copyrights, and other proprietary marks and that the same are
the sole property of COMPARE. CARRIER shall not in any way infringe upon
or harm the rights of COMPARE in its proprietary marks.
CARRIER shall protect the integrity of COMPARE's said service and
proprietary marks and copyrights to the extent they are used by CARRIER.
CARRIER shall not without the prior written approval of COMPARE, use any
mark or name in connection with providing its Hospital review under this
Agreement.
(3) CARRIER shall comply with all laws, rules and regulations that are now
or hereafter promulgated by any governmental authority or agency and that
govern or apply to the operation and/or use of the utilization review
services described herein.
(4) CARRIER shall be solely responsible for the direction control and
management of its agents and employees.
B. COMPARE agrees that this Agreement is subject to the following conditions:
(1) COMPARE shall comply with all laws, rules and regulations that are
now or hereafter promulgated by any governmental authority or agency and
that govern or apply to the use of the utilization review services
described herein.
(2) COMPARE shall be solely responsible for the direction, control and
management of its agents and employees.
(3) COMPARE acknowledges the validity of CARRIER's service marks,
trademarks, copyrights, and other
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proprietary marks and that the same are the sole property of CARRIER.
COMPARE shall not in any way infringe upon or harm the rights of CARRIER
in its proprietary marks.
4. FEES AND SERVICES.
A. COMPARE shall be paid a fee for each of its services rendered hereunder
which fee shall be as set out in the "Schedule of Fees" attached hereto.
COMPARE shall receive from CARRIER the fee set out in the Schedule of Fees
subject to the provision set forth therein. There shall be added to any
charges or fees due COMPARE amounts equal to any use or sales tax, or any
tax in lieu thereof, imposed by any governmental agency with respect to
services rendered by COMPARE hereunder. CARRIER has the option to renew this
Agreement, as provided in Section 12A below.
B. The "base fee" set out in the Schedule of Fees is for the first year of
this Agreement. For each year after the first year of the term, COMPARE
shall have the right to increase the fee charged CARRIER. Such base fee for
Hospital Review Services shall not, without the specific written approval of
CARRIER, be increased over the base fee by more than the percentage of
increase fee by which the Consumer Price Index (CPI) on December 31 of the
last preceding year exceeded the CPI from December 31, 1988. For the
purposes of the Agreement, the term "Consumer Price Index" means the
consumer price Index - U.S. City averages for Urban Wage Earners and
Clerical Workers, All Items, of the United States Bureau of Labor
Statistics. The Consumer Price Index for any year shall be determined by
averaging the monthly All Items Indices for that year. If the manner in
which such Consumer Price Index as determined by the Bureau of Labor
Statistics shall be substantially revised, an adjustment shall be made in
such revised index which, would produce results equivalent, as nearly as
possible, to those which would have been obtained if the Consumer Price
Index had not been so revised. If the 1967 average shall no longer be used
as an index of 100, such change shall constitute a substantial revision.
C. CARRIER agrees to pay COMPARE the fee in the amount specified each month
on or before the l5th day of such month. CARRIER shall report to COMPARE the
total number of enrollees for the previous calendar month subject to this
Agreement and along with said report shall pay to COMPARE the total fee due
COMPARE for the current month. CARRIER shall periodically provide a report
to COMPARE with the
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actual number of enrollees for each month and shall include any payment
adjustments. COMPARE shall have the right to inspect CARRIER's books and
records during normal business hours and upon seven (7) days advance written
notice to verify the number of enrollees for which fees are or should be
paid to COMPARE.
With respect to services provided by COMPARE for the Case Management Program
or other hourly services, CARRIER shall pay COMPARE the fees due within 20
days of receipt by CARRIER of monthly billing by COMPARE itemizing the
amount due for services rendered to each Covered Person during the
preceding calendar month.
D. CARRIER recognizes that COMPARE has no obligation to communicate,
disseminate, distribute and educate enrollees as to program requirements. It
is the responsibility of CARRIER to advise its eligible enrollees of the
Hospital Review services and distribute to them the appropriate tollfree
numbers.
E. COMPARE and CARRIER mutually agree to the performance provisions set out
in Exhibit A attached hereto and made a part hereof.
5. ASSISTANCE.
A. Subject to Paragraph 7 hereof, in addition to and without limiting the
access to records provided for in Subparagraph B. of this paragraph of this
Agreement, COMPARE agrees that at its office, during normal business hours,
and upon reasonable advance notice, CARRIER shall have access to and the
right to examine records which COMPARE has kept which relate directly to
CARRIER. Such access and right of examination shall continue to be provided
to CARRIER for a period of not less than forty-eight (48) months after the
date of discharge, end of the treatment, or the end of the review of the
Covered Person's hospitalization or other health care service. COMPARE and
CARRIER shall agree upon the documentation to be retained by COMPARE
consistent with CARRIER's obligations under Contract #CS-1067.
B. In the event legal action is brought against CARRIER to collect benefits
for which CARRIER has denied payment and for which COMPARE has not
recommended the certification of the medical necessity or appropriateness of
services provided or to have been provided, or in the event of any other
legal or administrative proceedings at the written
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<PAGE> 6
request of CARRIER, COMPARE will provide CARRIER and its legal counsel:
(1) access during normal business hours upon reasonable advance notice
including photocopies if requested by CARRIER at COMPARE's actual cost
therefor, to those of COMPARE's records relating to services provided to
the Covered Person in question, which are directly related to the subject
matter of such litigation.
(2) to the extent they are still employed by COMPARE, and if requested in
writing by CARRIER, COMPARE will make available to testify directly as to
such matter and to assist CARRIER in preparing to defend or respond to
any legal or administrative hearing, the appropriate physician reviewers,
or any other employee(s) directly involved in such matter. COMPARE shall
be reimbursed by CARRIER for its actual out-of-pocket expenses in
providing such personnel, including expenses incurred by COMPARE for said
persons' services, travel expenses, lodging and meals. CARRIER will pay
reasonable and customary witness fees for all expert witnesses. In the
event either party is validly and properly served with subpoena,
discovery request for production of documents or other legal process,
(all hereinafter referred to as "legal process"), such party shall
immediately notify the other party so that such other party may determine
whether any of its confidential or proprietary data, reports, or other
printed material may be included in the data. Such other party may, at
its own expense, take such legal action as it deems necessary to preserve
the confidentiality of its data. Neither party hereto shall have an
obligation to contest any such subpoena or legal process.
6. INDEPENDENT CHART REVIEW.
COMPARE further agrees to establish, operate and maintain, in accordance
with uniform criteria established from time to time by COMPARE, an adequate
mechanism for use by affected Covered Persons seeking additional review of
COMPARE's certification recommendation referred to in Paragraph 8 following.
7. CONFIDENTIALITY.
A. CARRIER and COMPARE agree to abide by applicable federal or state
statutes and regulations concerning the
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confidentiality of all information (in whatever form) exchanged between the
parties pursuant to this Agreement. The respective forms, methods, system,
procedures, business systems, data format, data gathering and retrieval
system and methods of use thereof of each party are proprietary and
confidential to each party to this Agreement; CARRIER and COMPARE agree that
they shall maintain these as proprietary and confidential. CARRIER and
COMPARE shall not disseminate or distribute the other's material in any
manner to affect adversely the proprietary nature of the material. Neither
party shall in any way attempt to market or use the data, documents,
reports, systems, specifications, manuals, data information or material of
any kind of the other party in competition directly or indirectly with the
other, nor shall either party attempt to use any such information and
material or derivation thereof directly or indirectly except in the
performance of this Agreement. The parties recognize that no remedy of law
may be adequate to compensate either party for a breach of the provisions of
this paragraph and, therefore, both parties agree that either party shall be
entitled to temporary and permanent injunctive relief against the other, in
addition to all other remedies which either party shall be otherwise
entitled to, and this paragraph shall in no way limit such other remedies of
the parties. Such temporary or permanent injunctive relief may be granted
without bond which each party does hereby waive.
B. COMPARE's forms, methods, system, procedures, data format, data gathering
and retrieval system and methods, all COMPARE data, computer software,
computer hardware, computer courseware, program name, design and manuals,
and all data, reports and printed material furnished or developed by COMPARE
(all herein collectively called "COMPARE Data, Systems and Proprietary
Rights") which is marked as being "Confidential" or "Proprietary" or "Not
for Public Disclosure" or which shall be copyrighted, registered or
otherwise protected, are confidential and/or proprietary information owned
by and proprietary to COMPARE and any use, furnishing, disclosure,
dissemination, publication, or revealing in any way by CARRIER of COMPARE
Data, Systems and Proprietary Rights, furnished by CARRIER or its employees,
agents and officers to any person, organization, firm, or government agency
contrary to law or to the provisions and terms of this Agreement shall
obligate CARRIER and the party failing to hold said data on a confidential
basis to indemnify and hold harmless COMPARE from any damages, litigation,
liability or claimed liability, claims, and any expenses, including
reasonable attorneys' fees, and incidental expenses resulting from any such
improper use,
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furnishing, disclosure or revealing of said COMPARE Data, Systems and
Proprietary Rights occurring during the term of this Agreement or
thereafter, except to the extent any such loss or damage was caused or
contributed to by COMPARE. To the extent that CARRIER furnishes COMPARE
with any CARRIER Data, Systems and Proprietary Rights, COMPARE agrees that
all of the above and foregoing obligations and agreements in this
Subparagraph B shall be reciprocal and mutual upon COMPARE as relates to
such CARRIER Data, Systems and Proprietary Rights.
C. Confidentiality of Medical Information
(i) CARRIER and COMPARE hereby acknowledge that, in order for COMPARE to
perform its duties and obligations pursuant to this Agreement,
participating providers shall be required to furnish COMPARE with medical
information reasonably required by COMPARE regarding covered services
provided by such participating providers to Covered Persons. COMPARE
agrees to maintain the confidentiality of such information for use only
in connection with the Scope of Services provided by COMPARE to CARRIER.
(ii) CARRIER hereby warrants and represents that each Covered Person, or
other person authorized to release medical records of any Covered Person
on behalf of such Covered Person, has executed or will execute and
CARRIER maintains or will maintain a valid authorization, properly
executed and then currently in effect, which shall authorize COMPARE to
release records or copies thereof to CARRIER for purposes of claims
payment, audit or any other purposes set forth in such authorization.
(iii) In addition to the foregoing, CARRIER shall provide to COMPARE, upon
the request of COMPARE at any time and in its sole discretion, a copy of
a valid authorization or COMPARE may request that any Covered Person, or
other person authorized to release medical records of a Covered Person,
execute and deliver to COMPARE a valid authorization as required by law
authorizing the release of medical information from COMPARE to CARRIER.
(iv) CARRIER shall indemnify, defend and hold COMPARE harmless from and
against any and all liabilities, damages, claims, actions and costs
(including, without limitation, attorneys' fees and expert witnesses'
fees)
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which may arise out of the disclosure of such medical records by COMPARE
to CARRIER in reliance upon Section 7(C)(ii).
8. NOTICE OF DETERMINATION.
The following parties will be notified in writing or through electronic
medium mutually agreeable to COMPARE and CARRIER by COMPARE of its advice
with respect to COMPARE's certification or non-certification for payment
of benefits for admission or extension of stay of a Covered Person based
upon medical necessity or appropriateness of stay thereof, to wit:
(a) CARRIER,
(b) The Covered Person,
(c) The appropriate attending physician,
(d) The hospital.
9. REPORTS.
A. Basic Reports.
COMPARE will provide CARRIER with written reports of its performance
activities under this Agreement for each program purchased. Said reports
will be provided as listed in Section C of the Exhibit IIs attached
hereto. These reports will be provided no later than sixty (60) days
after the close of the period set forth in the Exhibit IIs.
B. Special Reports.
On written request of CARRIER, for matters of special interest to
CARRIER, COMPARE will provide such special reports as it is capable of
providing and which are requested in writing by CARRIER. If
additional expense will be incurred by COMPARE in preparing such reports,
COMPARE will promptly provide a written cost estimate and schedule and
obtain CARRIER's approval of such costs prior to preparing any such
reports.
10. INSURANCE AND INDEMNIFICATION.
A. On the effective date of this Agreement, COMPARE will have professional
liability insurance in the amount of
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$5,000,000 per claim and aggregate. COMPARE agrees to advise CARRIER of any
changes in the amounts of professional liability insurance. To the extent
the insurance carrier will do so, CARRIER shall be added as an additionally
insured, provided if there is any charge therefor, CARRIER shall reimburse
COMPARE.
B. INDEMNIFICATION.
1. Should the CARRIER be caused to pay monies or damages to any Covered
Person or Estate or incur legal fees and other reasonable costs of
litigation, whether in settlement which COMPARE approves (whether or not
suit has been filed) or as a result of an order of a court of competent
jurisdiction because of bodily injury, sickness, death, mental or
emotional suffering, caused by or arising from any negligent act or
omission or willful misconduct of COMPARE in the course of performing its
services under the Utilization Review Agreement, COMPARE agrees to
indemnify and hold harmless the CARRIER to the extent of any such payment
of damages with the following exceptions:
(a) This agreement to indemnify and hold harmless does not apply to
any act to which the CARRIER itself is liable independent of any act
of COMPARE, provided however, this exception shall not apply to the
liability of CARRIER resulting solely from its act of denial of a
claim based on COMPARE's advice that said medical service not be
certified as medically necessary or appropriate.
(b) This agreement to indemnify and hold harmless shall become
effective only as to any amounts paid by the CARRIER which are not
otherwise covered by any policy of insurance under which the CARRIER
may be covered;
(c) This agreement does not apply unless COMPARE has received notice
from the CARRIER of the pendency of any such claim within a reasonable
time after the CARRIER has received notice or become aware of any such
claim or threatened claim;
(d) This agreement to indemnify and hold harmless shall be effective
if such payment does not arise from, or was not caused by or did not
result from
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the negligence, intentional or willful misconduct of the CARRIER or its
employees or agents other than COMPARE;
(e) This agreement does not apply unless COMPARE or its insurer has been
given a timely opportunity to defend the CARRIER against any claim.
2. Should COMPARE be caused to pay monies or damages to any Covered Person or
Estate or incur legal fees and other reasonable cost of litigation, whether in
settlement which the CARRIER approves (whether or not suit has been filed) or
as a result of an order of a court of competent jurisdiction because of bodily
injury, sickness, death, mental or emotional suffering, caused by or arising
from any negligent act or omission or willful misconduct of the CARRIER during
the course of performing their services under the Utilization Review Agreement,
CARRIER agrees to indemnify and hold harmless COMPARE to the extent of any such
payment of damages with the following exceptions:
(a) This agreement to indemnify and hold harmless does not apply to any
act to which COMPARE itself is liable independent of any act of
CARRIER;
(b) This agreement to indemnify and hold harmless shall be effective
only as to any amounts paid by COMPARE which are not otherwise
reimbursed under any policy of insurance under which COMPARE is
covered;
(c) This agreement does not apply unless CARRIER has received notice
from COMPARE of the pendency of any such claim within a reasonable time
after COMPARE has received notice or become aware of any such claim or
threatened claim;
(d) This agreement to indemnify and hold harmless shall be effective
only if such payment does not arise from, or was not caused by or did
not result from the negligence, intentional or willful misconduct of
COMPARE or its employees or agents other than CARRIER;
(e) This agreement does not apply unless CARRIER or its insurer has been
given a timely opportunity to defend COMPARE against any such claim.
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11. COMMUNICATIONS.
Any written or printed material prepared for general circulation by CARRIER
relating to COMPARE's services or obligations under this Agreement which
is to be published, disseminated, released or prepared for distribution by
CARRIER to physicians, hospitals, medical personnel, enrollees, or to the
general public will be released only after consultation with and approval
by COMPARE which shall not be unreasonably withheld.
12. TERM AND TERMINATION.
A. This Agreement shall commence on January 1, 1989, conditioned upon OPM
approval of the terms of this Agreement. This Agreement shall end on
December 31, 1989. At CARRIER's option, it shall be renewable for two
successive annual periods at the fee as outlined in Section 4(B) of this
Agreement. Should either party desire to modify the Agreement, said party
shall give written notice of such intent as soon as practicable upon
CARRIER's notice of intent to renew.
B. This Agreement may be terminated by CARRIER upon thirty (30) days
written notice if any one of the following occurs, but in no event shall
such termination relieve COMPARE from any of its obligations incurred under
this Agreement:
(l) Failure of COMPARE to meet any material covenant, agreement, or
obligation provided for in this Agreement if it has not commenced to
cure any such default within twenty (20) days after written notice
thereof to COMPARE by CARRIER.
(2) COMPARE becomes insolvent, or is adjudicated as bankrupt, or its
business comes into possession or control, even temporarily, of any
trustee in bankruptcy, or a receiver is appointed for it, or it makes a
general assignment for the benefit of creditors. If any one of these
events occurs, no interest in this Agreement shall be deemed an asset of
creditors. No interest in this Agreement shall be deemed an asset or
liability of COMPARE, nor shall any interest in this Agreement pass by
operation of law without the consent of CARRIER.
C. This Agreement may be terminated by COMPARE upon thirty (30) days
written notice if any of the following occurs, but
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in no event shall such termination relieve CARRIER from any of its
obligations incurred under this Agreement:
(1) Failure of CARRIER to meet any material covenant, agreement, or
obligation provided for in this Agreement if it has not commenced to
cure any such default within twenty (20) days after written notice
thereof to CARRIER by COMPARE.
(2) Failure of CARRIER to make payment provided for under this Agreement
or under any Agreement executed under the provisions of this Agreement
when due, and if payment is not made within fifteen (15) days following
written notice of non-payment sent by COMPARE to CARRIER.
(3) CARRIER ceases to operate or has its approval to operate revoked by
OPM, or becomes insolvent, or is adjudicated as bankrupt, or its
business comes into possession or control, even temporarily, of any
trustee in bankruptcy, or a receiver is appointed for it, or it makes a
general assignment for the benefit of creditors. If any one of these
events occurs, no interest in this Agreement shall be deemed an asset of
creditors. No interest in this Agreement shall be deemed an asset or
liability of CARRIER, nor shall any interest in this Agreement pass by
operation of law without the consent of COMPARE.
D. Upon the effective date(s) of the termination of this Agreement for any
reason:
(1) CARRIER or COMPARE will promptly pay to the other party all monies
due hereunder.
(2) CARRIER will immediately cease to represent that COMPARE is its
Hospital Review provider and will cease to use COMPARE's documents,
systems, logo-types, service marks, trademarks, trade names, methods and
techniques in any form, and all covenants, agreements, and obligations
of the parties under this Agreement shall thereupon end.
(3) COMPARE will be paid a one time administrative fee equal to one-half
of the final monthly fee as reimbursement for post-termination
activities,
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including the continuing access to information regarding reviews, final
data reporting and analyses and other termination activities. Prior to
the effective date of termination, CARRIER shall use its best efforts to
advise Covered Persons of said termination of Hospital Review services.
13. ASSIGNMENT.
Neither CARRIER nor COMPARE shall assign or transfer their respective
rights or obligations hereunder without the specific prior written approval
of the other party, provided, however, this shall not be deemed to limit
COMPARE from subcontracting, or employing other entities or parties, or
from assigning its rights and obligations hereunder to a subsidiary or
affiliate of COMPARE.
14. SUBCONTRACTOR COST OR PRICING DATA.
A. Should OPM require and CARRIER request, COMPARE shall submit, actually
or by specific identification in writing if actual submission of the data
is impracticable, to CARRIER cost or pricing data prior to the CARRIER's
execution of this Agreement and prior to the pricing of any modification to
this Agreement which involves aggregate increases or decreases in costs,
plus applicable profits, expected to exceed $100,000, except where the
price is based on adequate price competition, established catalog or market
prices of commercial items sold in substantial quantities to the general
public, or prices set by law or regulation.
B. COMPARE shall certify in writing to the CARRIER that to the best of its
knowledge and belief, the cost or pricing data submitted under subsection
(A) above is accurate, complete and current as of the date of agreement on
the negotiated price of this Agreement or change or modification thereto.
COMPARE shall make this certification by using the following form:
Certificate of Current Cost or Pricing Data
-------------------------------------------
This is to certify that, to the best of my
knowledge and belief, cost or pricing data,
submitted in writing, or specifically
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identified in writing if actual submission of the data
is impracticable, to in
------------------
support of [insert description] are accurate,
------------------------
complete, and current as of [insert date] .
-----------------
Firm
------------------------
Name
------------------------
Title
-----------------------
---------------------------
Date of Execution
C. COMPARE shall insert the substance of this subsection, including this
subsection (C), in each subcontract hereunder which exceeds $100,000 when
entered into, except where the price thereof is based on adequate price
competition, established catalog or market prices of commercial items sold
in substantial quantities to the general public, or prices set by law or
regulation. In each excepted subcontract hereunder in excess of $100,000,
COMPARE shall insert the substance of the "Subcontractor Cost or Pricing
Data - Price Adjustments" clause, recited in Contract #CS-1067.
15. OTHER PROVISIONS.
The following provisions of Contract #CS-1067 between the CARRIER and OPM
and its successor contracts are incorporated by reference in this Agreement
and shall be binding on COMPARE:
Section 4.2 Equal Opportunity
Section 4.6 Employment of the Handicapped
Section 4.7 Clean Air and Water
Section 4.8 Examination of Records by
Comptroller General
Section 4.10 Convict Labor
Section 4.11 Disabled Veterans and
Veterans of the Vietnam Era
Section 4.12 Preference for U.S. Flag Air
Carriers
Section 4.14 Audits and Records
Section 4.17 Administration of Cost Accounting
Standards
Section 4.20 Other Record Retention Requirements
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For purposes of this Agreement, all references in the foregoing provisions
of Contract #CS-1067 to the "contractor" shall be treated as references to
COMPARE, and all references to the "contract" or "prime contract" therein
shall be treated as references to this Agreement.
16. MISCELLANEOUS.
A. This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, and their successors and assigns. This Agreement
constitutes the entire agreement between the parties and supersedes any
prior agreement or understandings, whether oral or written, to the
contrary. Every change, amendment or alteration in this Agreement shall be
in writing and signed by the parties hereto. The paragraph headings are for
convenience only and shall not be deemed to limit, define, or restrict the
meaning or contents thereof. This Agreement is executed in the State of
Illinois, and will be controlled by and construed under the laws of the
State of Illinois except to the extent that it is governed by federal law.
B. The provisions of paragraphs 5, 7, 11, 12 and 16 shall survive the
termination of this Agreement.
C. All notices provided herein shall be in writing, and shall be sent
registered mail with return receipt requested to the following address or
to such other address as either party may hereafter furnish, to wit:
For COMPARE: (1) James C. Smith, President
HealthCare COMPARE Corp.
3200 S. Highland
Downers Grove, IL 60515-1223
(2) Copy Ronald H. Galowich
Vice President and General Counsel
200 W. Madison, 38th Fl.
Chicago, IL 60606
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For CARRIER: (1) Vincent R. Sombrotto, President
National Association of Letter
Carriers Health Benefit Plan
100 Indiana Ave., N.W.
Washington, D.C. 20001
(2) National Association of Letter
Carriers Health Benefit Plan
11111 Sunset Hills Road
Reston, VA 22093
Attn: Harry Boteler, Administrator
COPY Bruce H. Simon, Esq.
Cohen, Weiss & Simon
330 W. 42nd Street
New York, NY 10036
D. Neither the execution of this Agreement nor the performance of any of
its obligations constitutes an undertaking by COMPARE or CARRIER to
guarantee the results of health care provider services to Covered Persons
or that such will be rendered in accordance with generally accepted medical
standards or procedures; all such services and the results thereof are
determined by the physician or hospital.
E. In the event any provision of this Agreement conflicts with laws
applicable hereto or under which this Agreement is construed, or if any
provision of this Agreement shall be held illegal or unenforceable or
partially illegal or unenforceable by a court with jurisdiction over the
parties to this Agreement, then this Agreement shall be modified to conform
with said laws or judicial determination and such provision shall be
construed and enforced only to such extent as it may be a legal and
enforceable provision, and all other provisions of this Agreement shall be
given full effect separately therefrom and shall not be affected thereby.
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F. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the
same instrument. The Exhibits and Schedules attached hereto are by
reference deemed incorporated herein.
IN WITNESS WHEREOF the parties have executed this Agreement the day and date
first above written by their duly authorized officers for and on behalf of said
corporation.
National Association of Letter HealthCare COMPARE Corp.
Carriers Health Benefit Plan
By: Harry Boteler By: James C. Smith
-------------------------------- --------------------------
Title: Administrator President
-----------------------------
<PAGE> 19
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
Schedule of Fees
HOSPITAL REVIEW . . . . . . . . . $1.23 per employee per month
CASE MANAGEMENT . . . . . . . . . $160 per hour*
ADMINISTRATIVE
RUN-OFF FEE . . . . . . . . 50% of the final monthly fee
* The hourly charge is for time and services of case management personnel,
which may be a physician, registered nurse, or allied personnel.
12/9/88
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EXHIBIT IID-MA
HOSPITAL REVIEW PROGRAM
FOR NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
A. SCOPE OF PROGRAM
The Hospital Review Program provides preadmission and continued stay review of
all hospitalizations unless the primary diagnosis is for a mental or nervous
disorder or substance abuse (MDC-l9 and MDC-20 codes). For purposes of this
Agreement only, admissions for substance abuse detoxification are considered to
be a substance abuse admission, not a medical admission. For other mental or
nervous or substance abuse admissions where the proximate cause of the
admission is medical, COMPARE will perform review until such time as treatment
for the medical problem is complete.
An admission is reviewed under this program if the hospitalization occurs in
the 50 United States, if the date of admission (rather than the notification
date to COMPARE) is during the term of this Agreement as described in Section
12 of this Agreement; and if COMPARE is notified of the admission before or
during the hospitalization unless the first such notification occurs on the day
of discharge. (In the event of emergency admissions, review will occur after
discharge only if COMPARE is notified within three business days of the
admission). Completion of review may require that the attending physician
provide medical information to COMPARE by telephone; failure of the attending
physician to do so may result in inability to complete review.
All conditions and terms of the Utilization Review Agreement are in full force
and effect.
Review of hospital admissions not in accordance with the definitions of scope
of program contained herein will occur at the request of CARRIER and at the
discretion of COMPARE, and CARRIER will be billed for such services at
COMPARE's then customary charges for such services.
For example, at the request of CARRIER, COMPARE may perform a retrospective
review for admissions not reviewed prior to, or during the hospitalization.
Such review may be requested by CARRIER for hospitalizations for which COMPARE
was not notified prior to discharge or for which the attending physician failed
to provide required information. Medical records of such hospital admissions
must be provided by CARRIER at its expense to COMPARE and such retrospective
review is not included in the fees listed in the Schedule of Fees.
<PAGE> 21
CARRIER shall be charged at a rate of $160 per hour for retrospective review
requests.
B. PROCESS
l. Prior to a proposed hospitalization, the attending physician contacts
COMPARE, and provides the information needed to perform review. At a minimum,
the attending physician supplies COMPARE with information that includes:
demographic information, the reason for hospitalization, any proposed treatment
plan or surgery, and the number of hospital days anticipated. If a person other
than the attending physician contacts COMPARE regarding pending
hospitalization, COMPARE will initiate a call to the attending physician to
obtain necessary information. Failure of attending physician to provide
information as outlined on a timely basis may result in inability to complete
review. COMPARE will make two attempts to obtain the information from the
attending physician before stopping review as an incomplete review. The
decision on whether or not to be admitted to, or remain in, the hospital is
made only by the Covered Person and his or her attending physician. Failure to
follow program procedures may affect benefit coverage.
2. If a Covered Person is admitted to a hospital on an emergency basis, the
attending physician calls COMPARE within three business days of the admission
and furnishes the information as is required for review of elective admissions.
3. COMPARE will evaluate the proposed admission for certification of medical
necessity and appropriateness under CARRIER's benefit plan. On behalf of
CARRIER, COMPARE will then send a letter documenting its certification
recommendation to the Covered Person, with copies to the attending physician,
hospital, and CARRIER or its claims payor. The letter will state COMPARE's
advice as to whether the requested admission can or cannot be certified for
payment of benefits as medically necessary under the terms of CARRIER's benefit
plan. If the admission is certified, the letter will also include a statement as
to the number of days of hospitalization which can initially be recommended for
certification. COMPARE and CARRIER will not make any decisions as to whether
the Covered Person should or should not be or remain hospitalized; that
decision is made by the Covered Person and attending physician only.
4. Prior to the expiration of this initial or any further assigned length of
stay, COMPARE will contact the attending physician by telephone to determine if
the Covered Person has been discharged or if review for continued
hospitalization is required. If review for continued hospitalization is
required, such review will be performed as outlined in No. 3. Such continued
stay reviews will be performed until discharge occurs
<PAGE> 22
as long as adequate medical information is provided by the attending physician.
COMPARE will make two attempts to obtain the information from the attending
physician before stopping review as an incomplete review.
5. All nurses and physicians providing services set forth in this Exhibit are
currently licensed, registered, and/or certified in the appropriate states and
specialties. Such medical personnel will answer all incoming calls and shall be
primarily responsible for all other aspects of the review procedure. A
physician-reviewer is the only person who will make a recommendation for
non-certification of medical necessity under the terms of the benefit plan. Such
non-certification recommendation will be made only following discussion with,
or attempted discussion with, the attending physician.
C. REPORTS
COMPARE will provide CARRIER with written reports of its review activities
under this Agreement as follows:
Basic Reports Frequency
------------- ---------
(1) Review Activity Summary Reports (Quarterly and
Annually)
(2) Scheduled Admissions for Quarter (Quarterly)
(3) Emergency Admissions for Quarter (Quarterly)
(4) Hospitalization Analysis (Annually)
(5) Narrative Summary and Analysis (Annually)
COMPARE reserves the right to refine the style and content of the
above-referenced reports and to substitute such other reports as it
deems will provide comparable information to CARRIER.
<PAGE> 23
EXHIBIT IIF-S
CASE MANAGEMENT PROGRAM
A. PROCESS
COMPARE's Case Management Program is a benefits case management system which
focuses on cases which involve certain high cost diseases/conditions/
procedures. This program is intended only to provide information
regarding additional benefit alternatives, along with the coverage levels of
such alternatives for consideration by the patient and attending physician.
Such alternatives may involve the use of certain "high tech" or home health
care providers. COMPARE will serve as a resource to identify such providers and
will continue its utilization review recommendations regarding these
services.
The patient and his/her physician determine the patient's care. The patient and
his/her physician may choose not to follow any of the alternatives identified
by COMPARE. However, such a choice may affect benefit coverages as determined
only by the CARRIER.
1. Potential cases are referred by the Claims Administrator. Claims
Administrator will verify that patient is eligible participant prior to the
referral.
2. Nurse Case-Management Specialist reviews all identified cases using broad
screens. Does the case warrant further case management activity?
Yes/Step #3
No/Case returned to Claims Administrator
3. A COMPARE Medical Director reviews the case information. The Nurse
Case-Management Specialist and Medical Director also review the medical
necessity of the hospital confinement and advise Claims Administrator,
patient, doctor and hospital, as to the number of days which can be
recommended for benefit certification of medical necessity under the Plans.
Does the case warrant further case management activity?
Yes/Step #4
No/Case returned to Claims Administrator
<PAGE> 24
4. Nurse Case-Management Specialist notifies the CARRIER that a possible case
has been identified, and requests authorization from the CARRIER to proceed
with further activities.
Approval given/Step #6
No approval to proceed/Case returned to Claims
Administrator
5. The Medical Director reviews the case to determine if additional information
is needed. Information adequate for case management?
Yes/Step #6
No/Contacts attending physician for necessary
information - then Step #6
6. COMPARE's Physician Specialist reviews the case specifics and identifies
cost-effective sites and types of care. Cost-effective options available?
Yes/Options identified, then step #7
No/Stop process and case returned to Claims Administrator
7. Additional providers of health care services or durable medical equipment
required?
Yes/COMPARE contacts possible provider and obtains a
summary of projected costs which may include
significant COMPARE-negotiated discounts. Then to
step #8.
If no experienced provider can be identified patient's area, the process is
stopped and a summary of case management activity up to this point is
furnished to the payor.
No/Step #8
8. COMPARE submits a written summary of available options to the CARRIER and
requests information from the payor as to the coverage levels that will be
approved for these options. (At this time, the CARRIER may wish to make a
decision on coverage for the options on a "by exception" basis.)
CARRIER informs COMPARE that coverage equal at least to
hospital coverage will be approved for the identified
options/Step #9
CARRIER decides not to cover options or to cover
at a rate that will increase the out-of-pocket costs
<PAGE> 25
for the patient/Case returned to Claims Administrator
9. COMPARE's Medical Director calls the attending physician and provides
information on benefit options identified for patient care and the
authorized coverage levels. If the attending physician has questions that he
or she wishes to address to a physician regarding the options, COMPARE will
have the Physician Specialist call the attending physician. (If the
Physician Specialist, COMPARE and the CARRIER agree that it is appropriate,
an on-site visit may be made by the Specialist to speak with the attending
physician. With the patient's consent, an on-site examination may also
be made.)
Physician and patient decide to take advantage of the
options available for coverage under the benefit
plan/Step #10
Physician and/or patient decide not to take advantage of
the options available for coverage under the benefit
plan/Step #10
10. COMPARE confirms to the patient and attending physician the information
previously provided including projected costs and coverage levels authorized
by the CARRIER in a letter.
Options adopted/Necessary patient and family training
started by providers
If the attending physician and patient decide to take advantage of the benefit
options identified through the Case Management Program, COMPARE continues its
review until:
(a) the patient no longer requires the services, or
(b) the patient's benefits are exhausted, or
(c) the patient's need for the services are determined
to be life-long.
When (a), (b), or (c) is reached, review is discontinued and a letter so noting
is issued to the patient, attending physician, and CARRIER, and Claims
Administrator.
B. REPORTS
COMPARE will provide CARRIER with written reports Of its review activities
under this Agreement as follows:
<PAGE> 26
Basic Reports Frequency
------------- ---------
(1) Case Management Activity Report (Quarterly/
Annually)
(2) Case Management Case Report As Needed
(Analysis of Alternate
site options)
(3) Managed Cases Summary Report (Quarterly/
Annually)
COMPARE reserves the right to refine the style and content of the
above-referenced reports and to substitute such other reports as it deems will
provide comparable information to CARRIER.
<PAGE> 27
Exhibit A
Performance Provisions
A. Conditions
COMPARE represents that the Hospital Review Services as described in Exhibit
IID-MA of this Agreement will reduce the number of days of hospitalization
in the first year of this Agreement to the "Target Performance" as
hereinafter defined. COMPARE agrees that if the Target Performance is not
met, it will reimburse CARRIER an amount equal to that portion of the "At
Risk Pool" calculated in Subsection E (Reimbursement Calculation) of this
Exhibit. COMPARE and CARRIER further agree:
1. The means of measuring this performance provision and for calculating any
amounts which may be owed CARRIER hereunder are described in this Exhibit A.
2. a. For purposes of its proposal to CARRIER for this Exhibit A, CARRIER has
provided COMPARE with certain original 1987 data. CARRIER agrees to
provide more detailed l987 baseline data to COMPARE no later than April
1, l989. The "baseline data" include (i) age/sex demographics of the
entire beneficiary population, (ii) age/sex demographics of patients with
inpatient care, (iii) utilization data concerning such inpatient care.
Such baseline data shall be provided in a mutually agreed format, and
shall be sufficient to support the Expected Days calculation described in
Subsection C of this Exhibit. The baseline data will also include a
description of the accounting conventions followed by CARRIER in its
reporting of the numbers of days and admissions. The l987 baseline data
will not be used as the 1987 basis for determining 1989 expected days as
described in Section C.
b. If, upon examination of this 1987 baseline data provided to COMPARE by
CARRIER, it becomes apparent that material differences exist between it
and the original 1987 data provided to COMPARE which COMPARE used in the
development of its proposal, and if such differences would have resulted
in material modification of COMPARE's initial proposal, then appropriate
modifications to the Target Performance shall be made upon the reasonable
mutual agreement of COMPARE and CARRIER.
3. CARRIER agrees that it will advise COMPARE of any changes in data
reporting or claims processing
<PAGE> 28
conventions which could materially affect the calculations in Sections C, D,
and E of this Exhibit. If, upon evaluation of such changes, it becomes
apparent that these calculations are materially affected, then
appropriate modifications to the Target Performance or to calculations in
Sections C, D and E shall be made upon the reasonable mutual agreement of
COMPARE and CARRIER.
4. CARRIER agrees to provide the 1987 and 1989 data hereinafter required to do
the performance calculations as defined in Sections C, D and E of this
Exhibit no later than September 30, 1990. CARRIER shall do the calculations
defined in Sections C, D, and E, and provide COMPARE with their supporting
documentation no later than September 30, 1990.
5. COMPARE has the right to verify the accuracy of the data and calculations by
audits or other means it deems appropriate. If requested by COMPARE for the
purposes of its audit, CARRIER shall deliver to COMPARE valid, accurate and
sufficient data which were CARRIER's basis of calculating its performance
determinations, said data to be in such form as COMPARE requires so that
COMPARE can verify CARRIER's determination. If COMPARE is not reasonably
satisfied that the data provided it by CARRIER are valid accurate and
sufficient to perform its audit or if upon completing said audit, COMPARE's
performance calculations vary from CARRIER's performance calculations,
COMPARE shall not be obligated to reimburse CARRIER until appropriate data
have been provided to COMPARE or until a final determination has been made
relative to the differences in CARRIER's and COMPARE's
calculations.
6. Nothing herein shall create any liability of COMPARE to pay CARRIER as a
result of this performance provision more than the amount in the At-Risk
Pool" for l989.
B. Definitions
1. "Per Enrolle" Fee: The fee per enrollee will be $1.23 per
month for 1989.
2. At Risk Pool: The "at risk pool" will be 10% of the total Per
Enrollee Fees paid for the first twelve months
of the contract. This excludes any fees
or compensation paid for services other than
Hospital Review Services as described in
Exhibit IID-MA. The total Per Enrollee Fee
<PAGE> 29
includes retroactive adjustments and is not
based on the estimated membership
3. Target
Performance: The Percentage Reduction is calculated in
Section E of this Exhibit and is identified as
"X%". The target performance is the achievement
of a Percentage Reduction (X%) at least equal
to 14%.
4. Admission: Overnight stay of a Covered Person in an acute
care general non-federal community hospital
(American Hospital Association definition).
5. Utilization Data: Utilization data includes diagnosis codes,
admission and length of stay information
pertaining to Covered Persons, sufficient to
complete the Calculation of Expected Days in
1989 as described in Section C of this Exhibit.
6. Cohort: The Cohort will consist of all Covered Persons
who are provided health care benefits by
CARRIER for both all of 1987 and all of 1989.
7. All Other: The utilization base will be all hospital
admissions in 1987 for the Cohort excluding
admissions for psychiatric care and substance
abuse where the proximate cause of the
admission is not medical, and excluding
admissions for deliveries and newborns. The
comparison will be all hospital admissions in
1989 for the Cohort, again excluding
psychiatric, substance abuse, delivery and
newborn admissions.
8. Delivery: The utilization base will be all delivery
admissions in 1987 for women in the Cohort. The
comparison will be all delivery admissions in
1989 to women in the Cohort. Separate
comparisons will be made for C-section
deliveries and vaginal deliveries.
9. Newborns: Newborn statistics will not be part of the All
Other admissions or of the performance
calculation. However, COMPARE will still review
these admissions. Once the exact nature of
<PAGE> 30
the CARRIER data base coding for newborns is
determined, Wyatt and COMPARE will agree on a
suitable definition (such as a minimum claimant
aqe on admission of 6 months) for exclusion
of newborn claims from the All Other pool.
10. DRG States: Admissions occurring in states with DRG-based
reimbursement systems will be included on the
same basis as any other admissions; Covered
Persons with these admissions will be
included in the Cohort.
11. Claim Runoff: For purposes of determining both the 1987 and
1989 actual days, claims paid through a period
6 months after the end of the calendar year
(and incurred in that calendar year) will be
included. Claims submitted to the CARRIER too
late to be paid during the 6 month runoff
period will be excluded from the calculation.
To be included, 1987 claims must be paid by
June 30, 1988; 1989 claims by June 30, l990.
C. Calculation of Expected Days in 1989:
The demographic adjustments described in Subsections l, 2, and 3 below
for delivery and all other claims will be based on the following
calculations, using 1987 data for the Cohort and performed
independently for delivery and all other claims.
All Other 1987 days/l000 for the Cohort will be calculated to the
nearest one tenth day, with separate days/1000 statistics being
calculated for each age and sex combination of the Covered Person. For
children, if necessary, Wyatt and COMPARE will agree to appropriate
assumptions as to the distribution of the child enrollment population.
The 1987 days/1000 numbers for each age/sex cell will be multiplied by
the l989 enrollment by age/sex (for the Cohort). The sum of the products
of these multiplications, across all age/sex cells, is the total
expected number of All Other days for 1987.
Four delivery admissions, average 1987 length of stay for the Cohort
will be calculated to the nearest one tenth day, with separate average
length of stay (ALOS) statistics being calculated for each age of the
mother, separately for each of the delivery types. These 1987 ALOS
numbers for each age of the mother will be multiplied by the actual
number of
<PAGE> 31
l989 deliveries (for the Cohort) by age of the mother and delivery type. The
sum of the products of these multiplications across all ages and
delivery types is the total expected number of delivery days for l989.
1. Obtain 1987 utilization and demographic data:
a. All Other: Obtain the 1987 actual days/1000 for the following age and sex
groups for Covered Persons still covered in 1989:
Male: l, 2, 3, 4, 5, ... 63, 64.
Female: l, 2, 3, 4, 5, ... 63, 64.
b. Delivery: Obtain the 1987 actual C-section and vaginal delivery ALOS for
the following age groups for women still covered in l989:
Female: less than or equal to 10, 11, 12, 13, ...
48, 49, 50 and older
Broader age groups may be required for either the All Other or Delivery
calculations in the interests of smoothing the data. This will be determined
at the time of the base year calculation by Wyatt and COMPARE. Back up
information will be provided to COMPARE to substantiate the calculation.
2. Obtain 1989 utilization and population-parameters
a. All Other: For the cells listed in Subsection C(l)(a), obtain the
enrollment figures for l989, but including only Covered Persons who had been
members in 1987
b. Delivery: For the cells listed in Subsection C(l)(b), obtain the number
of C-section and vaginal delivery admissions in 1989, but including only
Covered Persons who had been members in 1987.
3. Expected Days Calculation
a. All Other: Multiply the l989 actual Cohort enrollment in each age/sex
cell times the respective 1987 days/1000 for that same cell and sum for the
products to obtain the total expected All Other days hospitalized for the
Cohort in l989.
b. Delivery: Multiply the 1989 actual delivery admissions in each
age/delivery type cell times the respectlve 1987 ALOS for that same cell and
sum for the products to obtain the total expected delivery days hospitalized
for the Cohort in l989.
<PAGE> 32
D. Performance Formulas:
1. Categories of Days Used In Calculation:
In doing the performance calculation, actual Cohort hospital days in l989
must be divided into the following three components distinguishing with
each component between delivery days (by type) and All Other days:
Group A (Reviewed/Certified): Certified days for admissions that were
reviewed by COMPARE. In cases where the Covered Person stayed
in the hospital longer than the number of days
certified by COMPARE, only the days certified will be included
in this total. In cases where the actual stay was shorter than
the certified days, the actual number of days is used.
Group B (Reviewed/Uncertified): Uncertified days for admissions that
were reviewed by COMPARE. In cases where the Covered Person
stayed in the hospital longer than the number of days certified
by COMPARE, the excess days that were not certified will be
included in this total.
Group C (Unreviewed): All hospital days for unreviewed admissions.
Group B is necessary because the wording regarding the application of the
penalty for the extension of a stay beyond the certified number of days
is not clear on the brochure.
2. All Other:
The total expected 1989 All Other hospital days for the Cohort is first
determined as described in Subsection C(3)(a) of this Exhibit. Then the
actual 1989 hospital days for the Cohort is determined and
separated into Percentage reduction calculations the three components
(Groups A, B and C) above.
All Other Actual to Expected Ratio (R) =
Group A
----------------------------------------------
Total Expected 1989 Days - (Group B + Group C)
All Other Percentage Reduction (AO%) = 100% x (l-R)
<PAGE> 33
3. Delivery:
The total expected 1989 delivery days for the Cohort is determined
as described in subsection c(3)(b) of this Exhibit, separated
into C-section and vaginal delivery days. Then the actual 1989
delivery days for the Cohort is determined and separated into six
components (C-section Groups A, B, and C; Vaginal Groups A,
B and Percentage Reduction Calculations.
Vaginal Actual to Expected Ratio (RV) =
Vaginal Group A
----------------------------------------------------------
Total Vaginal Expected 1989 Days - (Vaginal Group B +
Vaginal Group C)
C-section Actual to Expected Ratio (RC) =
C-section Group A
----------------------------------------------------------
Total C-section Expected 1989 Days - (C section Group B
+ C-section Group C)
Combined Delivery Percentage Reduction (M%) =
100% x [(1-RV) x Denominator RV + (1-RC) x Denominator RC]
- ----------------------------------------------------------
Denominator RV + Denominator RC
E. Reimbursement Calculation
Percentage Reduction (X%) =
AO% x Denominator R + M% x Denominator M%
-----------------------------------------
Denominator R & Denominator M%
If the decrease X% is less than 14.0%, then COMPARE would pay
CARRIER (14.0% - X%) x 10 of the At Risk Pool. No payment is
required if the decrease exceeds 14%.
For example, if the percentage reduction is 10.2%, a payment of
(14.0% - 10.2%) x 10 = 38% of the At Risk Pool to CARRIER would
result.
<PAGE> 1
FIRST AMENDMENT TO THE UTILIZATION REVIEW AGREEMENT
DATED JANUARY 1, 1989
BETWEEN
HEALTHCARE COMPARE CORP.
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH BENEFIT PLAN
This AGREEMENT is entered as of this __ day of November, 1989, between
HealthCare COMPARE Corp. (hereinafter called "COMPARE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter called
"COMPANY").
WITNESSETH
WHEREAS, COMPARE AND COMPANY have heretofore entered into a certain
UTILIZATION REVIEW AGREEMENT, dated January 1, 1989, which provides for
utilization review services to be rendered to COMPANY,
WHEREAS, COMPARE and COMPANY desire to amend the Utilization Review Agreement
in the manner set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, one dollar and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
A. Paragraph 4.B. of the Utilization Review Agreement is hereby amended to read
as follows:
B. The "base fee" set out in the Schedule of Fees is for the first year of this
Agreement. For each year after the first year of the term (the "Renewal
Year"), COMPARE shall have the right to increase the fee charged CARRIER.
Such base fee for Hospital Review Services shall not, without the specific
written approval of CARRIER, be increased over the base fee by more than
the lower of, i) the percentage of increase by which the Consumer Price
Index (CPI) on December 31 of the last preceding year exceeded the CPI from
December 31, 1988, or, ii) the annual percentage increase allowed by OPM in
establishing the administrative expense ceiling for the CARRIER applicable
to the Renewal Year. For the purposes of Subsection (i), the term "Consumer
Price Index" means the Consumer Price Index - U.S. City averages for Urban
Wage Earners and Clerical Workers, All Items, of the United States Bureau of
Labor Statistics (1982-l984 = 100). The Consumer Price Index for any year
shall be determined by averaging the
<PAGE> 2
monthly All Items Indices for that year. If the manner in which such
Consumer Price Index as determined by the Bureau of Labor Statistics shall
be substantially revised, an adjustment shall be made in such revised
index which would produce results equivalent, as nearly as possible, to
those which would have been obtained if the Consumer Price Index had not
been so revised. If the 1982-1984 average shall no longer be used as an
index of 100, such change shall constitute a substantial revision.
B. Parties hereby ratify and affirm the Utilization Review Agreement and agree
that it is in full force and effect and valid except as amended herein. This
Amendment shall prevail over any conflict with the Utilization Review
Agreement. In all respects the Utilization Review Agreement shall be
construed and interpreted to include all of the terms of this Amendment as
if the same were set out therein.
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
NATIONAL ASSOCIATION OF HEALTHCARE COMPARE CORP.
LETTER CARRIERS HEALTH
BENEFIT PLAN
By: Vincent R. Sombrotto By: James C. Smith
-------------------- ---------------------------
President
Title: President
------------------
2
<PAGE> 1
EXHIBIT 10.86
SECOND AMENDMENT TO THE UTILIZATION REVIEW AGREEMENT DATED
JANUARY 1, 1989
BETWEEN
HEALTHCARE COMPARE CORP.
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH BENEFIT PLAN
THIS AGREEMENT is entered as of this 1st day of January, 1991, between
HealthCare COMPARE Corp. (hereinafter called "COMPARE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter called
"CARRIER").
WITNESSETH
WHEREAS, COMPARE AND CARRIER have heretofore entered into a certain UTILIZATION
REVIEW AGREEMENT, dated January 1, 1989, which provides for utilization review
services to be rendered to CARRIER,
WHEREAS, COMPARE and CARRIER desire to amend the Utilization Review Agreement in
the manner set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, one dollar and other good and valuable consideration, receipt of which
is acknowledged, the parties hereto agree as follows:
A. Effective January 1, 1991, the Mental Health Services Review
Program as described in Exhibit IIG-FI shall be added to the scope of
services to be provided under the Utilization Review Agreement.
B. The Amended Schedule of Fees attached hereto and made a part
hereof shall replace and supersede all previous Schedules of
Fees.
C. Parties hereby ratify and affirm the Utilization Review Agreement and
agree that it is in full force and effect and valid except as amended
herein. This Amendment shall prevail over any conflict with the
Utilization Review Agreement. In all respects the Utilization Review
Agreement shall be construed and interpreted to include all of the
terms of this Amendment as if the same were set out therein.
<PAGE> 2
Page 2 of 2
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association of Letter HealthCare COMPARE Corp.
Carriers Health Benefit Plan
By: Harry D. Boteler By: James C. Smith
-------------------- -----------------------
Title: Administrator Title: President
-------------------- -----------------------
Date: 3/25/91 Date: 3/27/91
-------------------- -----------------------
<PAGE> 3
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH
BENEFIT PLAN
Amended Schedule of Fees
Effective 1/1/89 through 12/31/89 *
HOSPITAL REVIEW.....................................$1.23 per enrollee per month
CASE MANAGEMENT..................................................$160 per hour**
Effective 1/1/90 through 12/31/90 *
HOSPITAL REVIEW.................................... $1.29 per enrollee per month
CASE MANAGEMENT..................................................$178 per hour**
Effective 1/1/91 through 12/31/91 *
HOSPITAL REVIEW.....................................$1.36 per enrollee per month
CASE MANAGEMENT..................................................$189 per hour**
MENTAL HEALTH SERVICES REVIEW.......................$0.23 per enrollee per month
Plus $189 per hour ***
All Years
ADMINISTRATIVE RUN-OFF FEE..........................50% of the final monthly fee
* Adjustments to fees will be made annually.
* * The hourly charge is for time and services of staff personnel who may
be physicians, registered nurses or allied personnel.
* * * The hourly charge is for all activity associated with practitioner-to-
practitioner review and independent chart review.
<PAGE> 4
EXHIBIT IIG-FI
MENTAL HEALTH SERVICES REVIEW PROGRAM
FOR
NATIONAL ASSOCIATION OF LETTER CARRIERS HEALTH BENEFIT PLAN
A. SCOPE OF PROGRAM
The Mental Health Services Review Program provides pre-admission and
continued stay review of all full-time (or round-the-clock) inpatient (MDC 19 &
20) hospital admissions in hospitals or free-standing psychiatric facilities
where the length of stay is greater than seven (7) days. It also provides
review of all fully inpatient programs that focus on specific metal health
problems. An admission is reviewed under this program if the hospitalization
occurs in the 50 United States, if the services are rendered during the term of
this Agreement as described in Section 12 of this Agreement; and beginning on
the date of admission or the notification date, whichever is later. However,
if the service is ongoing and the admission began within two weeks of the date
of notification, COMPARE will include in its telephone review those two weeks
of service. If the admission began more than two weeks prior to the date of
notification, COMPARE will not perform review for that period. If PLAN desires
review for the period earlier, COMPARE will agree to provide the review if PLAN
obtains and provides the medical record. In those situations, COMPARE will
charge for that review at its normal, customary hourly rate, and the medical
records received shall become the property of COMPARE. In the event of an
emergency admission to inpatient facilities, review will begin at the time of
admission rather than at the time of notification to COMPARE, if COMPARE is
notified of that admission within three business days of the admission.
Completion of review may require that the attending physician provide medical
information to COMPARE's Mental Health Services Review Program by telephone;
failure of the attending physician to do so on a timely basis may result in
the inability to complete review.
All conditions and terms of the Utilization Review Agreement are in full force
and effect.
Review of inpatient mental health services not in accordance with the
definition of the scope of the program contained herein will occur at the
request of PLAN and the discretion of COMPARE. PLAN may be asked to provide
medical records for treatment which occurred prior to the beginning of the term
of this Agreement or the notification to COMPARE of the treatment, whichever is
later, and the PLAN will be responsible for obtaining and paying for such
records. PLAN will be billed for such reviews at COMPARE's then customary
charges for such services.
<PAGE> 5
The decision whether or not to be admitted to or remain in the hospital is made
only by the Covered Person and his or her attending physician. Failure to
follow program procedures may affect benefit coverage.
The program offers review of inpatient services with lengths of stay greater
than seven (7) days for:
1. full-time inpatient care in hospitals or free-standing
psychiatric facilities.
2. full-time inpatient programs which focus on specific mental
health problems (e.g., drug/alcohol abuse).
B. PROCESS
A. Initiation of Review
1. Elective Inpatient Admissions
The Covered Person and his/her practitioner determine the Covered
Persons care and hospitalization. However, in order to qualify
for maximum benefits coverage, prior to the admission the attending
practitioner must call COMPARE, using the toll-free number, and
provide demographic information, the Covered Person's history and
physical findings, drug work up, comprehensive treatment plan,
treatment goals, and proposed duration of therapy, as well as
information on educational background of the primary and attending
practitioner. If the Covered Person is participating in a formal
mental health program, the practitioner must also inform the
coordinator if the program has been certified by an authorizing
organization (e.g., AHA, JCAHA). Failure of the attending physician to
provide information as outlined on a timely basis may result in
inability to complete review.
This information is then reviewed by a COMPARE coordinator. A Mental
Health Review (MHR) practitioner contacts the attending physician if the
information appears to be incomplete or if it does not appear that the
admission can be certified as medically necessary under the terms of
the Covered Persons benefit plan.
If COMPARE'S coordinator or MHR practitioner determines that the
admission can be certified as medically necessary under the terms of
the benefit plan, he or she assigns a length of stay to determine the
date for the nest review. All recommendations of non-certification and
all cases where review is incomplete are verified to the PLANS written
copies of which will also be sent to the Covered
<PAGE> 6
Person, attending physician, and hospital if appropriate. COMPARE will
provide verbal notice of its recommendations to the attending
practitioner and will assign a certification number to the
certification period.
2. Emergency Admission
If the Covered Person is admitted to an inpatient setting on an
emergency basis, COMPARE must be notified by telephone within three
business days of the admission. Once this notification is
received, review is conducted as described above.
3. Cases Excluded From Review
In the following cases, a record will be opened and identified by a
specific reason code; however, review will not be performed for:
a. admissions where the proposed length of stay is seven (7) days
for less. In all such cases, the discharge date will be
verified by COMPARE and, if the patient remains in the hospital
beyond seven days, COMPARE will place a call to the attending
practitioner to initiate review.
b. court ordered admissions
c. cases where PLAN indicates that the patient has reached PLAN's
lifetime maximum as described in its official Brochure.
B. Extensive Review
COMPARE initiates all extended stay review for inpatient care. Two
days before an assigned length of stay ends, COMPARE calls the
attending physician to confirm that the Covered Person is still
receiving care and to obtain the information needed to perform the
review. Once again, a COMPARE MHR practitioner contacts the attending
physician if there is a question on certification. If certification is
recommended, a new length-of-stay is assigned.
If the attending practitioner cooperates with the Program, this process
is repeated until the Covered Person is discharged, until the
equivalent of the lifetime maximum benefit is reached, or until a
recommendation is made for non-certification under the terms of the
benefit plan.
<PAGE> 7
COMPARE will provide verbal notice of all its extension review
recommendations to the attending practitioner and will assign a
certification number to the certification period. All recommendations
of non-certification and all cases where review is incomplete are
verified to the PLAN, written copies of which will also be sent to the
Covered Person, attending physician, and hospital is appropriate.
C. REPORTS
COMPARE will provide PLAN with written reports of its review activities under
this Agreement as follows:
<TABLE>
<CAPTION>
Basic Reports Frequency
- ------------- ---------
<S> <C>
(1) Mental Health Services Review Summary (Quarterly & Annually)
Report (Reviews Requested/Outcomes)
(2) Mental Health Services Review (Quarterly)
Case Report
</TABLE>
COMPARE reserves the right to refine the style and content of the
above-referenced reports and to substitute such other reports as it deems will
provide comparable information to PLAN.
D. CHARGES FOR MENTAL HEALTH SERVICES REVIEW
All activity associated with the first level of review as described herein is
covered under the capitation fee set out in the Schedule of Fees. All
activity associated with practitioner-to-practitioner review and independent
chart review is billable at the hourly professional review fee set out in the
Schedule of Fees.
<PAGE> 1
EXHIBIT 10.87
Page 1 of 3
THIRD AMENDMENT TO THE UTILIZATION REVIEW AGREEMENT
DATED JANUARY 1, 1989, AS AMENDED
BETWEEN
HEALTHCARE COMPARE CORP.
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
THIS AGREEMENT is entered as of this 31st day of December 1991, between
HealthCare COMPARE Corp. (hereinafter called "COMPARE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter called
"CARRIER").
WITNESSETH
WHEREAS, COMPARE AND CARRIER have heretofore entered into a certain UTILIZATION
REVIEW AGREEMENT, dated January 1, 1989, and amended on November 1, 1989, and
January 1, 1991, which provides for utilization review services to be rendered
to CARRIER,
WHEREAS, COMPARE and CARRIER desire to amend the Utilization Review Agreement
in the manner set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out
herein, one dollar and other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
A. Paragraph 12.A. of the Utilization Review Agreement shall be deleted in
its entirety and replaced by the following:
A. The term of this Agreement shall be for one (1) year, beginning
January 1, 1989, and ending December 31, 1989, and shall automatically
renew for consecutive one (1) year terms thereafter, unless terminated
as hereinafter set forth, conditioned upon OPM approval of the terms of
this Agreement.
B. Effective January 1, 1992, Section 4.B (FEES AND SERVICES) shall be
deleted in its entirety and replaced with the following:
B. The "base fee" set out in the Schedule of Fees is for the first
year of this Agreement. For each year after the first year of the
term (the "Renewal Year"), COMPARE shall have the right to
increase the fee charged CARRIER. Such base fee for Hospital Review
Services shall not, without the specific written approval of
CARRIER, be increased over the base fee by more than the lower of,
i) the percentage of increase by which the Consumer Price Index
("CPIU") on December 31 of the last preceding year exceeded the CPI
from December 31, 1988, or, ii) the annual CPI increase allowed by
OPM in establishing the administrative expense ceiling for the
CARRIER applicable to the Renewal Year ("OPM-CPI"). For the purposes
of Subsection (i), the term "Consumer Price Index" means the
consumer price Index - U.S. City averages for Urban Wage Earners and
Clerical Workers, All Items, of the United States Bureau of Labor
Statistics
<PAGE> 2
Page 2 of 3
(1982-1984=100). The Consumer Price Index for any year shall be determined
by averaging the monthly All Items Indices for that year. If the manner in
which such Consumer Price Index as determined by the Bureau of Labor
Statistics shall be substantially revised, an adjustment shall be made in
such revised index which, would produce results equivalent, as nearly as
possible, to those which would have been obtained if the Consumer Price
Index has not been so revised. If the 1982-1984 average shall no longer be
used as an index of 100, such change shall constitute a substantial
revision.
For the purposes of Subsection (ii), CARRIER shall notify COMPARE of the
average of the monthly OPM-CPI between October 1 and September 30 no later
than October 31 of each year. COMPARE shall prepare and deliver to
CARRIER a Schedule of Fees for the upcoming year based on the OPM-CPI. The
Schedule of Fees shall be sent to CARRIER within thirty (30) days of
receipt of OPM's estimate. Provided, however, in January of the year for
which the price increase is effective, COMPARE will determine whether the
CPIU was less than the OPM-CPI, in which case a revised Schedule of Fees
will be promptly provided to CARRIER.
CARRIER shall provide COMPARE with a summary document of OPM's advice of
the actual CPI percentage promptly upon their becoming aware of it.
CARRIER and COMPARE agree to adjust Hospital Review Fees paid as
set out above. Such adjustment and reconciliation will be completed within
thirty (30) days of receipt of OPM's actual annual percentage increase,
and COMPARE shall pay CARRIER or CARRIER shall pay COMPARE monies due
within thirty (30) days of completion of the adjustment.
C. Effective January 1, 1992, the revised Schedule of Fees, attached hereto
and made a part hereof, shall replace and supersede all previous
Schedules of Fees.
D. Parties hereby ratify and affirm the Utilization Review Agreement and agree
that it is in full force and effect and valid except as amended herein.
This Amendment shall prevail over any conflict with the Utilization Review
Agreement. In all respects the Utilization Review Agreement shall be
construed and interpreted to include all of the terms of this Amendment
as if the same were set out therein. The execution and delivery of this
Amendment by the undersigned has been duly authorized by all necessary
corporate action.
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association Of Letter Carriers HealthCare COMPARE Corp.
Health Benefit Plan
By: Vincent R. Sombrotto By: J.C. Smith
------------------------------ ------------------------
President
Title: President
---------------------------
Date: 1/3/94
---------------------------- Date:
-----------------------
<PAGE> 3
National Association of Letter Carriers
Health Benefit Plan
Schedule of Fees
Effective January 1, 1992 - December 31, 1992*
MEDICAL/SURGICAL HOSPITAL REVIEW . . . . . . . . . $1.39 per enrollee per month
CASE MANAGEMENT. . . . . . . . . . . . . . . . . . $200 per hour**
MENTAL HEALTH SERVICES REVIEW . . . . . . . . . . $0.24 per enrollee per month
Plus $200 per hour***
ADDITIONAL SERVICES:
Medical Record Photocopies . . . . . . . . . . . FEE WAIVED****
ADMINISTRATIVE RUN-OFF FEE. . . . . . . . . . . . . 50% of the final monthly fee
* Adjustments to fees will be made annually.
** The hourly charge is for time and services of staff personnel who may
be physicians, registered nurses, or allied personnel.
*** The hourly charge is the all activity associated with
practitioner-to-practitioner review and independent chart review.
**** COMPARE will photocopy 180 medical records per year at no charge to
NALC. Each record in excess of 180 will be billed at $100 per hour for
staffing and equipment costs.
November 22, 1991
rev. November 13, 1992
rev. December 9, 1993
<PAGE> 1
EXHIBIT 10.88
Page 1 of 2
FOURTH AMENDMENT TO THE UTILIZATION REVIEW AGREEMENT
DATED
JANUARY 1, 1989, AS AMENDED
BETWEEN
HEALTHCARE COMPARE CORP.
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
THIS AGREEMENT is entered as of this 1st day of January, 1993, between
HealthCare COMPARE Corp. (hereinafter called "COMPARE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter called
"CARRIER").
WITNESSETH
WHEREAS, COMPARE AND CARRIER have heretofore entered into a certain UTILIZATION
REVIEW AGREEMENT, dated January 1, 1989, and amended on November 1, 1989,
January 1, 1991, and December 31, 1991, which provides for
utilization review services to be rendered to CARRIER,
WHEREAS, COMPARE and CARRIER desire to amend the Utilization Review Agreement
in the manner set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
out herein, one dollar and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
A. Effective January 1, 1993, the revised Schedule of Fees, attached
hereto and made a part hereof, and shall replace and supersede all
previous Schedule of Fees.
B. Parties hereby ratify and affirm the Utilization Review Agreement
and agree that it is in full force and effect and valid except as
amended herein. This Amendment shall prevail over any conflict with the
Utilization Review Agreement. In all respects the Utilization Review
Agreement shall be construed and interpreted to include all of the
terms of this Amendment as if the same were set out therein. The
execution and delivery of this Amendment by the undersigned has
been duly authorized by all necessary corporate action.
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association Of Letter Carriers HealthCare COMPARE Corp.
Health Benefit Plan
By: Vincent R. Sombrotto By: James C. Smith
---------------------------- ---------------------------
President
Title: President
--------------------------
Date: 1/3/94 Date:
-------------------------- --------------------------
<PAGE> 2
Page 2 of 2
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
Schedule of Fees
Effective January 1, 1993 - December 31, 1993*
MEDICAL/SURGICAL HOSPITAL REVIEW ................. $1.43 per enrollee per month
CASE MANAGEMENT .................................. $200 per hour**
MENTAL HEALTH SERVICES REVIEW ................... $0.25 per enrollee per month
Plus $200 per hour***
ADDITIONAL SERVICES:
Medical Record Photocopies ....................... FEE WAIVED****
ADMINISTRATIVE RUN-OFF FEE ....................... 50% of the final monthly fee
* Adjustments to fees will be made annually.
** The hourly charge is for time and services of staff personnel who may
be physicians, registered nurses, or allied personnel.
*** The hourly charge is the all activity associated with
practitioner-to-practitioner review and independent chart review.
**** COMPARE will photocopy 180 medical records per year at no charge to
NALC. Each record in excess of 180 will be billed at $100 per hour for
staffing and equipment costs.
November 30, 1993
<PAGE> 1
EXHIBIT 10.89
Page 1 of 3
FIFTH AMENDMENT TO THE UTILIZATION REVIEW AGREEMENT
DATED
JANUARY 1, 1989, AS AMENDED,
BETWEEN
HEALTHCARE COMPARE CORP.
AND
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
THIS AGREEMENT is entered into as of this first day of January, 1994, between
HealthCare COMPARE Corp. (hereinafter called "COMPARE"), and National
Association of Letter Carriers Health Benefit Plan (hereinafter called
"CARRIER").
WITNESSETH
WHEREAS, COMPARE AND COMPANY have heretofore entered into a certain UTILIZATION
REVIEW AGREEMENT, dated January 1, 1989, and amended on November 1, 1989,
December 31, 1991, January 1, 1991 and January 1, 1993, which provides for
utilization review services to be rendered to CARRIER,
WHEREAS, COMPARE and CARRIER desire to amend the Utilization Review Agreement
in the manner set out herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
out herein, one dollar and other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
A. Effective January 1, 1994, the revised Schedule of Fees, attached
hereto and made a part hereof, shall replace and supersede all
previous Schedule of Fees.
B. Parties hereby ratify and affirm the Utilization Review Agreement as
amended, and agree that it is in full force effect and valid except
as amended herein. This Amendment shall prevail over any
conflict with the Utilization Review Agreement. In all respects the
Utilization Review Agreement shall be construed and interpreted to
include all of the terms of this Amendment as if the same were set out
therein. The execution and delivery of this Amendment by the
undersigned has been duly authorized by all necessary corporate action.
<PAGE> 2
Page 2 of 3
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Amendment as of the day and year first above written.
National Association Of Letter Carriers HealthCare COMPARE Corp.
Health Benefit Plan
By: Vincent R. Sombrotlo By: James C. Smith
---------------------------- ---------------------------
President
Title: President
--------------------------
Date: 1/3/94 Date:
-------------------------- --------------------------
<PAGE> 3
Page 3 of 3
NATIONAL ASSOCIATION OF LETTER CARRIERS
HEALTH BENEFIT PLAN
Schedule of Fees
Effective January 1, 1994 - December 31, 1994*
MEDICAL/SURGICAL HOSPITAL REVIEW (Est) $1.47 per enrollee per month
.................
CASE MANAGEMENT .................................. $200 per hour**
MENTAL HEALTH SERVICES REVIEW (Est) $0.26 per enrollee per month
Plus $200 per hour*** ...................
ADDITIONAL SERVICES:
Medical Record Photocopies ....................... FEE WAIVED****
ADMINISTRATIVE RUN-OFF FEE ....................... 50% of the final monthly fee
* Adjustments to fees will be made annually.
** The hourly charge is for time and services of staff personnel who may
be physicians, registered nurses, or allied personnel.
*** The hourly charge is the all activity associated with
practitioner-to-practitioner review and independent chart review.
**** COMPARE will photocopy 180 medical records per year at no charge to
NALC. Each record in excess of 180 will be billed at $100 per hour for
staffing and equipment costs.
November 30, 1993
<PAGE> 1
EXHIBIT 10.90
RETAINER AGREEMENT
AGREEMENT, dated as of January 1, 1994, by and between HealthCare COMPARE
Corp., a Delaware corporation (the "Company"), and Ronald H. Galowich
("Galowich").
WITNESSETH:
WHEREAS, the Company desires to continue to employ Galowich as its General
Counsel and Galowich desires to continue to be employed in such capacity by the
Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereby agree as follows:
1. Retainer. The Company will continue to employ Galowich, and Galowich
will continue to diligently and faithfully serve the Company, on the terms and
conditions hereinafter set forth.
2. Term. The term of this Agreement shall commence on January 1, 1994,
and continue until terminated as hereinafter provided.
3. Duties. The Company will continue to employ Galowich as its General
Counsel with all responsibilities and duties currently attendant to such
position and such other duties as may, from time to time, be delegated to
Galowich by the Company's board of directors (the "Board").
4. Business of Company. During the term of this Agreement, Galowich will
devote adequate time, attention and energies to the business of the Company to
enable him to fulfill his duties hereunder.
5. Compensation. For services to be rendered by Galowich hereunder, in
whatever capacity, the Company agrees to pay to Galowich compensation of $3,750
per month. If requested to perform additional services pursuant to Paragraph 3
hereof in addition to those currently attendant to the position, Galowich shall
be paid such additional compensation as shall be agreed to by the Company and
Galowich.
6. Benefits.
(a) Benefits During the Term of this Agreement. In addition to the
compensation to be paid to Galowich pursuant to Paragraph 5 hereof, Galowich
shall be entitled, to the same extent as the Company's other employees and
executives, to participate in all employee welfare benefit programs maintained
by the Company from time to time during the term of this Agreement for its
employees and executives generally.
<PAGE> 2
(b) Benefits After the Term of this Agreement. In addition to the
compensation to be paid to Galowich pursuant to Paragraph 5 hereof, to the
fullest extent permitted under law, the Company shall make available to
Galowich and his wife (if he subsequently marries and requests coverage for his
wife at any time or from time to time thereafter), for the life of each of
them, at the Company's expense with respect to Galowich, and at Galowich's
expense with respect to his wife, all employee health benefits (including,
without limitation, medical, dental, vision and other similar plans) which are
maintained and/or paid for in whole or in part by the Company from time to time
for its employees and its executives generally; provided that (i) the Company's
obligations under this Paragraph 6(b) shall be suspended in whole or in part
during all periods after December 31, 1996 in which health benefits at least as
favorable as those to be made available hereunder are provided at no cost to
Galowich as a result of the employment of Galowich by any employer (other than
an employer with respect to which Galowich is the principal owner) subsequent
to the termination of his employment by the Company, and (ii) if health
benefits at least as favorable as those to be made available hereunder are
provided to Galowich as a result of the employment of Galowich by any employer
(other than an employer with respect to which Galowich is the principal owner)
subsequent to the termination of his employment by the Company but Galowich is
required to pay for such benefits, the Company, at its election, shall provide
health benefits to Galowich hereunder or reimburse Galowich for amounts
actually paid to his employer or others for such health benefits.
Notwithstanding the provisions of this Paragraph 6(b), Galowich may from time
to time elect not to accept such benefits for himself or his wife for any
period of time but, if thereafter requested by Galowich, such benefits shall be
made available to him or his wife. Nothing contained herein shall preclude the
amendment or termination of any such programs, the increase in any premium
payment or the reduction or elimination of any health benefit so long as it
applies to all employees or executives of the Company, in general. The
Company's obligations under this Paragraph 6(b) shall survive the termination
of this Agreement for any reason except for a termination of Galowich's
employment pursuant to Paragraph 8(c) hereof.
7. Expenses. The Company shall reimburse Galowich, upon submission by
Galowich of expense reports with substantiating vouchers, in accordance with
the Company's reimbursement policy for all reasonable expenses incurred by
Galowich in connection with the performance of services hereunder. To the
extent that Galowich is reimbursed for any expenses which are ultimately
disallowed to the Company by any taxing authorities, Galowich agrees to remit
to the Company the amount of any such disallowed expenses as the Board shall
determine to have been inappropriately expended.
8. Termination.
(a) The term of Galowich's employment under this Agreement shall
commence on January 1, 1994, and shall terminate on December 31, 1996, unless
otherwise terminated in accordance with the terms hereof. Upon the termination
of his employment hereunder pursuant to this Paragraph 8(a), all rights and
obligations of Galowich and the Company will terminate except as set forth
below:
-2-
<PAGE> 3
(i) Galowich shall be entitled to all earned but unpaid compensation
and amounts payable to Galowich pursuant to Paragraph 7 hereof; and
(ii) the terms and provisions of this Paragraph 8(a), and Paragraphs
6(b), 9 and 10 shall nevertheless survive and be binding and enforceable.
(b) Notwithstanding the provisions of Paragraph 8(a), Galowich may
terminate his employment under this Agreement at any time upon 30 days prior
written notice to the Company. Upon the termination of employment hereunder
pursuant to this Paragraph 8(b), all rights and obligations of Galowich and the
Company will terminate except as set forth below:
(i) Galowich shall be entitled to all earned but unpaid
compensation and amounts payable to Galowich pursuant to Paragraph 7
hereof; and
(ii) the terms and provisions of this Paragraph 8(b) and Paragraphs
6(b), 9 and 10 shall nevertheless survive and be binding and enforceable.
(c) Galowich's employment under this Agreement may be terminated
at any time by the Company for cause. As used herein "cause" shall mean (i)
theft, embezzlement or fraud by Galowich or Galowich's involvement in any other
scheme or conspiracy pursuant to which the Company has lost or could reasonably
be expected to lose assets to Galowich or to others calculated by Galowich
to receive such assets, (ii) incapacity on the job by reason of the non-medical
use or abuse of alcohol or drugs, (iii) commission of a felony or a crime
involving moral turpitude, (iv) material breach by Galowich of any of the
provisions of this Agreement which is not cured within 30 business days after
the Company gives written notice thereof to Galowich specifying the nature of
such breach, or (v) refusal to act in accordance with a lawful and duly adopted
resolution of the Board which is not contrary to the provisions of this
Agreement. Upon the termination of his employment hereunder pursuant to this
Paragraph 8(c), all rights and obligations of Galowich and the Company will
terminate except Galowich's obligations under Paragraph 9.
9. Confidentiality and Competition.
(a) In consideration of the substantial benefits to be provided
hereunder to Galowich by the Company, and in recognition of the fact that
Galowich occupies a position of trust and confidence with the Company,
Galowich acknowledges that he has provided, created and acquired and hereafter
will provide, create and acquire valuable and confidential information of a
special and unique nature relating to such matters as the Company's trade
secrets, systems, procedures, manuals, confidential reports, employee rosters,
client lists, software systems, products, business and financial methods and
practices, plans, pricing, selling techniques, special methods and processes
involved in designing, assembling and operating computer programs previously and
currently used by the Company and the application thereof to managed care
programs and other related electronic data processing information respecting
the Company's existing businesses and services and those developed during the
term of this Agreement, as well
-3-
<PAGE> 4
as credit and financial data relative to the Company and its clients, and
the particular business requirements of the Company's clients, including the
methods used and preferred by the Company's clients and fees paid by such
clients. For purposes of this Paragraph 9, the term "Company" shall mean
HealthCare COMPARE Corp. and each company which is a subsidiary thereof and any
partnership or joint venture in which the Company or any such subsidiary owns
an equity interest at any time during the term of this Agreement. In view of
the foregoing and in consideration of the compensation to be paid and other
benefits to be provided to Galowich hereunder, Galowich acknowledges and agrees
that it is reasonable and necessary for the protection of the goodwill and
business of the Company that he make the covenants contained herein regarding
his conduct during and subsequent to his employment by the Company and that the
Company will suffer irreparable injury if Galowich were to engage in any
conduct prohibited hereby. Galowich represents that his experience and/or
abilities are such that the observance of the aforementioned covenants will not
cause Galowich any undue hardship, nor will it unreasonably interfere with
Galowich's ability to earn a livelihood. Galowich and the Company further agree
that the covenants contained in this Paragraph 9 shall each be construed as a
separate agreement independent of any other provisions of this Agreement, and
that the existence of any claim or cause of action by Galowich against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of any of these covenants;
provided, however, that the covenants contained in this Paragraph 9 shall not be
enforceable by the Company during any period in which the Company has
wrongfully failed to (i) make a required payment under Paragraph 5 or 7 or
(ii) provide benefits as required under Paragraph 6. In the event a court of
competent jurisdiction determines that any provision of this Paragraph 9 is
unreasonable as to duration substantive extent or geographic scope, the
provision will nonetheless be enforced to the fullest extent reasonable.
(b) Galowich, while in the employment of the Company or at any time
thereafter, will not directly or indirectly communicate or divulge, or use for
the benefit of himself or of any other person, firm, association or
corporation, any of the Company's trade secrets or other confidential
information, including, without limitation, the information, described in
Paragraph 9(a), which trade secrets and confidential information were or will
be communicated to or otherwise learned or acquired by Galowich in the course
of his employment, except that Galowich may disclose such matters to the extent
that the disclosure thereof is required: (i) in the course of his employment by
the Company, provided such disclosure is made exclusively for the benefit of
the Company, or (ii) by a court, governmental agency of competent jurisdiction
or grand jury. This Agreement shall be inoperative as to such information which
(1) is or becomes generally available to the public other than as a result of a
disclosure by Galowich; (ii) is lawfully acquired by Galowich on a
non-confidential basis from a source other than the Company or any of its
affiliates, directors, officers, employees, agents or representatives, provided
that such source is not known to Galowich and should not reasonably be known to
Galowich to be bound by a confidentiality agreement in respect of or otherwise
prohibited from transmitting such information to Galowich by a contractual,
legal or fiduciary obligation; or (iii) Galowich can show was in his possession
prior to it being furnished to Galowich by or on behalf of the Company.
-4-
<PAGE> 5
(c) During the term of his employment by the Company, Galowich will
not contact, directly or indirectly, with a view towards selling any product or
service that is directly competitive with any product or service currently sold
(or currently proposed to be sold) by the Company during Galowich's employment,
any person, firm, association or corporation (aa) to which to Galowich's
knowledge the Company has provided its services, or (bb) which Galowich or to
his knowledge, any employee or representative of the Company has solicited,
contacted or otherwise dealt with on behalf of the Company, nor will he
directly or indirectly make any such contact, for the benefit or on behalf of
any other person, firm, association or corporation or in any manner assist any
person, firm, association or corporation to make any such contact.
(d) During the term of his employment by the Company, Galowich will
not directly or indirectly acquire any interest in any corporation, firm or
business (other than the Company) which is engaged in any business in the United
States that is directly competitive with the business of the Company as
currently conducted or currently proposed to be conducted, whether as an
employee, sole proprietor, director, officer, consultant, equity security
holder or otherwise (except that he may own up to 2% of the outstanding shares
of capital stock of any corporation whose stock is listed on a national
securities exchange or is traded in the over-the-counter market).
(e) During the term of his employment by the Company and for a
period of three years thereafter, neither Galowich nor any entity which,
Galowich controls, directly or indirectly, will, directly or indirectly, with
the knowledge of Galowich, employ, retain the services of or induce or attempt
to induce, in any manner whatsoever, any present or future employee of the
Company to leave the employ of the Company and/or to seek or accept employment
with Galowich or any other person, firm, association or corporation controlled,
directly or indirectly, by Galowich.
(f) In the event of a breach or threatened or intended breach of
this Agreement and the foregoing covenants by Galowich, Galowich acknowledges
that the Company will suffer irreparable injury and that ascertainment of the
exact amount of the Company's damages will be difficult, if not impossible, and
agrees that the Company shall be entitled, in addition to remedies otherwise
available to it at law or in equity, to injunctions both preliminary and
permanent and without bond therefor, enjoining or restraining such breach or
threatened or intended breach, and Galowich hereby consents to the issuance
thereof forthwith by any court of competent jurisdiction.
10. General Provisions.
(a) Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered or mailed by registered or
certified mail, return receipt requested, to the recipient at the address
indicated below:
-5-
<PAGE> 6
The Company: HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60615
Attention: James C. Smith
Galowich: Ronald H. Galowich, Esq.
200 West Madison Street
Suite 2800
Chicago, Illinois 60606
or to such addresses as are indicated by the Company's records or to such other
address or to the attention of such other person as the recipient party shall
have specified by prior written notice to the sending party. Notices will be
deemed to have been given hereunder when delivered or mailed in accordance with
this paragraphs.
(b) Modification, Amendment, Waiver. No modifications, amendment
or waiver of any provision of this Agreement shall be effective (unless made
pursuant to a written instrument signed by the party against whom enforcement
of any such modification, amendment or waiver is sought
(c) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(d) Remedies. Any party having any rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The failure of any party hereto at
any time to enforce any of the provisions of this Agreement will in no way
be construed as a waiver of such provisions and will not affect the right of
any party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(e) Complete Agreement. This Agreement embodies the complete
agreement and understanding between the parties and supersedes and preempts any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter in any way.
(f) Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and both of which taken
together shall constitute one and the same agreement.
-6-
<PAGE> 7
(g) Assignment. No right or obligation under this Agreement shall be
assignable.
(h) Choice of Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts of the State of Illinois.
(i) Further Actions. The Company and Galowich agree that at any
time, or from time to time after the execution of this Agreements, they will,
upon request of the other execute and deliver such further documents and do
such further acts and things as such party may reasonably request in order to
fully effect the purpose of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Retainer
Agreement as of the day and year first above written.
HEALTHCARE COMPARE CORP.
By: James C. Smith
-------------------------------------
President and Chief Executive Officer
Ronald H. Galowich
----------------------------------------
RONALD H. GALOWICH
-7-
<PAGE> 1
EXHIBIT 10.91
HEALTHCARE COMPARE CORP. EMPLOYMENT AGREEMENT
FOR SALES COLLEAGUES
This AGREEMENT is entered into between HealthCare COMPARE Corp., a
Delaware corporation headquartered in Illinois ("COMPARE") and Lottie A. Kurcz
(the "Colleague").
WITNESSETH
WHEREAS, COMPARE desires to employ Colleague in a sales capacity with an
incentive compensation plan, and Colleague is to be employed by COMPARE in such
capacity.
1. Employment. COMPARE hereby employs Colleague and Colleague agrees to
devote his/her full time and effort to COMPARE on the terms and conditions set
forth in this Agreement. Colleague also agrees to abide by any rules,
regulations and procedures of COMPARE as may be set forth in any policy or
procedure manual which COMPARE may adopt or modify from time to time.
2. Duties. COMPARE hereby employs the Colleague as a Vice President
Marketing with such sales responsibilities and duties as may be assigned by
COMPARE from time to time.
3. Term. This Agreement shall be effective as of July 1, 1992 and shall
continue until terminated as provided herein.
4. Compensation. Colleague shall be eligible for COMPARE's Sales Department
Incentive Compensation Program, which is attached as Exhibit A. Such Program
may be amended from time to time in COMPARE's sole discretion.
5. Termination. Either party may terminate this Agreement without cause
upon 30 days prior written notice to the other party.
6. Confidentiality. Colleague agrees not to directly or indirectly use or
disclose, for the benefit of any person, firm, or entity other than COMPARE, the
confidential business information of COMPARE. Confidential business information
means information or material which is not generally available to or used by
others or the utility or value of which is not generally known or recognized as
a standard practice, whether or not the underlying details are in the public
domain, including but not limited to its computerized and manual
<PAGE> 2
HealthCare COMPARE Employment Agreement Page 2
systems, procedures, reports, client lists, review criteria and methods,
financial methods and practices, plans, pricing and marketing techniques as well
as information regarding COMPARE's past, present, and prospective clients and
their particular needs and requirements, and their own confidential information.
Upon termination of employment, with or without cause, Colleague agrees to
return to COMPARE all policy and procedure manuals, records, notes, data,
memoranda, and reports of any nature (including computerized and electronically
stored information) which are in Colleague's, possession and/or control which
relate to (1) the confidential business information of COMPARE, (2)
Colleagues employment with COMPARE, or (3) the business activities or
facilities of COMPARE or its past, present, or prospective clients.
7. Restrictive Covenant. During the period of employment and for a period
of one year from the date of termination, with or without cause, Colleague will
not directly or indirectly, within the United States, own or engage in any
business which is similar to or competitive with any actual or planned business
activity engaged in or planned by COMPARE at the time the employment was
terminated, if in the course of such ownership or employment, it could
reasonably be anticipated that Colleague would be required to use or disclose
the confidential information of COMPARE. However, this Agreement shall not
prohibit ownership of up to 2% of the shares of stock of any such corporation
whose stock is listed on a national securities exchange or is traded in the
over-the-counter market.
For a period of one year after termination of employment, with or without
cause, Colleague will not directly or indirectly, for the purpose of selling
services provided or planned by COMPARE, call upon, solicit or divert any
actual customer or prospective customer of COMPARE. An actual customer, for
purposes of this paragraph, is any customer to whom COMPARE has provided
services within one year prior to Colleague's termination. A prospective
customer, for purposes of this paragraph, is any prospective customer to whom
COMPARE sought to provide services within one year prior to the date of
Colleague's termination and Colleague has knowledge of or and was involved in
such solicitation.
8. Non-Solicitation of Employees. Colleague further agrees that for a
period of one year from the date of Colleagues termination, with or without
cause, Colleague shall not directly or indirectly solicit or hire any person who
is currently or was an employee of COMPARE at any time during the six months
prior to Colleague's termination.
9. Remedies. In the event Colleague breaches or threatens to breach
Sections 6 or 7 of this Agreement, COMPARE shall be entitled to injunctive
relief, enjoining or restraining such breach or threatened breach. Colleague
acknowledges that COMPARE's remedy at law is inadequate and that COMPARE will
suffer irreparable injury if such conduct is not prohibited.
<PAGE> 3
HealthCare COMPARE Employment Agreement Page 3
Colleague and COMPARE agree that, because of the difficulty of ascertaining
the amount of damages in the event that Colleague breaches Section 8 of this
Agreement, COMPARE shall be entitled to recover, as liquidated damages and not
as a penalty, a sum equal to one year's annual salary of the employee(s)
solicited to leave COMPARE's semploy.
Colleague further agrees that the covenants contained in Sections 6, 7, and
8 shall be construed as separate and independent of other provisions of this
Agreement and the existence of any claim by Colleague against COMPARE shall not
constitute a defense to the enforcement by COMPARE of either of these paragraphs
10. Assignments. Neither party shall have the right or power to assign any
rights or duties under this Agreement without the written consent of the other
party, provided, however, that COMPARE shall have the right to assign this
Agreement without consent pursuant to any corporate reorganization, merger, or
other transaction involving a change of control of COMPARE.
If Colleague performs services and duties for any subsidiary or other
affiliated entity of COMPARE, then the provisions of Sections 6, 7, and 8 shall
apply to the confidential information and business activities, property rights,
clients, and employees of that subsidiary or other entity.
11. Severability. Each section, paragraph clause, sub-clause, and
provision, of this Agreement shall be severable from each other, and if for
any reason the paragraph, clause, subclause, or provision is invalid or
unenforceable, such invalidity or unenforceability shall not prejudice or in
any way affect the validity or enforceability of any other paragraph, clause,
sub-clause, or provision hereof.
12. Miscellaneous.
(a) Failure on the part of either party to insist upon strict
compliance by the other with respect to any of the terms, covenants,
and conditions hereof, shall not be deemed a subsequent waiver of such
term, covenant, or condition.
(b) In the event of litigation under this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees.
(c) The provisions of any paragraph containing a continuing obligation
after termination shall survive such termination whether with or
without cause and even if occasioned by COMPARE's breach or wrongful
termination.
(d) This Agreement may not be modified except in writing as signed by
the parties provided, however, that COMPARE may amend or terminate its
benefit plans or employees' rules and regulations in its sole discretion.
<PAGE> 4
HealthCare COMPARE Employment Agreement Page 4
(e) This Agreement supersedes the HealthCare COMPARE Employment
Agreement entered into between HealthCare COMPARE Corp. and Colleague
dated January 27, 1986.
13. Governing Law. This Agreement is executed in and shall be governed by
and construed in accordance with the laws of the State of Illinois.
COLLEAGUE ACKNOWLEDGES THAT COLLEAGUE HAS READ, UNDERSTOOD AND AGREES TO BE
BOUND BY THE TERMS AND CONDITIONS IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement in the State of Illinois.
HealthCare COMPARE Corp.
By: James C. Smith
------------------------
James C. Smith
Its: President and
Chief Executive Officer
Date:
------------------------
Colleague:
Lottie A. Kurcz
------------------------------
Lottie A. Kurcz
Date: 8/10/92
--------------------------
<PAGE> 1
EXHIBIT 10.92
HEALTHCARE COMPARE EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 23rd day of May, 1991, by and between HealthCare
COMPARE Corp., a Delaware corporation headquartered in Illinois (the
"Company"), and Mary Anne Carpenter (the "Employee").
WITNESSETH
WHEREAS, the Company desires to employ Employee, and Employee desires to be
employed by the Company.
1. Employment. The Company hereby agrees to employ the Employee as set
forth hereinafter, and Employee agrees to diligently and faithfully serve the
Company on the terms and conditions hereinafter set forth. Employee agrees to
perform such other duties as may be assigned during the term of this Agreement.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided the term of employment shall be for a period of three (3) years
commencing on May 23, 1991, and terminating on May 23, 1994, provided, however,
this agreement shall automatically renew and the term hereof shall be extended
for one year after the expiration of the Initial Term unless one party shall
give the other party not less than One hundred and twenty (120) days advance
written notice prior to the last date of the current term hereof that said party
is not extending the term hereof.
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<PAGE> 2
3. Duties. The Company hereby employs the Employee as the Senior Vice
President- Review Operations, with responsibilities and duties as are assigned
by, and subject to the supervision of the Executive Vice President and Chief
Operating Officer of the Company and for such other duties as may, from time to
time, be delegated to Employee by the Chief Operating Officer or his designee,
which duties shall include but shall not be limited to the overall supervision
of the Company's Review Operations, with direct reporting responsibilities to
the Executive Vice President and Chief Operating Officer of the Company, or any
other person(s) so directed.
4. Full-Time. During the term of this Agreement, Employee agrees to
devote Employee's entire time, attention and energies to the business of the
Company. Employee shall not be associated with, consult, advise, work for, be
employed by, or contract with or otherwise devote any of the Employee's time to
the pursuit of any other work or business enterprises which are in any ways
directly or indirectly competitive with the Company or any of its subsidiaries
whether as an employee, officer, director, consultant, creditor, security holder
or otherwise (except that Employee may own up to 2% of the shares of stock of
any corporation competitive to the Company whose securities are traded on a
national securities exchange or on the over-the-counter market).
5. Compensation. For services to be rendered by the Employee hereunder
in whatever capacity, the Company agrees to pay the following compensation to
Employee:
(a) Salary. Employee shall receive an annual salary of One Hundred
and Seventy-five Thousand ($175,000) effective May 23, 1991. This salary shall
be subject to annual increases on February 1 equal to the CPI rate for the
previous calendar year, and
2
<PAGE> 3
shall be payable at such time and manner as may from time to time be effective
and in force for similar employees of the Company, but not less often than
semi-monthly.
(b) Expenses. The Company shall reimburse the Employee upon
submission by the Employee of expense reports with substantiating vouchers in
accordance with the Company's reimbursement policy for all reasonable expenses
incurred by Employee in connection with the performance of services thereunder.
(c) Vacation. The Employee shall earn a total of three weeks paid
vacation for the first ten years of service and four weeks paid vacation over
ten years of service Vacation time shall be taken with due consideration for the
services required of Employee and to the requirements of the Company.
7. Illness, Incapacity and Death.
(a) If, because of illness or other incapacity, Employee shall fail
for a period of thirty (30) consecutive days or for shorter periods aggregating
thirty (30) days in any consecutive twelve (12) month period to render services
contemplated hereunder, the Company may, in its sole discretion and judgment,
fix a date on which it is deemed that the Employee became disabled and, at the
Company's option may terminate the term of Employee's employment hereunder by
giving written notice thereof to the Employees effective on the dates set forth
in such notice (which date shall not be less than ten (10) business days after
the mailing of such notice).
(b) In the event of the death of the Employee during the employment
term, the employment term shall terminate on the date of Employee's death.
3
<PAGE> 4
8. Termination Without Cause and Voluntary Termination.
(a) Anytime after the first year of this Agreement, without cause and
without any liability to the Company, the Company may terminate this Agreement
at any time upon one hundred and twenty (120) days notice to the Employee. In
such event, the Employee, if requested by the Company, shall continue to render
services and shall be paid Employee's regular compensation up to the date of
termination.
(b) If the Employee shall voluntarily terminate his employment
hereunder, the Company shall only be obligated to pay or cause to be paid to
Employee in a lump sum, an amount equal to (i) such amounts as the Employee
shall be entitled to receive under the terms of retirement and investment plans
of the Company, to the extent such plans permit such amount to be paid and
subject to and in accordance with applicable law and any beneficiary designation
made by the Employee in the plan which law and beneficiary designation shall
prevail, (ii) payment in respect of all accrued and unused vacation time, as
established in the Company's then current benefit plan, and (iii) payment in
respect of all accrued but unpaid compensation. Upon such termination and such
payment Company shall have no further obligation or liability to Employee.
9. Termination With Cause. If any of the following events occur during
the term of employment hereunder, the Company shall have the right to terminate
immediately the term of Employee's employment without any liability to the
Company.
(a) Employee commits a material and willful breach of this Agreement
which is not cured within five business days after the Company notifies the
Employee of such breach.
4
<PAGE> 5
(b) Employee refuses to follow a lawful and reasonable order or
direction of an officer of the Company.
(c) Employee commits an act which gives the Company cause for
terminating Employee. For purposes of this Agreement, "cause" shall include,
without limitation, the reasonable belief of the Company of the Employee's
dishonesty, theft, failure to follow Company policies or procedures, willful
misconduct or disregard of duties.
(d) Employee, in the sole judgment of the Company, is not performing
the duties assigned to him in a manner acceptable to Company or in a manner
consistent with Company's established procedures or policies.
10. Confidentiality and Competition.
(a) In consideration of the substantial benefits to be provided
hereunder to the Employee by the Company, and in recognition of the fact that
the Employee shall occupy a position of trust and confidence with the Company,
Employee acknowledges that Employee has acquired and hereafter will acquire
valuable and confidential information of a special and unique nature relating to
such matters as the Company's trade secrets, systems, procedures, manuals,
confidential reports, employee rosters, client lists, software systems,
products, business and financial methods and practices, plans, pricing, selling
techniques, and special processes involved in designing, assembling and
operating computer programs and the application there of to hospital
utilization review and other related electronic data processing information
respecting the Company's present and prospective clients, and the particular
business requirements of the Company's present and prospective clients,
including the methods used and preferred by the Company's clients and fees paid
by such clients. In
5
<PAGE> 6
addition, Employee has developed and may develop further on behalf of the
Company a personal acquaintance of the Company's clients and prospective
clients, which acquaintance may constitute the Company's only contact with such
clients. As a consequence thereof, Employee has occupied and will occupy a
position of trust and confidence with respect to the affairs of the Company, its
products and services. In view of the foregoing and in consideration of the
remuneration to be paid to Employee hereunder, Employee acknowledges and agrees
that it is reasonable and necessary for the protection of the goodwill and
business of the Company that he make the covenants contained in this Paragraph
10 regarding his conduct during and subsequent to his employment by the Company
and that the Company will suffer irreparable injury if Employee engaged in any
conduct prohibited thereby. Employee represents Employee's experience and/or
abilities are such that the observance of the aforementioned covenants will not
cause the Employee any undue hardship, nor will it unreasonably interfere with
Employee's ability to earn a livelihood. Employee and the Company further agree
that the covenants contained in this Paragraph 10 shall each be construed as a
separate agreement independent of any other provisions of this Agreement, and
the existence of any claim or cause of action by Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of any of these covenants.
(b) Employee, while in the employ of the Company or at any time
thereafter, will not, without the express written consent of the Company,
directly or indirectly communicate or divulge, or use for the benefit of
Employee or of any other person, firm, association or corporation, any of the
Company's trade secrets or other confidential
6
<PAGE> 7
information, including, solely by way of illustration, the matters mentioned in
Subparagraph (a) of this Paragraph 10, which trade secrets and confidential
information were or will be communicated to or otherwise learned or acquired by
Employee in the course of Employee's employment with the Company, except the
Employee may disclose such matters to the extent that disclosure thereof is
required (a) by a court or other governmental agency of competent jurisdiction.
During the term of this employment with the Company, Employee will not contact,
with a view towards selling any product or service competitive with any product
or service sold or proposed to be sold by the Company, any person, firm,
association or corporation (i) to which the Company provided its services or
(ii) which Employee solicited, contacted or otherwise dealt with on behalf of
the Company. During the term of his employment by the Company, Employee will not
directly or indirectly make any such contact, either for the benefit of Employee
or on behalf of any other person, firm, association or corporation to make any
such contact. During the term of Employee's employment by the Company, Employee
will not directly or indirectly have any interest in any corporation, firm or
business (other than the Company) which is engaged in a business in any area of
the world in which the Company engages in such business, whether as any
employee, director, officer, consultant, creditor, security holder or otherwise
(except that he may own up to 2% of the shares of stock of any such corporation
whose stock is listed on a national securities exchange or is traded on the
over-the-counter market). Employee and the Company acknowledge that the Company
presently conducts business in several jurisdictions within the United States.
7
<PAGE> 8
(c) Upon the voluntary or involuntary termination of employment during
the term hereof for any reason whatsoever, Employee agrees that, for the period
of one year from the date thereof, Employee will not directly or indirectly have
any interest or involvement in any corporation, firm, or business (other than
the Company) which is or becomes involved in any business activity of the
Company as presently conducted or as hereafter conducted during the employment
term, whether such interest or involvement is as an employee, director, officer,
consultant, creditor, security holder or otherwise (except that he may own up to
2% of the shares of stock of any such corporation whose stock is listed on a
national securities exchange or is traded on the over-the-counter market). In
addition, for such period the Employee shall not, directly or indirectly, for
the purpose of engaging in any activity of the Company, as presently conducted
or as hereafter conducted during the employment term, call upon, solicit,
divert, take away, contact, approach or deal with any person who is client or
employee of the Company during the employment term in order to obtain
utilization review business from such person or to cause such person to
terminate his employment with the Company, as the case may be. Notwithstanding
anything herein to the contrary, the Company and the Employee agree that the
Employee shall be permitted to become an officer, employee, director or
consultant with any insurance carrier, consulting firm or other entity which is
engaged in health care consulting or health care data processing, provided that
such business does not provide for utilization review, and that he shall be
further entitled to be employed by any professional standards review
orgarzation, professional review organization, state medical society, foundation
for medical care or multi-sited company whose principal business is not health
care.
8
<PAGE> 9
(d) In the event of a breach or threatened or intended breach of this
Agreement and the foregoing covenants by the Employee, Employee and the Company
agree that the Company shall be entitled to the following particular forms of
relief, in addition to remedies otherwise available to it a law or in equity:
(i) In the event Employee breaches or threatens to breach any
provision of this Paragraph 10, Company shall be entitled to injunctions, both
preliminary and permanent, enjoining or restraining such breach or threatened or
intended breach, and Employee hereby consents to the issuance thereof forthwith
by any court of compentent jurisdiction;
(ii) In the event Employee breaches any provision of this Paragraph
10, ascertainment of the exact amount of the Company's damages is acknowledged
to be difficult, if not impossible, and therefore the parties hereto fix, as
liquidated damages to be paid by the Employee to the Company upon the account of
any such breach and not as a penalty, the aggregate consideration received for
the provision of services or introduction of competitive activities arising as a
result of such breach.
11. Severability. Each paragraph, clause, sub-clause and provision of this
Agreement shall be severable from each other, and if for any reason the
paragraph, clause, sub-clause or provision is invalid or unenforceable, such
invalidity or unenforceability shall not prejudice or in any affect the validity
or enforceability of any other paragraph, clause, sub-clause or provision
hereof. This Agreement and all of the provisions hereof shall be read and
construed so as to give full effect thereto, subject only to any contrary
provision of law to the extent that, when this Agreement or any provision hereof
would have been
9
<PAGE> 10
read and construed as being void and ineffective but for the provisions of this
Paragraph 11, it shall nevertheless be a valid agreement or provision, as the
case may be, to the full extent to which it is not contrary to any provision of
law.
12. Assignments. No right under this Agreement shall be subject to
assignment by other parties without the consent of such other party thereto,
which consent shall not be unreasonably withheld, provided, however, that the
Company shall reserve the right to assign this Agreement without consent
pursuant to any corporate reorganization, merger, or other transaction involving
the change of control or a change in form of the Company.
13. Miscellaneous.
(a) This instrument contains and evidences the entire agreement of the
parties hereto with respect to the employment of the Employee.
(b) Failure on the part of either party to insist upon strict
compliance by the other with respect to any of the term, covenants and
conditions hereof, shall not be deemed a waiver of such term, covenant or
condition.
(c) In the event of litigation under this Agreement, the court shall
have discretion to award the prevailing party reasonable attorney's fees.
14. Governing Law. It is the intention of the parties hereto that all
questions with respect to the construction, formation, and performance of this
Agreement and the rights and liabilities of the parties hereto shall be
determined in accordance with the laws of the State of Illinois. The parties
hereto submit to the jurisdiction of the courts of Illinois in respect to any
manner or thing arising out of this agreement pursuant hereto.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
in the State of Illinois as of the day and year first above written.
The Company:
HealthCare COMPARE Corp.
By: James C. Smith
------------------------------
Its: President and
Chief Executive Officer
Employee:
Mary Anne Carpenter
-----------------------------------
Mary Anne Carpenter
pme
5/23/91
11
<PAGE> 1
EXHIBIT 10.93
HEALTHCARE COMPARE EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 21st day of August, 1990, by and between
HealthCare COMPARE Corp., a Delaware corporation headquartered in Illinois (the
"Company"), and Patrick G. Dills (the "Employee").
WITNESSETH
WHEREAS, the Company desires to employ Employee, and Employee desires to
be employed by the Company.
1. Employment. The Company hereby agrees to employ the Employee as set
forth hereinafter, and Employee agrees to diligently and faithfully serve the
Company on the terms and conditions hereinafter set forth. Employee agrees to
perform such other duties as may be assigned during the term of this Agreement.
2. Term. Subject to the provisions for earlier termination as hereinafter
provided, the term of employment shall be for a period of five years, three
months and eighteen days, commencing on August 21, 1990, and terminating on
December 9, 1995, provided, however, this agreement shall automatically renew
and the term hereof shall be extended for one year after the expiration of the
Initial Term unless one party shall give the other party not less than One
hundred and twenty (120) days advance written notice prior to the last date of
the current term hereof that said party is not extending the term hereof.
3. Duties. The Company hereby employs the Employee as the Vice President
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<PAGE> 2
of Sales, with responsibilities and duties as are assigned by, and subject
to the supervision of the President of the Company and for such other duties as
may, from time to time, be delegated to Employee by the President or his
designee, which duties shall include but shall not be limited to the overall
supervision of the Company's Sales activities, with direct reporting
responsibilities to the President and Chief Executive Officer of the Company,
or any other person(s) so directed.
4. Full Time. During the term of this Agreement, Employee agrees to
devote Employee's entire time, attention and energies to the business of the
Company. Employee shall not be associated with, consult, advise, work for, be
employed by, or contract with or otherwise devote any of the Employee's time to
the pursuit of any other work or business enterprises which are in any way,
directly or indirectly, competitive with the Company or any of its subsidiaries
whether as an employee, officer, director, consultant, creditor, security
holder or otherwise (except that Employee may own up to 2% of the shares of
stock of any corporation competitive to the Company whose securities are traded
on a national securities exchange or on the over-the-counter market).
5. Compensation. For services to be rendered by the Employee hereunder, in
whatever capacity, the Company agrees to pay the following compensation to
Employee:
(a) Salary. Employee shall receive an annual salary of One Hundred and
Eighty-Five Thousand Dollars ($185,000), effective February 1, 1991. This
salary shall be subject to annual increases on February 1 equal to the CPI rate
for the previous calendar year, and shall be payable at such time and manner as
may from time to time be effective and in force for similar employees of the
Company, but not less often than semi-monthly.
2
<PAGE> 3
(b) Expense. The Company shall reimburse the Employee upon submission
by the Employee of expense reports with substantiating vouchers, in accordance
with the Company's reimbursement policy for all reasonable expenses incurred by
Employee in connection with the performance of services thereunder.
(c) Vacation. The Employee shall earn a total of three weeks paid
vacation for the first ten years of service and four weeks paid vacation over
ten years of service. Vacation time shall be taken with due consideration for
the services required of Employee and to the requirements of the Company.
7. Illness, Incapacity and Death.
(a) If, because of illness or other incapacity, Employee shall fail for a
period of thirty (30) consecutive days, or for shorter periods
aggregating thirty (30) days in any consecutive twelve (12) month period, to
render services contemplated hereunder, the Company may, in its sole
discretion and judgment, fix a date on which it is deemed that the Employee
became disabled and, at the Company's option, may terminate the term of
Employee's employment hereunder by giving written notice thereof to the
Employee, effective on the dates set forth in such notice (which date shall
not be less than ten (10) business days after the mailing of such notice).
(b) In the event of the death of the Employee during the employment term,
the employment term shall terminate on the date of Employee's death.
8. Termination Without Cause and Voluntary Termination
(a) Anytime after the first five years of this Agreement, without cause
and without any liability to the Company, the Company may terminate this
Agreement at any time upon one hundred and twenty (120) days notice to the
Employee. In such event, the Employee, if requested by the Company, shall
continue to render
3
<PAGE> 4
services and shall be paid Employee's regular compensation up to the date
of termination
(b) If the Employee shall voluntarily terminate his employment hereunder,
the Company shall only be obligated to pay or cause to be paid to Employee in a
lump sum, an amount equal to (i) such amounts as the Employee shall be
entitled to receive under the terms of retirement and investment plans of the
Company, to the extent such plans permit such amount to be paid and subject to
and in accordance with applicable law and any beneficiary designation made by
the Employee in the plan which law and beneficiary designation shall prevail,
(ii) payment in respect of all accrued and unused vacation time, as
established in the Company's then current benefit plan, and (iii) payment in
respect of all accrued but unpaid compensation. Upon such termination and such
payment Company shall have no further obligation or liability to Employee.
9. Termination With Cause. If any of the following events occur during the
term of employment hereunder, the Company shall have the right to terminate
immediately the term of Employee's employment without any liability to the
Company:
(a) Employee commits a material and willful breach of this Agreement
which is not cured within five business days after the Company notifies the
Employee of such breach.
(b) Employee refuses to follow a lawful and reasonable order or direction
of an officer of the Company.
4
<PAGE> 5
(c) Employee commits an act which gives the Company cause for
terminating Employee. For purposes of this Agreement "cause" shall include,
without limitation, the reasonable belief of the Company of the Employee's
dishonesty, theft, failure to follow Company policies or procedures, willful
misconduct or disregard of duties.
(d) Employee, in the sole judgment of the Company, is not performing the
duties assigned to him in a manner acceptable to Company or in a manner
consistent with Company's established procedures or policies.
10. Confidentiality and Competition.
(a) In consideration of the substantial benefits to be provided
hereunder to the Employee by the Company, and in recognition of the fact that
the Employee shall occupy a position of trust and confidence with the Company,
Employee acknowledges that Employee has acquired and hereafter will acquire
valuable and confidential information of a special and unique nature relating
to such matters as the Company's trade secrets, systems, procedures, manuals,
confidential reports, employee rosters, client lists, software systems,
products, business and financial methods and practices, plans,
pricings, selling techniques and special processes involved in designing,
assembling and operating computer programs and the application there of to
hospital utilization review and other related electronic data processing
information respecting the Company's present and prospective clients, and the
particular business requirements of the Company's present and prospective
clients, including the methods used and preferred by the Company's clients and
fees paid by such clients. In addition, Employee has developed and may
develop further on behalf of the Company a personal acquaintance of the
Company's clients and prospective clients, which acquaintance may constitute
the Company's only contact
5
<PAGE> 6
with such clients. As a consequence thereof, Employee has occupied and will
occupy a position of trust and confidence with respect to the affairs of the
Company, its products and services. In view of the foregoing and in
consideration of the remuneration to be paid to Employee hereunder, Employee
acknowledges and agrees that it is reasonable and necessary for the protection
of the goodwill and business of the Company that he make the covenants
contained in this Paragraph 10 regarding his conduct during and subsequent
to his employment by the Company and that the Company will suffer irreparable
injury if Employee engaged in any conduct prohibited thereby. Employee
represents Employee's experience and/or abilities are such that the observance
of the aforementioned covenants will not cause the Employee any undue
hardships, nor will it unreasonably interfere with Employees's ability to earn
a livelihood. Employee and the Company further agree that the covenants
contained in this Paragraph 10 shall each be construed as a separate agreement
independent of any other provisions of this Agreement, and the existence of
any claim or cause of action by Employee against the Company's whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of any of these covenants.
(b) Employee, while in the employ of the Company or at any time
thereafter, will not, without the express written consent of the Company,
directly or indirectly communicate or divulge, or use for the benefit of
Employee or of any other person, firm, association or corporation, any of the
Company's trade secrets or other confidential information, including, solely by
way of illustration, the matters mentioned in Subparagraph (a) of this
Paragraph 10, which trade secrets and confidential information were or will be
communicated to or otherwise learned or
6
<PAGE> 7
acquired by Employee in the course of Employee's employment with the
Company, except the Employee may disclose such matters to the extent that
disclosure thereof is required (a) by a court or other governmental agency of
competent jurisdiction. During the term of this employment with the Company,
Employee will not contact, with a view towards selling any product or service
competitive with any product or service sold or proposed to be sold by the
Company, any person, firm, association or corporation (i) to which the Company
provided its services, or (ii) which Employee solicited contacted or otherwise
dealt with on behalf of the Company. During the term of his employment by the
Company, Employee will not directly or indirectly make any such contact, either
for the benefit of Employee or on behalf of any other person, firm, association
or corporation to make any such contact. During the term of Employee's
employment by the Company, Employee will not directly or indirectly have any
interest in any corporation, firm or business (other than the Company) which
is engaged in a business in any area of the world in which the Company engages
in such business, whether as any employee, director, officer, consultant,
creditor, security holder or otherwise (except that he may own up to 2%
of the shares of stock of any such corporation whose stock is listed on a
national securities exchange or is traded on the over-the-counter market).
Employee and the Company acknowledge that the Company presently conducts
business in several jurisdictions within the United States.
7
<PAGE> 8
(c) Upon the voluntary or involuntary termination of employment during
the term hereof for any reason whatsoever, Employee agrees that, for the period
of one year from the date thereof, Employee will not directly or indirectly have
any interest or involvement in any corporation, firm, or business (other than
the Company) which is or becomes involved in any business activity of the
Company as presently conducted or as hereafter conducted during the employment
term, whether such interest or involvement is as an employee, director,
officer, consultant, creditor, security holder or otherwise (except that he may
own up to 2% of the shares of stock of any such corporation whose stock is
listed on a national securities exchange or is traded on the over-the-counter
market). In addition, for such period the Employee shall not, directly or
indirectly, for the purpose of engaging in any activity of the Company, as
presently conducted or as hereafter conducted during the employment term, call
upon, solicit, divert, take away, contact, approach or deal with any person who
is client or employee of the Company during the employment term in order to
obtain utilization review business from such person or to cause such person to
terminate his employment with the Company, as the case may be. Notwithstanding
anything herein to the contrary, the Company and the Employee agree that the
Employee shall be permitted to become an officer, employee, director or
consultant with any insurance carrier, consulting firm or other entity which is
engaged in health care consulting or health care data processing, provided that
such business does not provide for utilization review, and that he shall be
further entitled to be employed by any professional standards review
organization, professional review organization, state medical society,
foundation for medical care or multi-sited company whose principal business is
not health care.
8
<PAGE> 9
(d) In the event of a breach or threatened or intended breach of this
Agreement and the foregoing covenants by the Employee, Employee and
the Company agree that the Company shall be entitled to the
following particular forms of relief, in addition to remedies
otherwise available to it at law or in equity:
(i) In the event Employee breaches or threatens to breach any provision
of this Paragraph 10, Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach
or threatened or intended breach, and Employee hereby consents to the
issuance thereof forthwith by any court of competent jurisdiction;
(ii) In the event Employee breaches any provision of this Paragraph 10,
ascertainment of the exact amount of the Company's damages is
acknowledged to be difficult, if not impossible, and therefore
the parties hereto fix, as liquidated damages to be paid by the
Employee to the Company upon the account of any such breach and not as
a penalty, the aggregate consideration received for the provision of
services or introduction of competitive activities arising as a result
of such breach.
11. Severability. Each paragraph, clause, sub-clause and provision of
this Agreement shall be severable from each other, and if for any reason the
paragraph, clause, sub-clause or provision is invalid or unenforceable, such
invalidity or unenforceability shall not prejudice or in any way affect the
validity or enforceability of any other paragraph, clause, sub-clause or
provision hereof. This Agreement and all of the provisions hereof shall be read
and construed so as to give full effect thereto, subject only to any contrary
9
<PAGE> 10
provision of law to the extent that, when this Agreement or any provision
hereof would have been read and construed as being void and ineffective but for
the provisions of this Paragraph 11, it shall nevertheless be a valid agreement
or provision, as the case may be, to the full extent to which it is not
contrary to any provision of law.
12. Assignments. No right under this Agreement shall be subject to
assignment by other parties without the consent of such other party thereto,
which consent shall not be unreasonably withheld, provided, however, that the
Company shall reserve the right to assign this Agreement without consent
pursuant to any corporate reorganization, merger, or other transaction
involving the change of control or a change in form of the Company.
13. Miscellaneous.
(a) This instrument contains and evidences the entire agreement of the
parties hereto with respect to the employment of the Employee.
(b) Failure on the part of either party to insist upon strict
compliance by the other with respect to any of the terms, covenants and
conditions hereof, shall not be deemed a waiver of such term, covenant or
condition.
(c) In the event of litigation under this Agreement, the court shall
have discretion to award the prevailing party reasonable attorney's fees.
14. Governing Law. It is the intention of the parties hereto that all
questions with respect to the construction, formation, and performance of this
Agreement and the rights and liabilities of the parties hereto shall be
determined in accordance with the laws of the State of Illinois. The parties
hereto submit to the jurisdiction of the courts of Illinois in respect to any
manner or thing arising out of this agreement pursuant hereto.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement in the State of Illinois as of the day and year first above written.
The Company:
HealthCare COMPARE Corp.
By:
------------------------
Its: President and
Chief Executive Officer
Employee:
----------------------------
Patrick G. Dills
pme
11/11/90
11
<PAGE> 1
EXHIBIT 11
HEALTHCARE COMPARE CORP.
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1993 December 31, 1994 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Income $38,471,000 $50,669,000 $66,537,000
=========== =========== ===========
Weighted average number of common
shares outstanding:
Shares outstanding from beginning of
period ............................ 34,710,000 35,033,000 34,034,000
Purchase of treasury stock ......... (109,000) (867,000) (59,000)
Other issuances of common stock .... 260,000 255,000 340,000
Common share equivalents:
Assumed exercise of common stock
options ........................... 619,000 581,000 808,000
---------- ---------- ----------
Weighted average common and common
share equivalents ................. 35,480,000 35,002,000 35,123,000
========== ========== ==========
Net income per share ............... $1.08 $1.45 $1.89
========== ========== ==========
</TABLE>
<PAGE> 2
Exhibit 12
HEALTHCARE COMPARE CORP.
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1993 December 31, 1994 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Income $38,471,000 $50,669,000 $66,537,000
=========== =========== ===========
Weighted average number of common
shares outstanding:
Shares outstanding from beginning of
period ............................ 34,710,000 35,033,000 34,034,000
Purchase of treasury stock ......... (109,000) (867,000) (59,000)
Other issuances of common stock .... 260,000 255,000 340,000
Common share equivalents:
Assumed exercise of common stock
options ........................... 649,000 702,000 874,000
---------- ---------- ----------
Weighted average common and common
share equivalents ................. 35,510,000 35,123,000 35,189,000
========== ========== ==========
Net income per share ............... $1.08 $1.44 $1.89
========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS. The following table presents the percentages of
the Company's revenues represented by certain statement of operations items.
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues 100% 100% 100%
Expenses:
Cost of Services 39 34 30
Selling and Marketing 13 12 12
General and Administrative 6 5 5
Depreciation and Amortization 5 6 5
Interest Income, Net (3) (3) (4)
--- --- ---
Subtotal 60 54 48
--- --- ---
Income Before Income Taxes 40 46 52
--- --- ---
Net Income 24% 27% 31%
--- --- ---
</TABLE>
REVENUES. The Company's revenues consist primarily of fees for cost
management services provided under contracts on a percentage of savings basis
(PPO and fee schedule services) or on a predetermined contractual basis. The
Company also derives revenue based upon a fixed monthly charge for each
participant excluding covered dependents in a client-sponsored health care plan
(capitated revenue).
Total revenues increased $27,732,000 (15%) from 1994 to 1995 and
$28,956,000 (18%) from 1993 to 1994. This growth is primarily attributable to:
1) Increased utilization of the Company's PPO services by existing
clients;
2) Expansion and development of the Company's PPO networks, especially in
secondary and tertiary markets; and
3) New clients.
Revenue from clinical cost management services increased slightly from 1994 to
1995 as a result of growth in the number of clients. Revenue from clinical cost
management services decreased from 1993 to 1994 as more insurance carriers and
administrators served by the Company provided these services through their
internal operations. Fee schedule services revenue increased from 1994 to 1995
due to new and expanded contract activity, particularly with General Motors
Corporation and Liberty Mutual Insurance Company. Fee schedule services revenue
had declined from 1993 to 1994 as the number of clients serviced by the Company
was reduced, particularly in California where the Company elected not to
decrease its prices in response to increased competition. Government contract
revenue had increased from 1993 to 1994 as a result of broader services
provided under the Company's contract with the Department of Defense.
Government contract revenue decreased from 1994 to 1995 due to the successful
completion of the regional utilization review portion of the same contract with
the Department of Defense. Price increases have not been an important factor in
the
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF
OPERATIONS
Company's revenue growth. There can be no assurance that the Company will
continue to experience revenue growth comparable to prior periods.
The following table sets forth information with respect to the Company's
sources of revenues for the years ended December 31, 1993, 1994 and 1995 and
the percentage of total revenues represented thereby:
<TABLE>
<CAPTION>
SOURCES OF REVENUES
Years Ended December 31,
1993 % 1994 % 1995 %
($ In thousands)
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PPO Services $109,113 69% $140,201 75% $165,577 77%
Clinical cost management Services 27,133 17 25,425 14 25,909 12
Fee Schedule Services 15,634 10 14,760 8 17,764 8
Government Contract Services 5,770 4 6,220 3 5,088 3
---------- ---- -------- ---- -------- ----
TOTAL $157,650 100% $186,606 100% $214,338 100%
========== ==== ======== ==== ======== ====
</TABLE>
COST OF SERVICES. Cost of services consists primarily of salaries and
related costs for personnel involved in PPO administration, development and
expansion, clinical cost management programs, and other cost management
services offered by the Company. To a lesser extent, it includes telephone
expenses, facility expenses and information processing costs. The largest
increases in these expenses during 1993 to 1995 relate to costs for the
development of hospital and outpatient care PPO networks in various locations,
the development of new information systems required to service the Company's
growth and the development of the Company's risk-based products. As a
percentage of revenues, however, these costs have decreased from 39% in 1993 to
34% in 1994 and to 30% in 1995 due to substantial revenue growth and efficient
management of various operating expenses.
SELLING AND MARKETING. Selling and marketing expenses have increased
primarily as a result of the hiring and training of new sales and marketing
members. As a percentage of revenues, selling and marketing expenses have
remained between 12% and 13% from 1993 to 1995.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased
from 1993 to 1995 primarily due to the addition of staff in the executive and
administrative areas as well as increased utilization of outside professional
services in connection with the Company's efforts to create, develop and market
insurance products. As a percentage of revenues, however, these costs declined
from 6% of revenues in 1993 to 5% in 1994 and 1995.
DEPRECIATION AND AMORTIZATION. These expenses increased significantly from
1993 to 1994 principally as a result of the purchase of additional computer
hardware and software, office equipment and leasehold improvements. To a lesser
extent, the increase is a result of shortening the useful lives of certain
computer hardware and software in 1994 to reflect the Company's plans to
replace these assets. Consequently, depreciation and amortization decreased
from 1994 to 1995 as a result of the shortening of the useful lives which
resulted in higher depreciation expense in 1994. As a percentage of revenues,
these costs remained in the 5% to 6% range from 1993 to 1995.
INTEREST INCOME, NET. The Company invests a significant portion of its
available cash in various interest-bearing instruments. The net interest
income realized from such investments represented 3% of revenues in 1993 and
1994 and 4% of revenues in 1995.
INCOME TAXES. Income taxes were provided at an effective rate of 40% in
1994 and 1995 compared to 39% in 1993. The higher than statutory rate for 1993
to 1995 includes provisions for state income taxes.
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SEASONALITY. The Company has historically experienced increases in
salaries and related training costs for nurse reviewers, physicians and PPO
personnel, as well as associated equipment costs during its first and fourth
calendar quarters in anticipation of an increase in the number of new
participants in client-sponsored health care plans. Since health care plans
typically have an open enrollment period for new participants during January of
each year, the Company anticipates that its future first and fourth quarters
will continue to reflect similar cost increases. The Company's future earnings
could be adversely affected if the Company were to incur costs in excess of
those necessary to service the actual number of new participants resulting from
the open enrollment.
INFLATION. Although inflation has not had a significant effect on the
Company's operations to date, management believes that the rate at which health
care costs have increased has contributed significantly to the demand for PPO,
clinical cost management and other cost management services, including the
services provided by the Company.
OTHER INFORMATION. Since 1993, there has been considerable discussion of
health care reform. Although specific features of any legislation that
ultimately may be enacted into law cannot be predicted at this time, based on
the Company's review of legislation previously considered by Congress and
various state legislatures, management believes that the Company's existing
programs and those under development provide a foundation that will enable the
Company to continue to grow.
LIQUIDITY AND CAPITAL RESOURCES. During the three year period ended
December 31, 1995, the Company generated $194,002,000 of cash from operating
activities. The Company had $157,124,000 of working capital at December 31,
1995, compared to $78,444,000 at December 31, 1994.
Investment activities used $45,489,000 and $30,785,000 in cash during 1995
and 1994, respectively, reflecting net increases in investments of $36,812,000
in 1995 and $22,389,000 in 1994, and capital expenditures of $8,677,000 in 1995
and $8,396,000 in 1994.
Cash provided by financing programs in 1995 consisted of $11,247,000 of
proceeds from the issuance of common stock pursuant to Company stock option and
stock purchase programs and was partially offset by $2,170,000 used to purchase
shares of its outstanding common stock. Cash used for financing programs in
1994 consisted of $28,222,000 used to purchase shares of its outstanding common
stock partially offset by $4,486,000 of proceeds from the issuance of common
stock pursuant to Company stock option and stock purchase programs.
The Company believes that its working capital, long-term investments and
cash generated from future operations will be sufficient to fund the Company's
anticipated operations and expansion plans.
In February 1996, the Company acquired a small health and life insurance
company, which is licensed in 26 states, in order to enable the Company to
underwrite group health insurance. The maximum purchase price will be
approximately $11.5 million subject to the satisfaction of certain
contingencies. Additionally, the Company is seeking to acquire in 1996 an
inactive insurance company that is broadly licensed in at least 40 states.
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF HEALTHCARE COMPARE CORP.
AFFORDABLE HealthCare Concepts
Incorporated in California
Occupational-Urgent Care Health Systems, Inc.
Incorporated in California
Office Realty Investors, Inc.
Incorporated in Illinois
COMPARE Leasing Corp.
Incorporated in Delaware
HCC Insurance Services Corp.
Incorporated in Illinois
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
HEALTHCARE COMPARE CORP.:
We consent to the incorporation by reference in the Registration Statements of
HealthCare COMPARE Corp. on Form S-8 (file numbers - 33-26639, 33-26640,
33-42902, 33-43806, 33-43807, 33-46185, 33-87986 and 33-62747) of our reports
dated February 12, 1996, appearing in and incorporated by reference in this
Annual Report on Form 10-K Of HealthCare COMPARE Corp. for the year ended
December 31, 1995.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 26, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Thomas J. Pritzker
------------------------------
Thomas J. Pritzker
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Robert J. Becker, M.D.
------------------------------
Robert J. Becker, M.D.
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Ronald H. Galowich
------------------------------
Ronald H. Galowich
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Michael J. Boskin
------------------------------
Michael J. Boskin
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Burton W. Kanter
------------------------------
Burton W. Kanter
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/J. Patrick Foley
------------------------------
J. Patrick Foley
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
------------------------------
David Simon
<PAGE> 8
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Daniel Brunner
------------------------------
Daniel Brunner
<PAGE> 9
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of HealthCare COMPARE Corp., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby constitutes and appoints James C.
Smith, Joseph E. Whitters and Ronald H. Galowich and each of them, (with full
power to each of them to act alone), his true and lawful attorneys-in-fact and
agents for him and on his behalf and in his name, place and stead, in any and
all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 to be filed by the Company with the Securities and
Exchange Commission and any and all amendments thereto, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and to perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he himself might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Dated: March 26, 1996
/s/Robert S. Coleman
------------------------------
Robert S. Coleman
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 74,599
<SECURITIES> 138,685
<RECEIVABLES> 25,062
<ALLOWANCES> (2,807)
<INVENTORY> 0
<CURRENT-ASSETS> 173,922
<PP&E> 79,886
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0
0
<COMMON> 366
<OTHER-SE> 279,904
<TOTAL-LIABILITY-AND-EQUITY> 297,194
<SALES> 0
<TOTAL-REVENUES> 222,322
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