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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, 1996
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15846
HealthCare COMPARE Corp.
(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
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (630) 241-7900
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
--- ---
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. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant on March 21, 1997, was approximately $1,076,565,000. On that date,
there were 26,257,687 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
1996 Annual Report to Stockholders Parts I, II and IV
Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held on
May 20, 1997 Parts I and III
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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. The target market for
the Company's services are multi-sited, widely dispersed payors for health care
services.
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 three lines of managed care programs are:
ConfidentCare(SM) - a national HMO-type offering for self-funded plans
AFFORDABLE Care Program(R) - a nationwide group health offering
Occupational Care System(SM) - a nationwide workers' compensation offering
These managed care programs all build upon:
THE AFFORDABLE(R) MEDICAL NETWORKS--The Company's national network of
hospitals, physicians and outpatient care providers that facilitate the
delivery of quality care at fixed, negotiated rates.
COMPARE(R) MEDICAL REVIEW PROGRAMS--Clinical management programs that
facilitate the delivery of medically necessary care and identify cost-effective
treatment alternatives.
OUCH(R) 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 (630) 241-7900.
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RECENT DEVELOPMENTS
In August 1996, the Board of Directors approved the repurchase by the
Company of up to 5,000,000 shares or approximately 15% of its outstanding
common stock. The Company has previously repurchased a total of 2,500,000
shares. The Company will utilize working capital to purchase shares. The
Company repurchased approximately 640,000 shares under this authorization
through March 17, 1997.
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 acquisition of a small indemnity insurance company in
early 1996, the Company will expand its product offering to leverage its
managed care assets of The AFFORDABLE Medical Network and its clinical
management services. In addition, the Company anticipates acquiring a 49-state
insurance shell (with no ongoing business) in 1997. This expansion of product
offering will allow the Company to provide a national HMO-like service to
self-insured, multi-sited employers. The Company is rolling out these services
and expects to see substantial growth in 1997 and beyond from these efforts.
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
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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 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.
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 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 29 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.
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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 is the largest area of the Company's
business and is principally responsible for the significant growth in revenue
and earnings since 1989. The AFFORDABLE networks 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 2,320
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 207,000 physicians, clinical
laboratories, surgery centers, radiology facilities and other providers in 49
states, the District of Columbia and Puerto Rico.
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 few years have been in these
areas. Management expects to continue to incur significant expenses to further
expand its hospital and outpatient care networks, particularly in secondary and
tertiary markets and believes that its investment in developing these markets
has significantly differentiated it from competitors.
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,
------------------------------------------
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Number of Hospitals in Network 1,250 1,550 1,900 2,100 2,320
Outpatient Care Network
Providers 85,000 107,000 150,000 181,000 207,000
</TABLE>
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 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.
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COMPENSATION. 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 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.
The network consists of a full array of providers including hospitals and
outpatient providers (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 the vast majority of the client's health costs and to facilitate
referrals within the network for all needed care.
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The general criteria for hospital contracting is as follows:
- - ACCESSIBILITY -- each hospital is evaluated as to whether it is
geographically accessible to current clients' employees.
- - AVAILABILITY -- each hospital's utilization and service patterns are
evaluated as to occupancy and scope of services.
- - ACCEPTABILITY -- each hospital is evaluated as to whether it falls within
current client member utilization patterns.
- - QUALITY -- each hospital is evaluated as to quality of care on a wide range
of criteria.
- - COST -- each hospital's charges are evaluated using both public data and
client data.
The general criteria for physician contracting includes:
- - Valid state licensure
- - Active DEA registration, if applicable
- - Specialty board certification, if applicable
- - Staff privileges at one or more network hospitals, where applicable
- - Professional malpractice liability coverage
- - A history of a low number of malpractice claims
- - No suspensions, limitations or revocations of hospital practice privileges
- - No sanctions or disciplinary actions as a Medicare, Medicaid or other
government provider
- - No state license investigation, restriction, suspension or revocation
- - No DEA license investigation, restriction, suspension or revocation
- - No liability insurance cancellation
- - No chronic illness or physical defect that impairs practice
- - No mental illness or chemical dependency (substance abuse)
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 physician and outpatient 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 and to improve rate structure as care continues to
shift to outpatient settings.
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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 99% and over 97% 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 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. The key
elements of our PPO Quality Assessment program include:
- - Networks that offer necessary and effective health care services which are
provided within an appropriate setting, in a timely fashion and in a
manner that maintains satisfaction and confidence.
- - Networks that consist of a stable base of member providers that provide a
comprehensive range of cost-effective health care services which are
within reasonable access to network members.
- - Network providers shall meet clinical and operational standards
established by the federal and state licensing bodies and other recognized
professional organizations.
- - Network providers shall meet clinical and operational standards.
- - Network providers shall monitor the quality of patient care provided in
their facilities and provide documentation upon request.
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.
AFFORDABLE also maintains an array of information systems to re-price
health care claims to the contracted rate for its clients. Clients rely on
AFFORDABLE to determine PPO contractual payments for claims submitted from
hospital 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.
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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.
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. Historically, COMPARE charged its clients a "capitated fee,"
i.e., a fixed monthly fee for each participant (excluding covered dependents)
in a client-sponsored health care plan. The amount of this fee varied
depending on the size of the client and the number and type of review programs
selected by the client. During the last two years or so, the Company has
concentrated on selling its clinical management services coupled with its PPO
services. As a result, the fee is an "add-on" to the PPO fee. 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 a 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.
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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. 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 which COMPARE's other programs may be
added. Over 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
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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.
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.
COMPARE has defined three broad levels of case management intensity:
- - TERTIARY CASE MANAGEMENT focuses on long-term or complex clinical
scenarios for which there are significant quality, cost and clinical
outcome risks. Cases that benefit from tertiary case management
include those which involve multiple providers, complex or long-term
treatment plans, multiple levels or sites of care, and an extended
period of lost time. Tertiary case management requires the expertise of
our most experienced registered nurses and frequently includes input
from a COMPARE Medical Director.
- - In comparison to tertiary case management, SECONDARY CASE MANAGEMENT
focuses on less complex medical situations in which there are moderate
cost, quality and clinical outcome risks. Cases which benefit from
secondary case management include those with a need for coordination and
management of medical services on an ongoing basis.
- - PRIMARY CASE MANAGEMENT is the least complex level of intervention and
focuses on short-term or episodic health care services. This level of
case management intensity is appropriate for situations in which focused
and limited involvement by COMPARE will achieve the optimal cost,
quality and clinical outcome.
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.
REFERRAL MANAGEMENT. For clients who prescribe to COMPARE's
point-of-service program, referral to specialists is managed through the
Clinical Management area. When a referral from a primary care physician to a
specialist is required, a patient calls the toll-free telephone number. These
referrals are reviewed and authorized for a specified period of time.
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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.
ONCALL BY AFFORDABLE. This is a 24-hours-a-day, 7-days-a-week service
that ties together the full range of COMPARE'S managed programs by providing
participants with a single source for guidance through the health care delivery
system. The services of this program include:
- - Help members obtain answers to general medical questions;
- - Assist members to make informed health care decision;
- - Provide educational materials to increase member comprehension of
diseases and treatments;
- - Locate appropriate network providers;
- - Facilitate communication between providers and members;
- - Identify patient situations that may be appropriate for referral to
Clinical Management Services;
- - Initiate pre-certification for medical and mental health care;
- - Answer claims questions and inquiries; and
- - Answer pharmacy program questions or referrals.
This service is offered to clients who participate in the full range of
network and clinical management programs.
OTHER CLINICAL MANAGEMENT PROGRAMS:
- Managed Surgical Opinion - Prospective Chiropractic Review
- Mental Health Review Services - Maternity Line
- 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.
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
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<PAGE> 14
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 and is highly cost effective for larger workers' compensation
entities who generally process in excess of 100,000 bills annually. 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. OUCH's
workers' compensation program was introduced in California in 1986.
MARKETING. COMPARE markets the workers' compensation programs to
insurance carriers, third party administrators, state workers' compensation
funds, 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
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<PAGE> 15
directories (either paper or electronic) and other materials provided by
its payor clients encourage injured employees to utilize The AFFORDABLE
provider network.
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.
Additionally, through the system, we are able to go beyond "traditional" bill
review services to provide enhanced systems savings by reorganizing non-related
services, upcoding and unbundling of charges and other features. Finally, bill
review data is integrated with medical management and quality assessment
activities.
An agreement was entered into with Electronic Data Systems Corporation
("EDS") primarily to utilize its extensive data processing and communications
networks. 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. Systems development occurred
throughout the latter half of 1989, with operations beginning in the first
quarter of 1990.
Bill Review decreases workers' compensation payors' administrative costs
because HealthCare COMPARE Corp. maintains virtually all aspects of the
program, including:
- - Technical support through a technical response help desk
- - User training and documentation
- - Database management
- - The ability to process from single or multiple sites.
HealthCare COMPARE Corp. offers three variations of the Bill Review program:
- - Systems Lease: The systems technology is brought to the client's office
where their staff performs bill review.
- - Service Bureau: Bills are sent to COMPARE'S processing centers and
COMPARE keys the bills and performs bill review.
- - EDI Service Bureau: Clients electronically transmit key data elements to
COMPARE and COMPARE performs bill review.
COMPENSATION. The Company generally receives an agreed upon percentage of
total savings generated for clients through bill reviews plus a per-bill fee,
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.
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
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<PAGE> 16
markets its services to and through group health and workers' compensation
insurance carriers and third party administrators. The following are
representative customers of COMPARE:
Arthur J. Gallagher & Co.
American Postal Workers Union Health Plan
American Chambers Insurance Company
Boilermakers National Trust and Welfare
Fund
Celtic Life Insurance Company
ConAgra, Inc.
First Health Strategies, Inc. (ALTA)
General Motors Corporation
Government Employees Hospital Association
Kemper National Insurance Company
Liberty Mutual Insurance Company
McDonald's Corporation
NALCO Chemical Company
National Association of Letter Carriers
National Health Laboratories, Inc.
Norwest Corporation
Pacific Telesis Group
R. E. Harrington, Inc.
RETA Trust
Sedgwick James
State Farm Mutual Automobile Insurance
Company
Texas Instruments
The Sherwin-Williams Company
Travelers/AETNA
United Airlines, Inc.
Walgreen Company
Wausau Insurance Companies
COMPARE presently has 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.
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 1994 and 1995, the Company's contract with Government Employees
Hospital Association (a plan covering certain government employees) accounted
for 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.
No customer accounted for 10% of the Company's revenues, individually,
during 1996.
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<PAGE> 17
INTEGRATED PRODUCTS
The Company has introduced a number of new services during the last few
years that 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.
These programs constitute important elements of the Company's risk
products and programs it is in the process of introducing.
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 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.
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<PAGE> 18
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 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
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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.
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.
RISK PRODUCTS AND 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. 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 various
medical plans for multi-sited employers. The 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.
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In 1996, American's A. M. Best rating was upgraded to A- from B+.
The Company also is seeking to acquire a 49-state licensed insurance
company (which has ceased writing new business and whose existing policies will
be fully reinsured) in order to expand the states in which the Company can do
business.
COMPARE has developed, in conjunction with its risk products users, a
single source of accountability for all elements of their health plan, and all
at a guaranteed cost. The Company calls this product "The Total Cost
Guarantee".
The Company's product promotes the continuity of care through a single
point of entry into the health care delivery system. By calling OnCall by
AFFORDABLE, the 24-hour, seven days a week toll-free number, employees can
obtain information on all aspects of their health benefit program. This
includes information ranging from preventative care and claims status, to
inquiries regarding network providers and benefit plan coverage.
The program integrates the Company's PPO network of providers, the
AFFORDABLE Medical Networks, with Clinical Management Programs. Access to our
national network of providers, including specialty and sub-specialty care such
as Maternity and Transplant, gives unparalleled provider coverage not only
locally but throughout the country.
Claims administration is provided through the Company's internal
capabilities, which have been developed since the time of the American
acquisition, and is integrated throughout the entire process so as to take
advantage of the potential synergies and competencies.
For a single guaranteed cost, the Company's clients can be assured of a
comprehensive health care benefit plan that ensures the earliest possible
impact on patient care which provides a higher quality of employee healthcare
at a lesser cost.
Plan Design
In each employer's case, the Company will require adoption of a benefit
plan with significant out-of-pocket costs be assumed by the employee if they
access a non-contracted PPO provider (generally a 30% differential).
Program Features
The Company's risk products generally include the following:
- - All medical claims incurred during the effective plan year.
- - All managed care fees, including complete Clinical Management Programs and
24-hour, 7-day OnCall by AFFORDABLE program.
- - Employee communications.
- - Access to The AFFORDABLE Medical Networks.
- - Claims administration services.
- - Premium for aggregate stop loss policy.
- - All implementation fees.
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- - The Company's Managed Pharmacy Program.
- - The Company's Managed Transplant Program.
- - The Company's Managed Maternity Program.
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, other
health care programs, 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 requires extended discussions and significant
time.
EMPLOYEES
As of December 31, 1996, COMPARE had approximately 1,500 employees,
including approximately 290 employees involved in PPO negotiations and
development; 290 involved with bill review and claims pricing activities; 260
employees in various review and quality assessment activities; 200 in
information systems, 180 in sales and marketing 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. None
of the Company's employees are presently covered by a collective bargaining
agreement. The Company considers its relations with its employees to be good.
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 and
clinical management operations.
Although COMPARE believes that its level of Directors' and Officers' and
Errors and Omissions 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.
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ITEM 2. PROPERTIES
COMPARE owns three office buildings consisting of approximately 385,000
square feet of space. One is in Downers Grove, Illinois where the Company is
headquartered, and the other two are in West Sacramento, California and
Scottsdale, Arizona (purchased in January, 1997). These locations house the
majority of the Company's colleagues. Additionally, the Company leases
facilities in the Detroit, Dallas, Atlanta, Boston and New York City areas.
The remaining locations' leases represent less than 50,000 square feet.
All of the Company's buildings and equipment are being utilized, have been
maintained adequately and are in good operating condition. These assets,
together with planned capital expenditures, are expected to meet the Company's
operating needs in the foreseeable future.
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 declined to appeal this 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, 1996.
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EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION
------------------- --- --------------------------------------------
James C. Smith 56 President and Chief Executive Officer
Daniel Brunner 53 Executive Vice President,
Government Affairs
Mary Anne Carpenter 51 Executive Vice President, Service Products
A. Lee Dickerson 47 Senior Vice President, Provider Networks and
OUCH Systems Administration
Patrick G. Dills 43 Executive Vice President, Managed Care Sales
Ronald H. Galowich 61 Secretary
Lottie A. Kurcz 42 Senior Vice President, Risk Products
Susan T. Smith 46 General Counsel
Joseph E. Whitters 38 Vice President, Finance and
Chief Financial Officer
Edward L. Wristen 45 Executive Vice President, Risk Products
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.
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.
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.
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Ronald H. Galowich has served as Secretary of the Company since 1983,
General Counsel from 1983 to March, 1997, 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.
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.
Susan T. Smith has served as and General Counsel of the Company
since February, 1997. She was Associate General Counsel from September 1994
and joined the Company in July 1992. Prior to joining COMPARE, Ms. Smith was a
partner in a large Denver law firm where she headed the firm's healthcare law
practice.
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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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 1996 Annual Report to Stockholders. Information concerning the
Company's dividend policy is set forth under "Dividend Policy" in the Company's
1996 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 1996 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 1996 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 1996 Annual Report to Stockholders on the pages indicated below and
are incorporated herein by reference.
FINANCIAL STATEMENTS: PAGE NO.
--------
Report of Independent Auditors 23
Consolidated Balance Sheets as of
December 31, 1995 and 1996 24
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 25
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1995 and 1996 26-27
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1995 and 1996 28-29
Notes to Consolidated Financial Statements 30-36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. 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 20, 1997 (the
"Proxy Statement"), and such information is incorporated herein by reference.
ITEM 11. 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 12. 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 13. 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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PART IV
ITEM 14. 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 1996.
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HEALTHCARE COMPARE CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<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, 1996:
- ---------------------------------
Allowance for Doubtful Accounts $2,807,000 $(200,000) $( 34,000) $2,573,000
========== ========== ============ ==========
Accrued Restructuring Expenses $1,436,000 $69,000 $(364,000) $1,141,000
========== ========== ============ ==========
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
========== ========== ============ ==========
</TABLE>
28
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
HealthCare COMPARE Corp.
Downers Grove, IL 60515
We have audited the consolidated financial statements of HealthCare COMPARE
Corp. as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996 and have issued our report thereon, dated
February 17, 1997; such consolidated financial statements and report are
included in your 1996 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 14. 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, IL
February 17, 1997
<PAGE> 30
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 25, 1997
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 25, 1997:
SIGNATURE TITLE
------------------------- ---------------------------------------------
/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
------------------------- Director
Ronald H. Galowich
/s/Michael J. Boskin * Director
-------------------------
Michael J. Boskin
/s/Burton W. Kanter * Director
-------------------------
Burton W. Kanter
/s/David Simon * Director
-------------------------
David Simon
/s/Daniel Brunner * Executive Vice President, Government Affairs,
------------------------- Director
Daniel Brunner
/s/Robert S. Colman * Director
-------------------------
Robert S. Colman
/s/Harold S. Handelsman * Director
-------------------------
Harold S. Handelsman
/s/Don Logan * Director
-------------------------
Don Logan
* By: /s/ Joseph E. Whitters
Joseph E. Whitters, Attorney in Fact
29
<PAGE> 31
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
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.36. HealthCare COMPARE Corp. 1989 Employee Stock Purchase Plan. {10.36} (7)
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)
10.55-10.62. 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. {10.67} (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)
10.73. Option Agreement dated as of July 1, 1993 by and between the Company and James C. Smith. {10.73} (15)
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
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.
{10.80}
10.81. PPO Agreement dated October 1, 1990 between the Company and National Association of Letter Carriers. {10.81}
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> 34
<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}
10.95 Employment Agreement dated January 1, 1997 between HealthCare COMPARE Corp. and James C. Smith.
10.96 Option Agreement dated as of January 1, 1997 by and between The Company and James C. Smith.
10.97 Option Agreement dated as of January 1, 1997 by and between The Company and James C. Smith.
10.98 Option Agreement dated as of January 1, 1997 by and between The Company and James C. Smith.
10.99 Agreement dated as of September 1, 1995 between HealthCare COMPARE Corp. and Electronic Data Systems.
11. Statement of computation of earnings per share.
13. 1996 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.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
{ } 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.
(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.
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(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.
(19) Annual Report on Form 10-K for the year ended December 31, 1995 as filed with the Securities and Exchange
Commission on March 27, 1996.
</TABLE>
35
<PAGE> 1
Exhibit 10.95
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 1st day of
January, 1997, by and between James C. Smith (the "Employee") and HealthCare
COMPARE Corp., a Delaware corporation (the "Company").
IN CONSIDERATION of the mutual promises set forth below, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Employee, and the Employee
hereby accepts employment with the Company, upon the terms and subject to the
conditions hereinafter set forth.
2. Duties. The Employee is employed as the President and Chief Executive
Officer of the Company and shall render his services at the principal business
offices of the Company in Downers Grove, Illinois, unless otherwise agreed by
him and the Board of Directors of the Company. The Employee shall have such
authority and shall perform such duties as are customary for the office to
which he has been appointed, including, without limitation, the full authority
to conduct and direct the day-to-day operations of the Company, subject to such
limitations, instructions, directions and control as the Board of Directors of
the Company or the Chairman of the Board of the Company (acting at the
direction or with the authority of the Board of directors) may specify from
time to time. He shall not otherwise devote time to the active pursuit of any
other business enterprise, nor shall he have any interest in any business
enterprise which is competitive with or adverse to the Company, whether as an
employee, officer, director, consultant, creditor, security holder or otherwise
(except to the extent permitted in Paragraph 8 hereof). The foregoing
notwithstanding, the Employee shall be entitled to belong to and participate in
professional organizations and to engage in professional activities in
furtherance of the Company's business.
3. Term. The term of Employee's employment under this Agreement shall
commence on January 1, 1997 and shall terminate on December 31, 1999 unless
otherwise terminated in accordance with the terms hereof.
4. Compensation. As compensation for the services rendered hereunder, the
Employee shall be entitled to receive the following:
a. Base Salary. Commencing as of the date of this Agreement, Employee
shall receive an annual salary of $900,000 ("Base Salary") payable in
installments at such times and in such manner as may from time to time be in
effect for executives of the Company, but not less often than monthly. The
Base Salary payable to Employee in 1998 and 1999 shall be increased in each
such year by an amount equal to the amount of the percentage increase, if any,
in the Consumer Price Index (as defined herein) during the previous calendar
year. Consumer Price Index ("CPI") means the U.S. City Averages for all Urban
Consumers, All Items, (1982-1984 = 100) of the United States Bureau of Labor
Statistics. The CPI for any calendar year shall be determined by averaging the
monthly indices for that year. If the Bureau of Labor Statistics substantially
revises the manner in which the CPI is determined, an adjustment shall
2
<PAGE> 2
be made in the revised index which would produce results equivalent, as nearly
as possible, to those which would be obtained if the CPI 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. If the CPI becomes
unavailable to the public because publication is discontinued or otherwise, the
Company and the Employee shall substitute therefor a comparable index based
upon changes in the cost of living or purchasing power of the consumer dollar
published by any other governmental agency or, if no such index is available,
then a comparable index published by a major bank, other financial institution,
university or recognized financial publication.
b. Additional Compensation. As soon as practicable after the end of each
fiscal year of the Company during the term of this Agreement commencing with
the year ending December 31, 1997 in which the earnings per share of Common
Stock of the Company for such fiscal year (determined in accordance with
generally accepted accounting principles) ("EPS") increases by at least 10%
from the EPS for the immediately preceding fiscal year (the "Threshold
Increase"), the Employee shall receive additional compensation in an amount
equal to the product obtained by multiplying $36,000 by each percentage point
(or fraction thereof) by which EPS for such year exceeds the Threshold
Increase. By way of example, if EPS for 1997 increases by 8% from EPS for
1996, no additional compensation will be payable to the Employee; if EPS for
1997 increases by 21.5% from EPS for 1996, additional compensation in the
amount of $414,000 i.e., ($36,000 x 21.5% - 10%) will be payable to the
Employee. For purposes of this Agreement, EPS shall be adjusted in an
appropriate manner in the event of any stock split, stock dividend or similar
change in the Common Stock during the term of this Agreement.
5. Stock Options. Effective upon the execution and delivery of this
Agreement the Company shall grant to the Employee options to purchase shares of
Common Stock of the Company, each such option to be on the terms and subject to
the conditions of the respective stock option agreements (the "Option
Agreements") to be entered into between the Company and the Employee, the forms
of which are attached hereto as Exhibits 1, 2 and 3.
6. Benefits.
a. Benefits During the Term of this Agreement. In addition to the
compensation to be paid to the Employee pursuant to Paragraph 4 hereof, the
Employee shall be entitled to participate in all employee benefit programs
currently maintained by the Company as such programs may be modified from time
to time and each such other program or policy established by the Company from
time to time during the term of this Agreement for its employees and executives
generally (to the extent that it is more favorable to the Employee than an
existing program covering the same benefit). Employee shall be entitled to an
annual paid vacation of four weeks during each year of employment hereunder.
Unused vacation time shall accumulate from year to year, but in no event shall
the Employee be entitled to accumulate more than eight week of vacation time.
b. Benefits After the Term of this Agreement. The Company hereby confirms
the agreement contained in that certain Employment Agreement, dated as of July
1, 1993 between Employee and the Company (the "Prior Employment Agreement"), as
modified herein, to make available to the fullest extent permitted under law to
Employee and Norma Smith, his wife, for
2
<PAGE> 3
the life of each of them, at the Company's expense (subject to the limitations
set forth below with respect to Norma), all employee health benefits
(including, without limitation, medical, dental, life, disability and other
similar plans) which are currently or hereafter established or maintained by
the Company from time to time for employees of the Company generally, and all
other health plans and policies established by the Company after the date of
this Agreement; provided, however, that (i) the Company's obligations hereunder
shall be suspended in whole or in part during all periods in which health
benefits at least as favorable as those to be made available hereunder are
provided at no cost to Employee or Normal Smith as a result of the employment
of Employee by another employer 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 Employee or Normal Smith as a
result of the employment of Employee by another employer subsequent to the
termination of his employment by the Company but Employee is required to pay
for such benefits, the Company, at its election, shall provide health benefits
to Employee hereunder or reimburse Employee for amounts actually paid to his
employer. The Company's obligations under this Paragraph 6b shall terminate in
the event the Employee's employment is terminated pursuant to paragraph 9c
hereof.
7. Reimbursement of Expenses. The Company, promptly upon receipt from the
Employee of appropriate documentation, shall reimburse the Employee for all of
his reasonable business expenses, including, without limitation, travel
expenses, necessarily and appropriately incurred in the performance of his
duties hereunder.
8. 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 occupies a position of trust and confidence with the Company, the
Employee 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 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. In addition, the Employee has developed
and may further develop on behalf of the Company a personal acquaintance with
the Company's clients, which acquaintances may constitute the Company's only
contact with such clients. For purposes of this Paragraph 8, 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 remuneration
to be paid to the Employee hereunder, the 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 herein regarding his
conduct during and subsequent to his employment by the company
3
<PAGE> 4
and that the Company will suffer irreparable injury if the Employee were to
engage in any conduct prohibited hereby. The Employee represents that his
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 the Employee's ability to earn a livelihood. The
Employee and the Company further agree that the covenants contained in this
Paragraph 8 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 the 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; provided, however, that the covenants
contained in this Paragraph 8 shall not be enforceable by the Company during
any period in which the Company has wrongfully failed to make a required
payment under Paragraph 4a hereof. In the event a court of competent
jurisdiction determines that ny provision of this Paragraph 8 is unreasonable
as to duration, substantive extent or geographic scope, the provision will
nonetheless be enforced to the fullest extent reasonable.
b. The Employee, while in the employ 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 8a, which trade secrets and confidential information were or will be
communicated to or otherwise learned or acquired by the Employee in the course
of his employment with the Company, except that the Employee may disclose such
matters to the extent that the disclosure thereof is required: (i) in the
course of his employment with 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.
c. During the term of his employment with the Company and for a period of
three years thereafter, the Employee will not contact, directly or indirectly,
with a view towards selling any product or service competitive with any product
or service sold (or proposed to be sold) by the Company during the Employee's
employment, any person, firm association or corporation (aa) to which the
Company has provided its services, or (bb) which the Employee or, to his
knowledge, any other 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 and for a period of
three years thereafter, the Employee 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 the same as, similar to
or competitive with the business of the Company as conducted at any time during
the Employee's employment, 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), nor will be Employee directly or indirectly have any
interest in any corporation, firm or business which is engaged in a business
adverse to the Company's business (except that he may own up to 2% of the
4
<PAGE> 5
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 the Employee nor any entity by which the
Employee is employed or otherwise associated with will directly or indirectly
employ, retain the services of or induce or attempt to induce, an 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 the Employee or any
other person, firm, association or corporation.
f. In the event of a breach or threatened or intended breach of this
Agreement and the foregoing covenants by the Employee, the Employee
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 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 the Employee hereby consents
to the issuance thereof forthwith by any court of competent jurisdiction.
9. Termination of Employment.
a. Incapacity. If, during the term of this Agreement, the Employee should
be prevented from performing his duties by reason of illness or physical or
mental disability (hereinafter referred to collectively as "Incapacity") for a
continuous period of between 90 and 180 days, the Employee shall receive
one-half his perdiem Base Salary for each day during such time period that he
fails, due to his Incapacity, to render the services contemplated hereunder.
If during the term of this Agreement, the Employee should be prevented from
performing his duties by reason of Incapacity for a continuous period greater
than 180 days, the Company may terminate the Employee's employment hereunder by
giving written notice thereof to the Employee, effective on the date set forth
in the notice (which date shall be not less than 15 business days after the
notice is given).
For purposes hereof, a continuous period of incapacity shall not be deemed
interrupted until the Employee returns to substantially full time work for a
period of at least 30 days.
b. Death. In the event of the Employee's death during the term of this
Agreement, the Employee's employment hereunder shall be deemed terminated as of
the date of the Employee's death.
c. Cause. This Agreement and the Employee's employment hereunder may be
terminated at any time by the Company for cause. As used herein "cause" shall
mean (i) theft, embezzlement or fraud by the Employee or the Employee's
involvement in any other scheme or conspiracy pursuant to which the Company has
lost or could reasonably be expected to lose assets to the Employee or to
others calculated by the Employee to receive such assets, (ii) incapacity on
the job by reason of the use or abuse of alcohol or drugs, (iii) commission of
a felony or a crime involving moral turpitude, (iv) gross insubordination, (v)
unexplained and continuous absences from work, (vi) material breach by the
Employee of any of the provisions
5
<PAGE> 6
of this Agreement which is not cured within 30 business days after the
Company gives written notice thereof to the Employee specifying the nature of
such breach, (vii) refusal to act in accordance with a lawful and duly adopted
resolution of the Board of Directors.
d. Termination of Employment by the Employee. If, at any time during the
term of this Agreement, the Employee shall not be reappointed as President and
Chief Executive Officer of the Company but his services under this Agreement
are not terminated by the Company, the Employee shall have the right, by
written notice to the Chairman of the Board of the Company, to terminate his
services hereunder, effective as of the thirtieth day after receipt of said
notice, and the Employee shall have no further obligations under this
Agreement, except as provided in Paragraph 8 hereof. Termination of the
Employee's services pursuant to this Paragraph shall be treated as a
termination of employment by the Company other than for cause and shall be
governed by the provisions of Paragraph 10e hereof.
e. Termination of Employment by the Company. The Company may terminate
the Employee's employment for any reason deemed sufficient by the Company.
As used in this Paragraph 9, unless otherwise specified, the term "days"
refers to calendar days.
10. Effect of Termination of Employment.
a. Incapacity. If termination of employment results or occurs due to
Incapacity under Paragraph 9a, the Company shall pay or cause to be paid in a
lump sum (i) such amounts, if any, as the Employee shall be entitled to under
the Company's disability policy and program applicable to the Employee, (ii)
subject to the limitations set forth in the last sentence of Paragraph 6a
hereof, payment in respect of all unused paid vacation time, to the extent the
Employee has not prior thereto received compensation in lieu thereof, (iii) the
Employee's interest in all Company retirement and investment plans, to the
extent such plans permit such interest to be distributed and (iv) payment in
respect of all compensation earned to date but not theretofore paid.
b. Death. If termination of employment occurs as a result of the
Employee's death, the Company shall pay to the Employee's estate a lump sum
payment equal to (i) such amounts as the Employee's estate shall be entitled to
receive under the terms of retirement and investment plans of the Company, to
the extent such plans permit such amounts to be paid, (ii) subject to the
limitation set forth in the last sentence of Paragraph 6a hereof, payment in
respect of all unused paid vacation time, to the extent the Employee has not
prior thereto received compensation in lieu thereof, and (iii) payment in
respect of all compensation earned to date but not theretofore paid. In
addition, the Company will pay to his spouse for a period of 60 days an amount
equal to the Employee's per diem Base Salary.
c. Cause. If the Employee's employment is terminated by the Company for
cause, Employee shall be entitled to all earned but unpaid compensation,
provided, however, the Company shall be entitled to offset therefrom any
amounts lost by the Company as a result of Employee's action giving rise to
such cause.
6
<PAGE> 7
d. Voluntary Termination. If the Employee shall voluntarily terminate his
employment hereunder, the Company shall be obligated to pay or cause to be paid
in a lump sum (i) payment in respect of the Employee's interest in all Company
retirement and investment plans, to the extent such plans permit such payment
to be made, (ii) subject to the limitations set forth in the last sentence of
Paragraph 6a hereof, payment in respect of all unused paid vacation time, to
the extent the Employee has not prior thereto received compensation in lieu
thereof.
e. Termination of Employment Pursuant to Paragraphs 9d or 9e. In the
event that this Agreement is terminated by the Employee pursuant to Paragraph
9d hereof or by the Company pursuant to Paragraph 9e hereof, the Company shall
be obligated to pay or cause to be paid to the Employee (i) the balance of the
Base Salary payments required to be paid during the remaining term of this
Agreement, which payments shall be made at regular intervals in accordance with
the Company's regular pay periods, (ii) payment in respect of the Employee's
interest in all Company retirement and investment plans, to the extent that
such plans permit such payment to be made, and (iii) subject to the limitations
set forth in the last sentence of Paragraph 6a hereof, payment in respect of
all unused paid vacation times, to the extent Employee has not prior thereto
received compensation in lieu thereof. Payments pursuant to subsections (ii)
and (iii) shall be paid in a lump sum.
f. Effect of Termination of Employment; Survival. In the event that the
Employee's employment with the Company terminates, this Agreement shall be
deemed terminated, provided, however, that the terms and conditions of
Paragraphs 6b (to the extent provided therein), 8, 9 and 10 shall survive such
termination and be fully binding and enforceable.
11. Return of Documents. Upon termination of this Agreement for any
reason, the Employee shall deliver to the Company any property then in his
possession belonging to the Company. For purposes of this Agreement, the
parties hereto do hereby agree that any original or copies of any books,
papers, customer lists, files, books of accounts, summaries, notes and other
documents and data or other writings, tapes or records, relating to the Company
or prepared in connection with the Employee's performance of his duties
hereunder, are owned by and are the property of the Company.
12. Best Efforts. The Company and the Employee each agree to use its or
his best efforts to operate the business of the Company in a manner designed to
maximize the revenues and net income of the Company and to preserve and enhance
its goodwill and other assets.
13. Termination of Prior Employment Agreement. The Prior Employment
Agreement is hereby terminated.
14. Notices. Any notices to be given hereunder by either party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid, with return receipt requested.
Mailed notices shall be addressed to the respective addresses shown below.
Either party may change its address for notice by giving written notice in
accordance with the terms of this Paragraph 14.
7
<PAGE> 8
(a) If to the Employee;
James C. Smith
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
(b) If to the Company:
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
with a copy to:
Ronald H. Galowich, Esq.
Madison Group Holdings, Inc.
200 West Madison Street, Suite 2800
Chicago, Illinois 60606
15. Acknowledgment of Reading. The Employee acknowledges, represents and
warrants to the Company that he has received a copy of this Agreement, that he
has read and understands this Agreement, that he has had the opportunity to
seek the advice of legal counsel before signing this Agreement and that he has
either sought such counsel or has voluntarily decided not to do so.
16. General Provisions.
a. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Illinois.
b. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provisions shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provisions had never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provisions or by its
severance herefrom. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically as a part of this
Agreement a provision as similar in terms to the illegal, invalid or
unenforceable provision as may be possible and still be legal, valid or
enforceable.
c. Entire Agreement. This Agreement and the Option Agreements set forth
the entire understanding of the parties with respect to the matters specified
herein. No other terms, conditions or warranties, and no amendments or
modifications hereto, shall be binding unless made in writing and signed by the
parties hereto.
d. Binding Effect; Assignment and Assumption of Agreement. This Agreement
shall be binding upon the parties hereto and inure to the benefit of such
parties, their respective heirs,
8
<PAGE> 9
representatives, successors and permitted assigns. This Agreement may
not be assigned by the Employee nor may it be assigned by the Company without
the Employee's consent.
e. Waiver. The waiver by either party hereto of any breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of any
other breach of the same or any other term or condition hereof.
f. Titles. Title of the paragraphs herein are used for convenience only
and shall not be used for interpretation or construction of any word, clause,
paragraph, or provision of this Agreement.
g. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but which together
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date and year first written above.
COMPANY:
HEALTHCARE COMPARE CORP.
By: ______________________________________
Chairman of the Board
EMPLOYEE:
__________________________________________
JAMES C. SMITH
9
<PAGE> 1
Exhibit 10.96
HEALTHCARE COMPARE CORP.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1997, by and between HEALTHCARE COMPARE CORP., a Delaware corporation (the
"Company"), and JAMES C. SMITH (the "Employee").
WHEREAS, the Employee is a valued employee of the Company and the Company
wishes to induce him to enter into an employment agreement dated as of January
1, 1997 (the "Employment Agreement") and to encourage him in the performance of
his duties thereunder by granting him an option to purchase shares of common
stock, $.01 par value, of the Company (the "Common Stock") pursuant to the
HealthCare COMPARE Corp. 1995 Stock Option Plan (the "Plan"), which Plan is
incorporated herein by this reference; and
WHEREAS, the Employee wishes to acquire the right to purchase shares of
Common Stock.
NOW, THEREFORE, for good and valuable consideration, the parties hereto,
intending to be legally bound, hereby agrees as follows:
1. Grant of Option: Exercise Price. Subject to the provision of Section
2 hereof, the Company hereby grants to the Employee effective as of the date
hereof the right, privilege and option to purchase on the terms and conditions
hereinafter set forth up to 200,000 shares of common Stock at an exercise price
of $42.375 per share (the "Option"). The Option is intended to be an
"Incentive Stock Option" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), subject to the provisions of Section 6(a) of
the Plan and Section 422 of the Code, to the extent permitted by the Code, and
a nonstatutory option with respect to the balance.
2. Time for Exercise of Option. Subject to the provisions of paragraphs 3
and 7 hereof, the Option may be exercised by the Employee from time to time, in
whole or in part, beginning on December 31, 1997 and ending on March 31, 1998
or within such shorter period as is provided in paragraph 3 hereof.
3. Termination of Employment
(a) If the Employee's employment by the Company is terminated by the
Company without cause, then, notwithstanding the provisions of paragraph 2 of
this Agreement, upon such termination of employment, the Option shall become
exercisable in full and the Employee may, for a period of 90 days following
such termination (but before expiration of the original exercise period),
exercise the Option in whole or in part.
(b) If (i) the Employee's employment by the Company is terminated due to
the death or Incapacity (as defined in the Employment Agreement) of the
Employee and (ii) pursuant to paragraph 2 hereof the Option has theretofore
vested or is scheduled to vest within 90 days following the date of such
termination of employment, the Employee or his legal representative may, for a
period of 90 days following such termination (but before expiration or the
original exercise period), exercise the Option, in whole or in part.
(c) If (i) the Employee's employment by the Company is terminated
voluntarily by the Employee and (ii) pursuant to paragraph 2 hereof the Option
has theretofore vested, the Employee may,
<PAGE> 2
for a period of 30 days after the date of termination (but before
expiration of the original exercise period), exercise the Option, in whole or
in part.
(d) If the Employee's employment by the Company is terminated by the
Company for cause (as such term is defined in the Employment Agreement), the
Option shall terminate on the date on which the Employee's employment is
terminated, and the Employee shall have no further rights hereunder.
(e) The Employee acknowledges and understands that certain exercises of
the Option pursuant to this paragraph 3 may cause disqualification of the
Option as an Incentive Stock Option.
4. Method of Exercise. The Option may be exercised by written notice (the
"Notice"), addressed and delivered to the Company (Attention: Chief Financial
Officer), specifying the number of shares of Common Stock to be purchased and
accompanied by (i) a check, or (ii) that number of shares of Common Stock which
have an aggregate fair market value as of the date of exercise equal to the
exercise price, or (iii) any combination thereof. For purposes of this
Agreement, "fair market value" of a share of Common Stock shall mean: (i) if
the Common Stock is traded on a national stock exchange on the date of exercise
of the Option, fair market value shall be the closing price reported by the
applicable composite transactions report on such day, or if the Common Stock is
not traded on such date, the mean between the closing bid-and-asked prices
thereof on that date on such exchange; (ii) if the Common Stock is traded
over-the-counter and is classified as a national market issue on the date of
exercise of the Option, fair market value shall be the last reported
transaction price quoted by the NASDAQ on that day; (iii) if the Common Stock
is traded over-the-counter and is not classified as a national market issue on
the date of exercise of the Option, fair market value shall be the mean between
the last representative bid-and-asked prices quoted by the NASDAQ on that day;
or (iv) if none of the foregoing provisions is applicable, fair market value as
of the date of exercise of the Option shall be determined by the Board of
Directors in good faith on such basis as it deems appropriate. In all cases,
the determination of fair market value shall be binding and conclusive on all
persons.
5. Delivery of Stock Certificates. The Option shall be deemed to have
been exercised upon receipt by the Company of the Notice accompanied by the
exercise price (the "Exercise Date"). The certificate representing the share
of Common Stock purchased upon exercise of the Option shall be issued as of the
Exercise Date and delivered by the Company to the Employee free and clear of
all claims, liens and encumbrances, within five days following the Exercise
Date or as soon thereafter as practicable. As a condition to the exercise of
the Option, the Company may require the Employee to represent and warrant at
the time of any such exercise that the shares of Common Stock are being
purchased for investment purposes only, for the account of the Employee and
without any intention to distribute such shares. If the share of Common Stock
issuable upon exercise of the Option have not previously been registered under
the Securities Act of 1933, as amended, each certificate evidencing shares of
Common Stock acquired upon exercise of the Option shall contain on its face, or
on the reverse side thereof, the following legend:
"These share have not been registered under the Securities Act of 1933 or
under any applicable state law. They may not be offered for sale, sold,
transferred, or pledged without (1) registration under the Securities Act
of 1933 and any applicable state law, or (2) an opinion (satisfactory to
the corporation) that registration is not required."
2
<PAGE> 3
6. Adjustment Provisions. If, during the term of this Agreement, there
shall be any stock dividend, stock rights distribution, stock split,
recapitalization, merger, consolidation, sale of assets, reorganization or
other similar change or transaction of or by the Company, an appropriate
adjustment shall be made to the number and kind of shares remaining to be
acquired upon exercise of the Option and to the exercise price of the Option so
that the value to be received by the Employe upon exercise of the Option shall,
in the aggregate, be the same as if none of the foregoing transactions had
occurred.
7. Merger, Consolidation or Sale of Assets. In the event the Company
enters into an agreement providing for (i) the sale of all or substantially all
of the assets of the Company or (ii) a merger, consolidations or reorganization
which would result in the stockholders of the Company immediately prior tro
such transaction owning less than 50% of the surviving corporation, the Option
shall become exercisable in full without regard to any vesting limitations, and
the Employee shall be entitled, commencing at least ten days prior to the
effective date of such transaction, to exercise the Option in whole or in part,
tot he extent ot previously exercised.
8. Withholding Obligations. In the event that the Company is required to
satisfy withholding obligations under the Code as a result of the exercise of
the Option, the Employee may request that, in lieu of withholding amounts from
the Employee's paycheck or requiring that the Employee deliver a check in the
amount of the withholding obligation, the Company withhold that number of
shares of Common Stock which have a fair market value (determined in accordance
with the provisions of paragraph 5 hereof) on the Exercise Date equal to the
amount required to be withheld.
9. Non-Transferability. The Option is not transferable or assignable by
the Employee other than by will or by the laws of descent and distribution and
are exercisable during the lifetime of the Employee only by the Employee.
10. Compliance with Law. By accepting the Option, the Employee agrees for
himself and his legal representative that the Company shall not be required to
deliver any shares of Common Stock upon the exercise of the Option until such
shares have been qualified for delivery under applicable securities laws and
regulations as determined by the Company or its legal counsel.
11. Rights as a Stockholder; Not an Employment Agreement. The Employee
shall have no rights as a stockholder of the Company with respect to shares of
Common Stock subject to the Option until the Option has been exercised and
payment made as herein provided and certificates representing the shares as to
which the Option has been exercised have been delivered to the Employee.
Nothing contained in this Agreement shall be construed to be a contract of
employment between the Company and the Employee.
12. Construction.
(a) Successors. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, heirs and successors, except as
expressly herein otherwise provided.
(b) Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties with respect to the matters referred to
herein and such agreement shall not be modified, except by written instrument
signed by the parties hereto.
3
<PAGE> 4
(c) Headings; Pronouns; Governing Law. The descriptive headings of the
respective sections and subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to modify or construe the
provisions which follow them. Any use of any masculine pronoun shall include
the feminine and vice-versa and any use of a singular, the plural and
vice-versa, as the context and facts may require. The construction and
interpretation of this Agreement shall be governed in all respects by the laws
of the State of Delaware.
(d) Notices. All communications between the parties shall be in writing
and shall be deemed to have been duly given as of the date and time of hand
delivery or three days after mailing via certified or registered mail, return
receipt requested, proper postage prepaid to the following or such other
addresses of which the parties shall from time to time notify one another:
If to the Company: HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
If to the Employee: James C. Smith
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
(e) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application
thereof to any party of circumstance shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the minimal extent of
such provision or the remaining provisions of this Agreement or the application
of such provision to other parties or circumstances.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement as of the date first above written.
HEALTHCARE COMPARE CORP.
By: ______________________________________
Chairman of the Board
EMPLOYEE:
By: ______________________________________
JAMES C. SMITH
4
<PAGE> 1
Exhibit 10.97
HEALTHCARE COMPARE CORP.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1997, by and between HEALTHCARE COMPARE CORP., a Delaware corporation (the
"Company"), and JAMES C. SMITH (the "Employee").
WHEREAS, the Employee is a valued employee of the Company and the Company
wishes to induce him to enter into an employment agreement dated as of January
1, 1997 (the "Employment Agreement") and to encourage him in the performance of
his duties thereunder by granting him an option to purchase shares of common
stock, $.01 par value, of the Company (the "Common Stock") pursuant to the
HealthCare COMPARE Corp. 1995 Stock Option Plan (the "Plan"), which Plan is
incorporated herein by this reference; and
WHEREAS, the Employee wishes to acquire the right to purchase shares of
Common Stock.
NOW, THEREFORE, for good and valuable consideration, the parties hereto,
intending to be legally bound, hereby agrees as follows:
1. Grant of Option: Exercise Price. Subject to the provision of Section
2 hereof, the Company hereby grants to the Employee effective as of the date
hereof the right, privilege and option to purchase on the terms and conditions
hereinafter set forth up to 200,000 shares of common Stock at an purchase price
of $44.49 per share (the "Option"). The Option is intended to be an "Incentive
Stock Option" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), subject to the provisions of Section 6(a) of the Plan
and Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
to the extent permitted by the Code, and a nonstatutory option with respect to
the balance.
2. Time for Exercise of Option. Subject to the provisions of paragraphs 3
and 8 hereof, the Option may be exercised by the Employee from time to time, in
whole or in part, beginning on December 31, 1998 and ending on March 31, 1999
or within such shorter period as is provided in paragraph 3 hereof.
3. Termination of Employment
(a) If the Employee's employment by the Company is terminated by the
Company without cause, then, notwithstanding the provisions of paragraph 2 of
this Agreement, upon such termination of employment, the Option shall become
exercisable in full and the Employee may, for a period of 90 days following
such termination (but before expiration of the original exercise period),
exercise the Option in whole or in part.
(b) If (i) the Employee's employment by the Company is terminated due to
the death or Incapacity (as defined in the Employment Agreement) of the
Employee and (ii) pursuant to paragraph 2 hereof the Option has theretofore
vested or is scheduled to vest within 90 days following the date of such
termination of employment, the Employee or his legal representative may, for a
period of 90 days following such termination (but before expiration or the
original exercise period), exercise the Option, in whole or in part.
(c) If (i) the Employee's employment by the Company is terminated
voluntarily by the Employee and (ii) pursuant to paragraph 2 hereof the Option
has theretofore vested, the Employee may,
<PAGE> 2
for a period of 30 days after the date of termination (but before expiration of
the original exercise period), exercise the Option, in whole or in part.
(d) If the Employee's employment by the Company is terminated by the
Company for cause (as such term is defined in the Employment Agreement), the
Option shall terminate on the date on which the Employee's employment is
terminated, and the Employee shall have no further rights hereunder.
(e) The Employee acknowledges and understands that certain exercises of
the Option pursuant to this paragraph 3 may cause disqualification of the
Option as an Incentive Stock Option.
4. Method of Exercise. The Option may be exercised by written notice (the
"Notice"), addressed and delivered to the Company (Attention: Chief Financial
Officer), specifying the number of shares of Common Stock to be purchased and
accompanied by (i) a check, or (ii) that number of shares of Common Stock which
have an aggregate fair market value as of the date of exercise equal to the
exercise price, or (iii) any combination thereof. For purposes of this
Agreement, "fair market value" of a share of Common Stock shall mean: (i) if
the Common Stock is traded on a national stock exchange on the date of exercise
of the Option, fair market value shall be the closing price reported by the
applicable composite transactions report on such day, or if the Common Stock is
not traded on such date, the mean between the closing bid-and-asked prices
thereof on that date on such exchange; (ii) if the Common Stock is traded
over-the-counter and is classified as a national market issue on the date of
exercise of the Option, fair market value shall be the last reported
transaction price quoted by the NASDAQ on that day; (iii) if the Common Stock
is traded over-the-counter and is not classified as a national market issue on
the date of exercise of the Option, fair market value shall be the mean between
the last representative bid-and-asked prices quoted by the NASDAQ on that day;
or (iv) if none of the foregoing provisions is applicable, fair market value as
of the date of exercise of the Option shall be determined by the Board of
Directors in good faith on such basis as it deems appropriate. In all cases,
the determination of fair market value shall be binding and conclusive on all
persons.
5. Delivery of Stock Certificates. The Option shall be deemed to have
been exercised upon receipt by the Company of the Notice accompanied by the
exercise price (the "Exercise Date"). The certificate representing the share
of Common Stock purchased upon exercise of the Option shall be issued as of the
Exercise Date and delivered by the Company to the Employee free and clear of
all claims, liens and encumbrances, within five days following the Exercise
Date or as soon thereafter as practicable. As a condition to the exercise of
the Option, the Company may require the Employee to represent and warrant at
the time of any such exercise that the shares of Common Stock are being
purchased for investment purposes only, for the account of the Employee and
without any intention to distribute such shares. If the share of Common Stock
issuable upon exercise of the Option have not previously been registered under
the Securities Act of 1933, as amended, each certificate evidencing shares of
Common Stock acquired upon exercise of the Option shall contain on its face, or
on the reverse side thereof, the following legend:
"These share have not been registered under the Securities Act of 1933 or
under any applicable state law. They may not be offered for sale, sold,
transferred, or pledged without (1) registration under the Securities Act
of 1933 and any applicable state law, or (2) an opinion (satisfactory to
the corporation) that registration is not required."
6. Registration of Shares Subject to the Option. On or before December
31, 1998, the Company will use its best efforts to:
2
<PAGE> 3
(i) prepare and file with the Securities and Exchange Commission("SEC") a
registration statement with respect to the shares of Common Stock issuable upon
exercise of the Option and use its best efforts to cause such registration
statement to become effective under the Securities Act;
(ii) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective until the earlier to
occur of (A) the expiration of the Option or (B) the exercise of the Option in
whole.
7. Adjustment Provisions. If, during the term of this Agreement, there
shall be any stock dividend, stock rights distribution, stock split,
recapitalization, merger, consolidation, sale of assets, reorganization or
other similar change or transaction of or by the Company, an appropriate
adjustment shall be made to the number and kind of shares remaining to be
acquired upon exercise of the Option and to the exercise price of the Option so
that the value to be received by the Employe upon exercise of the Option shall,
in the aggregate, be the same as if none of the foregoing transactions had
occurred.
8. Merger, Consolidation or Sale of Assets. In the event the Company
enters into an agreement providing for (i) the sale of all or substantially all
of the assets of the Company or (ii) a merger, consolidations or reorganization
which would result in the stockholders of the Company immediately prior tro
such transaction owning less than 50% of the surviving corporation, the Option
shall become exercisable in full without regard to any vesting limitations, and
the Employee shall be entitled, commencing at least ten days prior to the
effective date of such transaction, to exercise the Option in whole or in part,
tot he extent ot previously exercised.
9. Withholding Obligations. In the event that the Company is required to
satisfy withholding obligations under the Code as a result of the exercise of
the Option, the Employee may request that, in lieu of withholding amounts from
the Employee's paycheck or requiring that the Employee deliver a check in the
amount of the withholding obligation, the Company withhold that number of
shares of Common Stock which have a fair market value (determined in accordance
with the provisions of paragraph 5 hereof) on the Exercise Date equal to the
amount required to be withheld.
10. Non-Transferability. The Option is not transferable or assignable by
the Employee other than by will or by the laws of descent and distribution and
are exercisable during the lifetime of the Employee only by the Employee.
11. Compliance with Law. By accepting the Option, the Employee agrees for
himself and his legal representative that the Company shall not be required to
deliver any shares of Common Stock upon the exercise of the Option until such
shares have been qualified for delivery under applicable securities laws and
regulations as determined by the Company or its legal counsel.
12. Rights as a Stockholder; Not an Employment Agreement. The Employee
shall have no rights as a stockholder of the Company with respect to shares of
Common Stock subject to the Option until the Option has been exercised and
payment made as herein provided and certificates representing the shares as to
which the Option has been exercised have been delivered to the Employee.
Nothing contained in this Agreement shall be construed to be a contract of
employment between the Company and the Employee.
13. Construction.
3
<PAGE> 4
(a) Successors. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, heirs and successors, except as
expressly herein otherwise provided.
(b) Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties with respect to the matters referred to
herein and such agreement shall not be modified, except by written instrument
signed by the parties hereto.
(c) Headings; Pronouns; Governing Law. The descriptive headings of the
respective sections and subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to modify or construe the
provisions which follow them. Any use of any masculine pronoun shall include
the feminine and vice-versa and any use of a singular, the plural and
vice-versa, as the context and facts may require. The construction and
interpretation of this Agreement shall be governed in all respects by the laws
of the State of Delaware.
(d) Notices. All communications between the parties shall be in writing
and shall be deemed to have been duly given as of the date and time of hand
delivery or three days after mailing via certified or registered mail, return
receipt requested, proper postage prepaid to the following or such other
addresses of which the parties shall from time to time notify one another:
If to the Company: HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
If to the Employee: James C. Smith
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
(e) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application
thereof to any party of circumstance shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the minimal extent of
such provision or the remaining provisions of this Agreement or the application
of such provision to other parties or circumstances.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement as of the date first above written.
HEALTHCARE COMPARE CORP.
By: ______________________________________
Chairman of the Board
EMPLOYEE:
By: ______________________________________
JAMES C. SMITH
4
<PAGE> 1
Exhibit 10.98
HEALTHCARE COMPARE CORP.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of January,
1997, by and between HEALTHCARE COMPARE CORP., a Delaware corporation (the
"Company"), and JAMES C. SMITH (the "Employee").
WHEREAS, the Employee is a valued employee of the Company and the Company
wishes to induce him to enter into an employment agreement dated as of January
1, 1997 (the "Employment Agreement") and to encourage him in the performance of
his duties thereunder by granting him an option to purchase shares of common
stock, $.01 par value, of the Company (the "Common Stock") pursuant to the
HealthCare COMPARE Corp. 1995 Stock Option Plan (the "Plan"), which Plan is
incorporated herein by this reference; and
WHEREAS, the Employee wishes to acquire the right to purchase shares of
Common Stock.
NOW, THEREFORE, for good and valuable consideration, the parties hereto,
intending to be legally bound, hereby agrees as follows:
1. Grant of Option. Subject to the provision of Section 2 hereof, the
Company hereby grants to the Employee effective as of the date hereof the
right, privilege and option to purchase on the terms and conditions hereinafter
set forth up to 200,000 shares of common Stock at an exercise price of $46.61
per share (the "Option"). The Option is intended to be an "Incentive Stock
Option" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), subject to the provisions of Section 6(a) of the Plan and
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), to
the extent permitted by the Code, and a nonstatutory option with respect to the
balance.
2. Time for Exercise of Option. Subject to the provisions of paragraphs 3
and 8 hereof, the Option may be exercised by the Employee from time to time, in
whole or in part, beginning on December 31, 1999 and ending on March 31, 2000
or within such shorter period as is provided in paragraph 3 hereof.
3. Termination of Employment
(a) If the Employee's employment by the Company is terminated by the
Company without cause, then, notwithstanding the provisions of paragraph 2 of
this Agreement, upon such termination of employment, the Option shall become
exercisable in full and the Employee may, for a period of 90 days following
such termination (but before expiration of the original exercise period),
exercise the Option in whole or in part.
(b) If (i) the Employee's employment by the Company is terminated due to
the death or Incapacity (as defined in the Employment Agreement) of the
Employee and (ii) pursuant to paragraph 2 hereof the Option has theretofore
vested or is scheduled to vest within 90 days following the date of such
termination of employment, the Employee or his legal representative may, for a
period of 90 days following such termination (but before expiration or the
original exercise period), exercise the Option, in whole or in part.
(c) If (i) the Employee's employment by the Company is terminated
voluntarily by the Employee and (ii) pursuant to paragraph 2 hereof the Option
has theretofore vested, the Employee may,
<PAGE> 2
for a period of 30 days after the date of termination (but before expiration
of the original exercise period), exercise the Option, in whole or in part.
(d) If the Employee's employment by the Company is terminated by the
Company for cause (as such term is defined in the Employment Agreement), the
Option shall terminate on the date on which the Employee's employment is
terminated, and the Employee shall have no further rights hereunder.
(e) The Employee acknowledges and understands that certain exercises of
the Option pursuant to this paragraph 3 may cause disqualification of the
Option as an Incentive Stock Option.
4. Method of Exercise. The Option may be exercised by written notice (the
"Notice"), addressed and delivered to the Company (Attention: Chief Financial
Officer), specifying the number of shares of Common Stock to be purchased and
accompanied by (i) a check, or (ii) that number of shares of Common Stock which
have an aggregate fair market value as of the date of exercise equal to the
exercise price, or (iii) any combination thereof. For purposes of this
Agreement, "fair market value" of a share of Common Stock shall mean: (i) if
the Common Stock is traded on a national stock exchange on the date of exercise
of the Option, fair market value shall be the closing price reported by the
applicable composite transactions report on such day, or if the Common Stock is
not traded on such date, the mean between the closing bid-and-asked prices
thereof on that date on such exchange; (ii) if the Common Stock is traded
over-the-counter and is classified as a national market issue on the date of
exercise of the Option, fair market value shall be the last reported
transaction price quoted by the NASDAQ on that day; (iii) if the Common Stock
is traded over-the-counter and is not classified as a national market issue on
the date of exercise of the Option, fair market value shall be the mean between
the last representative bid-and-asked prices quoted by the NASDAQ on that day;
or (iv) if none of the foregoing provisions is applicable, fair market value as
of the date of exercise of the Option shall be determined by the Board of
Directors in good faith on such basis as it deems appropriate. In all cases,
the determination of fair market value shall be binding and conclusive on all
persons.
5. Delivery of Stock Certificates. The Option shall be deemed to have
been exercised upon receipt by the Company of the Notice accompanied by the
exercise price (the "Exercise Date"). The certificate representing the share
of Common Stock purchased upon exercise of the Option shall be issued as of the
Exercise Date and delivered by the Company to the Employee free and clear of
all claims, liens and encumbrances, within five days following the Exercise
Date or as soon thereafter as practicable. As a condition to the exercise of
the Option, the Company may require the Employee to represent and warrant at
the time of any such exercise that the shares of Common Stock are being
purchased for investment purposes only, for the account of the Employee and
without any intention to distribute such shares. If the share of Common Stock
issuable upon exercise of the Option have not previously been registered under
the Securities Act of 1933, as amended, each certificate evidencing shares of
Common Stock acquired upon exercise of the Option shall contain on its face, or
on the reverse side thereof, the following legend:
"These share have not been registered under the Securities Act of 1933 or
under any applicable state law. They may not be offered for sale, sold,
transferred, or pledged without (1) registration under the Securities Act
of 1933 and any applicable state law, or (2) an opinion (satisfactory to
the corporation) that registration is not required."
6. Registration of Shares Subject to the Option. On or before December
31, 1999, the Company will use its best efforts to:
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<PAGE> 3
(i) prepare and file with the Securities and Exchange Commission("SEC") a
registration statement with respect to the shares of Common Stock issuable upon
exercise of the Option and use its best efforts to cause such registration
statement to become effective under the Securities Act;
(ii) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective until the earlier to
occur of (A) the expiration of the Option or (B) the exercise of the Option in
whole.
7. Adjustment Provisions. If, during the term of this Agreement, there
shall be any stock dividend, stock rights distribution, stock split,
recapitalization, merger, consolidation, sale of assets, reorganization or
other similar change or transaction of or by the Company, an appropriate
adjustment shall be made to the number and kind of shares remaining to be
acquired upon exercise of the Option and to the exercise price of the Option so
that the value to be received by the Employe upon exercise of the Option shall,
in the aggregate, be the same as if none of the foregoing transactions had
occurred.
8. Merger, Consolidation or Sale of Assets. In the event the Company
enters into an agreement providing for (i) the sale of all or substantially all
of the assets of the Company or (ii) a merger, consolidations or reorganization
which would result in the stockholders of the Company immediately prior tro
such transaction owning less than 50% of the surviving corporation, the Option
shall become exercisable in full without regard to any vesting limitations, and
the Employee shall be entitled, commencing at least ten days prior to the
effective date of such transaction, to exercise the Option in whole or in part,
tot he extent ot previously exercised.
9. Withholding Obligations. In the event that the Company is required to
satisfy withholding obligations under the Code as a result of the exercise of
the Option, the Employee may request that, in lieu of withholding amounts from
the Employee's paycheck or requiring that the Employee deliver a check in the
amount of the withholding obligation, the Company withhold that number of
shares of Common Stock which have a fair market value (determined in accordance
with the provisions of paragraph 5 hereof) on the Exercise Date equal to the
amount required to be withheld.
10. Non-Transferability. The Option is not transferable or assignable by
the Employee other than by will or by the laws of descent and distribution and
are exercisable during the lifetime of the Employee only by the Employee.
11. Compliance with Law. By accepting the Option, the Employee agrees for
himself and his legal representative that the Company shall not be required to
deliver any shares of Common Stock upon the exercise of the Option until such
shares have been qualified for delivery under applicable securities laws and
regulations as determined by the Company or its legal counsel.
12. Rights as a Stockholder; Not an Employment Agreement. The Employee
shall have no rights as a stockholder of the Company with respect to shares of
Common Stock subject to the Option until the Option has been exercised and
payment made as herein provided and certificates representing the shares as to
which the Option has been exercised have been delivered to the Employee.
Nothing contained in this Agreement shall be construed to be a contract of
employment between the Company and the Employee.
13. Construction.
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(a) Successors. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective legal representatives, heirs and successors, except as
expressly herein otherwise provided.
(b) Entire Agreement; Modification. This Agreement contains the entire
understanding between the parties with respect to the matters referred to
herein and such agreement shall not be modified, except by written instrument
signed by the parties hereto.
(c) Headings; Pronouns; Governing Law. The descriptive headings of the
respective sections and subsections of this Agreement are inserted for
convenience of reference only and shall not be deemed to modify or construe the
provisions which follow them. Any use of any masculine pronoun shall include
the feminine and vice-versa and any use of a singular, the plural and
vice-versa, as the context and facts may require. The construction and
interpretation of this Agreement shall be governed in all respects by the laws
of the State of Delaware.
(d) Notices. All communications between the parties shall be in writing
and shall be deemed to have been duly given as of the date and time of hand
delivery or three days after mailing via certified or registered mail, return
receipt requested, proper postage prepaid to the following or such other
addresses of which the parties shall from time to time notify one another:
If to the Company: HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
If to the Employee: James C. Smith
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
(e) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application
thereof to any party of circumstance shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the minimal extent of
such provision or the remaining provisions of this Agreement or the application
of such provision to other parties or circumstances.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement as of the date first above written.
HEALTHCARE COMPARE CORP.
By: ______________________________________
Chairman of the Board
EMPLOYEE:
By: ______________________________________
JAMES C. SMITH
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Exhibit 10.99
AMENDED AND RESTATED SYSTEM AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of September, 1995
("Effective Date") by and between ELECTRONIC DATA SYSTEMS CORPORATION, a Texas
corporation, having a place of business at 5400 Legacy Drive, Plano, Texas
75024 ("EDS") and HealthCare COMPARE Corp., a Delaware corporation, having a
place of business at 3200 Highland Avenue, Downers Grove, Illinois 60515.
WHEREAS, under that certain agreement effective May 26, 1989 (the "1989
Agreement"), EDS and OCCUPATIONAL-URGENT CARE HEALTH SYSTEMS, INC. ("OUCH"), a
wholly owned subsidiary of HealthCare COMPARE Corp., formed a strategic
alliance with a common goal to provide health care cost containment and
administrative cost containment services to the workers' compensation
marketplace and to other markets and customers;
WHEREAS, in furtherance of such goal, OUCH and EDS have developed and
jointly marketed certain automated workers' compensation bill review and
repricing system services operated on the TPS (as defined in Section 2.14) in
an EDS information processing center;
WHEREAS, under that certain agreement dated as of November 15, 1992 (the
"TSO Agreement"), EDS provides certain TSO services to HealthCare COMPARE Corp.
and AFFORDABLE Health Care Concepts, Inc. ("AFFORDABLE"), a wholly owned
subsidiary of HealthCare COMPARE Corp.; and
WHEREAS, HealthCare COMPARE Corp. (acting on behalf of itself, OUCH and
AFFORDABLE) and EDS desire to continue the strategic alliance developed under
the 1989 Agreement, continue the TSO services provided under the TSO Agreement
and restate their agreements regarding such alliance, services and respective
obligations in this Agreement which shall supersede and replace the 1989
Agreement and the TSO Agreement in their entirety.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein contained, the parties agree as follows:
ARTICLE I. AGREEMENT AND TERM
1.1 AGREEMENT. This Agreement establishes the terms and conditions under which
EDS shall provide to HCCC and HCCC shall acquire from EDS access to the EDS
Systems and the data processing, systems modifications, enhancements and
maintenance, marketing support services and other related services described in
this Agreement. The specific services EDS shall provide to HCCC and HCCC's
obligations to EDS in connection with EDS' supply of those services are
described in this Agreement. This Agreement also establishes the terms and
conditions under which HCCC and EDS shall jointly and cooperatively market
products and services of HCCC and EDS to existing and potential clients of HCCC
and EDS. Pursuant to this Agreement, the EDS Systems and services shall be
marketed as the OUCH Systems (or under such other name as the parties mutually
agree) and HCCC shall enter into agreements with HCCC clients for the provision
of such services.
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1.2 TERM. This Agreement shall commence on the Effective Date and shall expire
on January 1, 2005 (the "Expiration Date") unless terminated earlier in
accordance with the provisions of this Agreement. The Expiration Date may be
extended to January 1, 2010 and, if so extended, it may be further extended to
January 1, 2015, in each case upon mutual agreement of the parties. During the
last twelve (12) months of the initial term or any renewal term of this
Agreement, representatives of HCCC and EDS shall meet to discuss and negotiate
any extensions of this Agreement. Nothing contained in this Agreement,
however, shall obligate either party to extend this Agreement.
ARTICLE II. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
2.1 ACCOUNT MANAGER means an EDS employee with overall responsibility for the
management, coordination and delivery of all services and operations being
performed by EDS for HCCC under this Agreement.
2.2 BILL means a single billing for medical services including, without
limitation, hospital inpatient and outpatient, professional, pharmacy,
administrative and other billings for workers' compensation, group health,
automobile and other insurance programs, for which HCCC or the System Lease
Client has completed review, audit, and any and all adjustments made to that
single medical billing and for which a recommendation for payment, denial or
other response has been made.
2.3 CPI means the Consumer Price Index for All Urban Consumers, U.S. City
Average, for All Items (1982-84=100), as published by the Bureau of Labor
Statistics of the Department of Labor.
2.4 EDS SYSTEMS means TPS and any other computer programs or systems owned or
licensed by EDS or designed, developed or provided by EDS for use under this
Agreement, including all enhancements, additions and modifications thereto.
Unless specified otherwise, references to EDS Systems include the associated
System Documentation. EDS Systems shall not include HCCC Owned Data.
2.5 EDS OWNED DATA FILES/DATA means all data file formats in the EDS Systems
and all data contained therein which is not HCCC Owned Data, except that the
messages contained in the EDS Systems message file which were entered into the
message file by EDS are owned by both EDS and HCCC.
2.6 ESCROW ACCOUNT means an interest-bearing escrow account established by EDS
in accordance with Section 6.5 and maintained as a separate account for use
only in accordance with the applicable provisions of this Agreement.
2.7 HCCC means HealthCare COMPARE Corp. together with OUCH and, where
appropriate, AFFORDABLE.
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2.8 HCCC OWNED DATA means all data contained in the EDS Systems data files set
forth in items "a" through "q" in Section 11 of Schedule C, except that the
data contained in item "m", Geno Tables, is owned by HCCC only if HCCC is
responsible for maintaining and updating the Geno Table.
2.9 IPC means an information processing center or data center operated by EDS.
2.10 PROCEEDING means any litigation, claim, action or suit or any proceeding
for equitable relief.
2.11 SERVICE BUREAU CLIENT means a client of HCCC which accesses the EDS
Systems indirectly through HCCC as described in Schedule B, Section I.
2.12 SYSTEM DOCUMENTATION means all supporting documentation, specifications,
input and output formats, program listings, narrative descriptions, operating
instructions, any applicable manuals and reference materials related to the EDS
Systems, including the associated user procedure manuals developed and
maintained by HCCC pursuant to Schedule C.
2.13 SYSTEM LEASE CLIENT means a client of HCCC which accesses an EDS System
directly as described in Schedule B, Section I.
2.14 TOTAL PLAN SYSTEM ("TPS") means the computer programs comprising the EDS
bill review and repricing system (as modified under the 1989 Agreement) known
as the EDS Total Plan System (OUCH Version) which is further described in
Schedule B, Section II, including all enhancements, additions and modifications
thereto. Unless specified otherwise, references to TPS include the associated
System Documentation developed by EDS hereunder pursuant to Section 12 of
Schedule D.
ARTICLE III. EDS ACCOUNT MANAGEMENT AND STAFFING
3.1 EDS ACCOUNT MANAGEMENT. During the term of this Agreement, EDS will
provide the Account Manager at HCCC's facility located in Sacramento,
California or any successor facility. Upon the request of HCCC, the Account
Manager will prepare written reports summarizing EDS' performance under this
Agreement in a format and on a schedule to be mutually agreed upon by HCCC and
EDS.
3.2 MANAGEMENT MEETINGS. The Account Manager shall coordinate with a senior
officer of HCCC or such officer's duly authorized designee ("HCCC Manager").
HCCC will advise EDS in writing of the name of the HCCC Manager and each
replacement during the term of this Agreement. The Account Manager will meet
at least quarterly with the HCCC Manager to review the data processing
priorities established by HCCC and the status of EDS' performance under this
Agreement in light of HCCC's business objectives, strategies and tactics. The
Account Manager and HCCC Manager will work together to resolve any identified
performance issues prior to the next quarterly meeting.
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3.3 SUPPORT STAFF. HCCC and EDS will each allocate sufficient management,
operations and other personnel ("Support Staff") to meet their respective
obligations under this Agreement and will cross-train such Support Staff to the
extent necessary to make knowledgeable Support Staff generally available on a
consistent basis.
3.4 ENHANCED ACCESS/SERVICES. HCCC will notify EDS of each client request for
new EDS Systems access, enhanced EDS Systems capabilities, and/or new or
enhanced EDS Systems services ("Client Request"). Such notice will include
all requested implementation deadlines. Within seven (7) business days of EDS'
receipt of the HCCC notice and the associated written business requirements
related thereto, EDS will either advise HCCC of its response to the Client
Request or inform HCCC of a reasonable date by which it will respond. If EDS
reasonably cannot meet the Client Request, the parties will work together in
good faith to agree upon the terms of an alternate proposal in response to the
Client Request.
ARTICLE IV. OBLIGATIONS OF THE PARTIES
4.1 OBLIGATIONS OF THE PARTIES. During the term of this Agreement, HCCC will
comply with the obligations described in Schedule C and EDS will provide the
EDS Systems services described in Schedule D for Service Bureau Clients, System
Lease Clients and those additional clients to which the parties mutually agree.
EDS shall operate and maintain the EDS Systems on computer hardware located at
such IPCs as EDS deems appropriate and shall permit remote access by HCCC and
System Lease Clients.
4.2 OTHER SERVICES. The parties may agree to jointly market and provide to
clients other products and services including but not limited to data base
services and membership, billing and actuarial services ("Other Services").
The provision of Other Services to clients shall be upon such terms and
conditions as are agreed to by the parties.
4.3 MARKETING. During the term of this Agreement, the parties will perform
those marketing activities described in Schedule A.
4.4 ADDITIONAL SUPPORT BY EDS. In addition to the support services referred to
above, EDS shall provide HCCC such additional support as HCCC may reasonably
request in writing from time to time during the term of this Agreement upon
mutually acceptable terms and conditions.
ARTICLE V. DATA AND CONFIDENTIALITY
5.1 SAFEGUARDING HCCC DATA. EDS will establish and maintain safeguards to
protect HCCC's data and data files in the possession of EDS. The safeguards,
when taken as a whole, shall be no less rigorous than those that EDS uses to
safeguard its own data. HCCC shall have the right to establish additional
security for the data and data files and keep back-up data and data files on
HCCC's premises; however, EDS shall have access to such back-up data and data
files as reasonably required by EDS.
5.2 CONFIDENTIALITY DEFINITIONS. For purposes of Sections 5.3 and 5.4, the
following terms
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shall have the following meanings:
5.2.1 "Representatives" means the representatives of a party, including
without limitation its attorneys, accountants and financial advisors.
5.2.2 "Agents" means the agents of a party, including without limitation
its officers, directors and employees.
5.2.3 "Disclosing Party" means a party, its Agent or Representative,
disclosing Confidential Information.
5.2.4 "Recipient Party" means a party, its Agent or Representative,
receiving Confidential Information.
5.2.5 "Confidential Information" means all information furnished by one
party, its Agents or its Representatives, whether furnished prior to or
subsequent to the Effective Date, including without limitation
information regarding fees; computer software; business procedures;
contract rates; the EDS Systems; data files including without limitation
the data contained therein, edits and audits, medical bill history and
categorical relationships; the terms of this Agreement; and any
information identified by a party as confidential or proprietary together
with all analyses, compilations, forecasts, studies or other documents
prepared by either party, its Agents or its Representatives, which
contain or are based in whole or in part on any such information.
Confidential Information shall not include information which (i) was or
becomes generally available to the public other than as a result of
disclosure by the Recipient Party; (ii) becomes available to the
Recipient Party on a nonconfidential basis from a source (other than the
Disclosing Party) which the Recipient Party has no reason to believe,
after due inquiry, is prohibited from disclosing such information to the
Recipient Party by a legal, contractual or fiduciary obligation; (iii) is
independently developed by the Recipient Party without the use of the
Disclosing Party's Confidential Information; or (iv) was rightfully in
the Recipient Party's possession prior to receipt from the Disclosing
Party.
5.2.6 "Persons" shall be broadly interpreted to include, without
limitation, any corporation, company, group, partnership, entity or
individual.
5.3 CONFIDENTIALITY. The Confidential Information shall be kept confidential
and shall not, without the prior written consent of the Disclosing Party, be
disclosed to any Person or used by the Recipient Party, in any manner
whatsoever, other than pursuant to and in accordance with this Agreement.
Moreover, the Recipient Party shall disclose the Confidential Information only
to those Agents and Representatives who (i) need to know the Confidential
Information for the purposes of this Agreement; and (ii) are informed by the
Recipient Party of the confidential nature of the Confidential Information.
The Recipient Party shall be responsible for any breach of this Agreement
caused by its Agents or Representatives. If the Recipient Party or any Person
to whom the Recipient Party furnished any Confidential Information pursuant to
this Agreement
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becomes legally compelled to disclose any of the Confidential Information,
the Recipient Party shall provide the Disclosing Party with prompt notice
thereof so that the Disclosing Party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement with respect to such Confidential Information. Upon any actual or
threatened violation of this Section by either party, the other party shall be
entitled to preliminary injunctive relief and other injunctive relief against
any such violation. Such injunctive relief shall be in addition to, and in no
way in limitation of, any and all remedies or rights to recover damages which
such party shall have at law or in equity for enforcement of this Section.
Nothing herein shall prohibit EDS from using, licensing, selling, modifying or
otherwise commercially exploiting the EDS Systems.
5.4 RETURN OF CONFIDENTIAL INFORMATION. Upon termination or expiration of this
Agreement for any reason, each party shall promptly return or, upon direction
from the other party, destroy all Confidential Information of the other party
in such party's possession, including without limitation Confidential
Information which may be contained in any user or procedure manuals and certify
to the other party in writing that same has been returned or destroyed.
5.5 AUDIT RIGHTS. Subject to Section 5.3 and upon at least thirty (30) days'
prior written notice from HCCC, EDS shall provide to HCCC and its auditors and
regulators access during regular business hours to any EDS facility that is
used to provide services hereunder and data and records which directly relate
thereto or support such services. None of such audits shall extend longer than
ten (10) consecutive business days. Such access shall be limited to performing
an audit of data related to HCCC and its business, to verify the integrity of
such data and to examine the systems that support such data, including to the
extent directly applicable to EDS' provision of such services, audits of (i)
systems, (ii) general controls and security procedures, and (iii) disaster
recovery procedures. HCCC shall not be entitled to audit (i) EDS financial
information (other than the accuracy of EDS invoices to HCCC and HCCC clients
which relate to the EDS Systems or services provided under this Agreement),
(ii) services, facilities or functions that do not directly relate to or
support services provided to HCCC, or (iii) information regarding other EDS
customers. HCCC and its auditors and regulators must comply with all
reasonable security and confidentiality procedures established by EDS at any
facility to which access is granted. Audits shall not unreasonably interfere
with EDS' normal business operations. EDS shall provide to HCCC and its
auditors and regulators any assistance of a routine nature that they reasonably
require in connection with any such audit. For other assistance, HCCC shall
pay EDS at its then current commercial billing rates for similar services.
ARTICLE VI. PAYMENTS TO EDS
6.1 CHARGES FOR EDS SYSTEMS AND SERVICES. HCCC shall pay to EDS the fees
specified in Schedule E.
6.2 OTHER CHARGES. Fees for Other Services which may be provided under Section
4.2 and additional support which may be provided by EDS under Section 4.4 shall
be paid as agreed upon by the parties.
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6.3 OUT-OF-POCKET EXPENSES. Prior to incurring out-of-pocket expenses for
which payment or reimbursement will be requested from HCCC, EDS will obtain
written approval from the HCCC Manager. For approved expenses, HCCC shall pay,
or reimburse EDS, for all reasonable and actual out-of-pocket expenses, such as
travel and travel-related expenses in connection with the performance of this
Agreement with the following exceptions: such expenses incurred by (1) the EDS
system liaisons visits to System Lease Clients and (2) the EDS marketing
coordinator or other designee in support of HCCC sales and client management
activities related to the EDS Systems.
6.4 RERUNS. HCCC shall reimburse EDS for reruns necessitated by incorrect or
incomplete data or erroneous instructions supplied by HCCC or its clients and
for correction of programming, operator and other processing errors caused by
HCCC or its clients.
6.5 TIME OF PAYMENT. Unless otherwise specified herein, any sum or charge due
under this Agreement shall be due and payable within thirty (30) calendar days
after receipt by either party of an invoice from the other. Any sum not paid
when due shall bear interest until paid at a rate of two percent (2%) per annum
more than the prime rate as published in the Wall Street Journal but in no
event shall the interest exceed the maximum allowed by applicable law. HCCC
shall be permitted to withhold payment of any amounts invoiced by EDS that HCCC
reasonably and in good faith disputes if (i) HCCC promptly (but in any event
within thirty (30) calendar days after receipt of the invoice) notifies EDS in
writing of any disputed amount being withheld and specifies, in reasonable
detail, the reasons why the amount is disputed and (ii) all such amounts that
are individually or in the aggregate equal to or greater than $25,000 so
withheld are, within thirty (30) calendar days after receipt of invoice,
deposited into the Escrow Account. The Escrow Account shall be established as
follows:
(i) EDS shall open the Escrow Account in the name of EDS at a major national
bank selected by EDS. The Escrow Account shall be and shall remain the
property of EDS subject to the provisions below regarding disbursement of
funds.
(ii) The Escrow Account shall be established pursuant to an escrow agreement
that provides that the funds therein, including accrued interest, shall be
disbursed to HCCC and/or EDS, as applicable, in accordance with Article X
or a mutual agreement of the parties.
(iii) After resolution of any dispute with respect to which funds were placed
in the Escrow Account, and after payment from the Escrow Account of all
amounts due to EDS, including accrued interest thereon, with respect to
such dispute, any remaining portion of the funds therein relating to such
dispute including undisbursed accrued interest thereon, shall be promptly
paid to HCCC.
(iv) If the funds in the Escrow Account relating to any dispute are
insufficient to satisfy any award or mutually agreed upon amount due to
EDS with respect to such dispute, HCCC shall promptly pay to EDS the
balance due, including any interest thereon computed in accordance with
this Section.
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6.6 TAXES. There shall be added to any charges under this Agreement, or
separately billed, and HCCC shall pay to EDS, or reimburse EDS for the payment
of, amounts equal to any taxes, however designated or levied, based upon such
charges, or upon this Agreement, or upon the services (including, without
limitation, telecommunication services), or software, equipment, materials, or
other property (tangible or intangible), or the use thereof, provided under
this Agreement, including, without limitation, state and local sales taxes,
use taxes, property taxes, telecommunications taxes, privilege taxes, excise
taxes (including, without limitation, federal excise taxes), and any taxes or
amounts in lieu thereof paid or payable by EDS in respect of the foregoing,
exclusive, however, of franchise taxes, taxes based on the net income of EDS
and any tax levied on EDS generally for the provision of EDS'
telecommunications network.
6.7 COST OF LIVING ADJUSTMENT. Except as otherwise specified in Schedule E,
Section X, effective August 1, 1996 and each August 1st thereafter during the
term of this Agreement, the fees and charges then payable under this Agreement
and identified in Schedule E, Section X as subject to CPI increases, as
previously adjusted in accordance with this Section, shall be increased by the
lesser of (i) seventy percent (70%) of the percentage the CPI for June 1st of
that year (the "Current Index") increased from the CPI one year prior thereto
(the "Base Index") or (ii) eight percent (8%). EDS shall calculate such
adjusted rates and provide HCCC notice thereof in the form of a revised
Schedule E on or before July 1st of each year. If for any reason the CPI for
June 1st is not published by July 1st of that same year, the fee adjustment
shall be made as soon as possible after the publication of the CPI and shall be
effective as of August 1st of that same year. Any fees paid prior to the CPI
calculation which are subject to the CPI increase shall be adjusted promptly.
In the event the Bureau of Labor Statistics stops publishing the CPI or
substantially changes the content or format, the parties shall substitute
another comparable measure published by a mutually acceptable source. In the
event the change is merely to redefine the base year for the CPI from 1982-84
to some other year, the parties shall continue to use the CPI but shall, if
necessary, convert either the Base Index or the Current Index to the same basis
as the other by multiplying the Index by the appropriate conversion factor.
ARTICLE VII. TERMINATION
7.1 TERMINATION FOR CAUSE. In the event either party defaults in the
performance of any of that party's material duties or obligations under this
Agreement (except for a default in payments, which shall be governed by Section
7.2) which default shall not be substantially cured within sixty (60) days
after written notice is given to the defaulting party specifying the default
or, with respect to those defaults which cannot reasonably be cured within
sixty (60) days, should the defaulting party fail to proceed within sixty (60)
days to commence curing the default and thereafter to proceed with all due
diligence to substantially cure the default, the party not in default may
terminate this Agreement by giving written notice to the defaulting party.
7.2 TERMINATION FOR NONPAYMENT. In the event either party defaults in the
payment of any undisputed amount due to the other party under this Agreement
and does not cure the default within ten (10) days after receipt by the
defaulting party of written notice of the default, the
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other party may terminate this Agreement by giving written notice to the
defaulting party. In addition, EDS may terminate this Agreement if HCCC
withholds payment of any amounts invoiced by EDS and (i) HCCC fails to notify
EDS of such disputed amount in accordance with Section 6.5; (ii) HCCC fails, by
the end of the thirty (30) day period specified in Section 6.5, to deposit any
such disputed amount into the Escrow Account if so required by Section 6.5; or
(iii) the aggregate amount withheld by HCCC at any one time exceeds one million
dollars ($1,000,000) or, with respect to amounts due to EDS for any particular
month, the aggregate amount so withheld exceeds fifty percent (50%) of the
invoiced amounts for such month.
7.3 TERMINATION FOR INSOLVENCY. In the event either party becomes or is
declared insolvent or bankrupt, is the subject of any proceeding relating to
its liquidation, insolvency or the appointment of a receiver or similar
officer, makes an assignment for the benefit of all or substantially all of its
creditors or enters into an agreement for the composition, extension or
readjustment of all or substantially all of its obligations, the other party
may immediately terminate this Agreement.
7.4 SERVICES UPON EXPIRATION OR TERMINATION. Upon any expiration or
termination of this Agreement, HCCC shall promptly pay to EDS all amounts due
under this Agreement. Upon expiration of this Agreement or termination by HCCC
pursuant to Section 7.1 or 7.3 hereof, EDS will, if requested by HCCC, provide
reasonable training for HCCC personnel to permit continuity in the performance
of data processing services for HCCC, said training to be provided during any
notice period hereinabove specified and for up to six (6) additional monthly
increments commencing with the date of such expiration or termination, and HCCC
shall pay EDS for such training at EDS' then prevailing commercial rates for
the personnel and other resources used in providing such training.
7.5 LICENSE RIGHTS UPON EXPIRATION OR TERMINATION. EDS Systems will be and
remain EDS' property, and HCCC shall have no rights or interests therein except
as described herein. Subject to the payment by HCCC of all amounts due to EDS
under this Agreement, EDS shall grant HCCC, upon the Expiration Date or
termination of this Agreement by HCCC pursuant to Section 7.1 or 7.3, a
nonexclusive, nontransferable license to use any of the EDS Systems then owned
by EDS and being used by EDS in rendering services to HCCC; provided, that HCCC
shall give EDS not less than twelve (12) months' prior written notice of its
intention to use such EDS Systems following expiration of this Agreement and
agrees to pay a reasonable royalty for such use; provided further, however, in
order to preserve and protect the confidentiality of the EDS Systems, if HCCC
shall elect to operate such EDS Systems after the Expiration Date or
termination of this Agreement by HCCC pursuant to Sections 7.1 or 7.3, HCCC and
EDS shall enter into an agreement, in form and substance reasonably
satisfactory to EDS and HCCC, containing such covenants and conditions as are
necessary or reasonably required to protect EDS' proprietary rights to the EDS
Systems, including but not limited to:
(a) Except as provided in Paragraph (c) of this Section 7.5, the
EDS Systems shall not be operated directly or indirectly by persons
other than HCCC's full-time employees and shall only be operated on
equipment owned or leased by HCCC; provided,
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however, upon the mutual agreement of the parties, the EDS Systems
may be operated by EDS at its then prevailing commercial rates for
personnel and machine time.
(b) Only HCCC work, including work HCCC performs for its clients,
shall be processed utilizing the EDS Systems.
(c) At no time may the EDS Systems or any of the various
components thereof or any modifications thereto, be disclosed to
third parties, sold, assigned, leased or otherwise disposed of, or
commercially exploited or marketed in any way, with or without
charge; except that HCCC may permit access to the EDS Systems by
System Lease Clients which have executed agreements containing terms
and conditions regarding confidentiality of the EDS Systems which
have been approved by EDS. EDS shall not unreasonably withhold its
approval of such terms and conditions. Further, HCCC shall keep
confidential the EDS Systems and will not permit the EDS Systems to
be copied or reproduced, in whole or in part, by any person, firm or
corporation, at any time.
(d) Violation in any material respect of any provision of the
agreement referred to in this Section 7.5 may cause irreparable
injuries to EDS and EDS shall be entitled to preliminary injunctive
relief and other injunctive relief against any such violation. Such
injunctive relief shall be in addition to, and in no way in
limitation of, any and all remedies or rights to recover damages EDS
shall have at law or in equity for the enforcement of the above
agreements.
7.6 RIGHTS IN DATA UPON EXPIRATION OR TERMINATION. Upon expiration or
termination of this Agreement, HCCC shall have the right without cost or
accounting to EDS to use, disclose, sell or otherwise dispose of or
commercially exploit HCCC Owned Data and EDS shall have the right without cost
or accounting to HCCC to use, disclose, sell or otherwise dispose of or
commercially exploit the EDS Owned Data Files/Data.
ARTICLE VIII. INDEMNITIES
8.1 PERSONAL INJURY AND PROPERTY INDEMNITY.
8.1.1 EDS shall indemnify, defend and hold harmless HCCC from any and
all Proceedings, damages, liabilities, costs and expenses, including
without limitation, reasonable attorneys' fees and expenses, arising
out of (i) the death or bodily injury of any agent, employee,
customer or business invitee of EDS (other than HCCC or its
employees), or (ii) damages to any of EDS' tangible personal or
real property (whether owned or leased).
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8.1.2 HCCC shall indemnify, defend and hold harmless EDS from any and
all Proceedings, damages, liabilities, costs and expenses, including
without limitation, reasonable attorneys' fees and expenses, arising
out of (i) death or bodily injury of any agent, employee, customer or
business invitee of HCCC (other than EDS or its employees), or (ii)
damages to any of HCCC's tangible personal or real property (whether
owned or leased).
8.2 INFRINGEMENT INDEMNITY.
8.2.1 By EDS. EDS shall defend any Proceeding brought or threatened
against HCCC to the extent that such Proceeding is based on a claim
that any EDS System owned by EDS and used to provide services to HCCC
under this Agreement (i) infringes a copyright enforceable in the
United States, (ii) infringes a United States patent, (iii)
constitutes misappropriation or unlawful disclosure or use of any
trade secret under United States or state law, or (iv) infringes any
similar proprietary rights under United States or state law. EDS shall
bear the expense of such defense and pay any damages and attorneys'
fees finally awarded by a court of competent jurisdiction which are
attributable to such claim, provided that HCCC has complied with
Section 8.4. Should such EDS Systems become, or in EDS' opinion be
likely to become, the subject of a claim of infringement of a
copyright or patent or misappropriation or unlawful disclosure or use
of a trade secret, or infringement of a similar proprietary right, EDS
shall, at its option, attempt to procure the right to continue using
such EDS Systems, or replace or modify such EDS Systems to make their
use under this Agreement noninfringing. If neither option is
reasonably available in EDS' judgment, then the Account Manager and
the HCCC Manager shall meet to review the impact, if any, on the
completion of the services to be performed by EDS under this Agreement
and negotiate in good faith any appropriate adjustments to such
services.
8.2.2 By HCCC. HCCC shall defend any Proceeding brought or threatened
against EDS to the extent that such Proceeding is based on a claim
that any data, data files, edits, audits or other items provided to
EDS by HCCC under this Agreement, (i) infringes a copyright
enforceable in the United States, (ii) infringes a United States
patent, or (iii) constitutes misappropriation or unlawful disclosure
or use of any trade secret under United States or state law, or (iv)
infringes any similar proprietary right under United States or state
law. HCCC shall bear the expense of such defense and pay any damages
and attorneys' fees finally awarded by a court of competent
jurisdiction which are attributable to such claim, provided that EDS
has complied with Section 8.4. Should such items become, or in HCCC's
opinion be likely to become, the subject of a claim of infringement of
a copyright or patent or misappropriation or unlawful disclosure or
use of a trade secret, or infringement of a similar proprietary right,
HCCC shall, at its option, attempt to procure for
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EDS the right to continue using such items, or replace or modify such
items to make their use under this Agreement noninfringing. If
neither option is reasonably available in HCCC's judgment, then (i) at
HCCC's request, EDS shall destroy the original and all partial and
complete copies of such items and (ii) the Account Manager and HCCC
Manager shall meet to review the impact, if any, on the completion of
the services to be performed by EDS under this Agreement and negotiate
in good faith any appropriate adjustments to such services.
8.3 RENT AND UTILITY INDEMNITY. Each party shall indemnify, defend and hold
harmless the other party from any and all Proceedings, damages, liabilities,
costs and expenses, including without limitation, reasonable attorneys' fees
and expenses, arising out of any claims for rent or utilities at any location
where the indemnitor is required to furnish space or utilities to the other
party pursuant to this Agreement.
8.4 INDEMNITY PROCEDURES. Any party entitled to indemnification under this
Article VIII shall give the party from which it is seeking indemnification
prompt written notice of any matters in respect of which the indemnity may
apply and of which the party claiming indemnification has knowledge; provided,
however, that if a party claiming indemnification fails to give the other
prompt written notice, such other party shall only be relieved of its
obligations under such provision if and to the extent that such party is
materially prejudiced thereby. In addition, the party claiming indemnification
shall give the other party full opportunity to control the response thereto and
the defense thereof. The party claiming indemnification shall have the right
to participate in any legal Proceedings to contest and defend a claim for
indemnification involving a third party and to be represented by its own
attorneys, all at such party's cost and expense. No settlement or compromise
of any asserted third-party claim may be made without the prior written consent
of the party claiming indemnification.
ARTICLE IX. WARRANTY AND LIABILITY
9.1 WARRANTY. EDS warrants that (i) the TPS initially made available to HCCC
and System Lease Clients by EDS under this Agreement shall be the same TPS last
used by HCCC and EDS under the 1989 Agreement; (ii) the documented portions of
the TPS shall substantially conform to the applicable TPS Documentation (as
defined in Schedule D, Section 12) developed pursuant to Schedule D, Section
12; and (iii) unless otherwise agreed to by the parties, all EDS Systems other
than the TPS which may be provided under this Agreement shall substantially
conform to the associated System Documentation. EDS' entire liability and
HCCC's exclusive remedy for a breach of this warranty is as specified in
Schedule D, Section 20. EDS is primarily providing services and access to the
EDS Systems to HCCC under this Agreement. However, EDS may from time to time
provide certain equipment, additional systems and other items as an incidental
part of such services. With the exception of manufacturer's or licensor's
warranties which EDS is able to pass through for HCCC's benefit, such
equipment, systems and items are provided by EDS on an "AS-IS" basis without
warranty. EDS MAKES NO OTHER WARRANTIES OF
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ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY EQUIPMENT,
SYSTEMS, SERVICES, TECHNICAL INFORMATION, TECHNICAL ASSISTANCE OR OTHER ITEMS
PROVIDED BY EDS PURSUANT TO THIS AGREEMENT. EDS EXPRESSLY DISCLAIMS THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9.2 LIMITATION OF LIABILITY. If EDS is liable to HCCC for any matter arising
out of or relating to this Agreement, whether based on an action or claim in
contract, equity, negligence or otherwise, the aggregate amount of damages
recoverable against EDS for all events, acts or omissions shall not exceed the
amount paid to EDS under this Agreement (exclusive of amounts paid in
reimbursement or payment of expenses or taxes) during the three-month period
preceding the most recent event, act or omission for which damages are
recoverable against EDS; provided, however, that the foregoing limitation shall
not apply to (i) EDS' willful misconduct intended to cause harm to HCCC or (ii)
the indemnities set forth in Sections 8.1.1 and 8.2.1. In addition, EDS shall
not be liable for, and the measure of damages shall not include, any amounts
for (i) punitive, indirect or consequential damages or lost profits of any
party, including without limitation, third parties or (ii) damages that could
have been avoided had HCCC exercised reasonable diligence.
9.3 LIMITATION OF ACTIONS. No cause of action may be asserted against either
party under this Agreement later than two (2) years following the date on which
the cause of action accrued.
9.4 ACKNOWLEDGEMENT. HCCC and EDS expressly acknowledge that the limitations
contained in this Article IX represent the express agreement of the parties
with respect to the allocation of risks between the parties, including the
level of risk to be associated with the performance of services hereunder as
related to the amount of the payments to be made to EDS for such services, and
each party fully understands and irrevocably accepts such limitations.
ARTICLE X. DISPUTE RESOLUTION
10.1 INTERNAL RESOLUTION. If representatives of the parties are unable to
resolve promptly a dispute between the parties with respect to the
interpretation of any provision in this Agreement or the performance by either
party of its respective obligations under this Agreement, then such dispute
will be escalated within each party's organization to a senior executive for
resolution. If such senior executives are unable to resolve promptly such
dispute, then each of the parties will appoint another senior executive who
does not devote substantially all of his or her time to performance of this
Agreement, whose task it will be to meet for the purpose of endeavoring to
resolve promptly the dispute or to negotiate promptly an adjustment to the
disputed provision of this Agreement. In each case, the parties responsible
for resolving a dispute will discuss the problem and negotiate in good faith in
an effort to resolve such dispute or renegotiate the applicable provision
without the necessity of any formal proceeding. The specific format for the
discussions shall be left to the discretion of the parties responsible for
resolving the dispute. Both parties will continue performing their respective
obligations under this Agreement while the dispute is being resolved unless and
until this Agreement expires or is terminated in accordance with the provisions
of this
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Agreement. This Section 10.1 shall not prevent the parties from exercising
the termination rights set forth in this Agreement.
10.2 ARBITRATION. Any dispute, controversy, or claim arising out of or
relating to this Agreement, or the creation, validity, interpretation, breach,
or termination of this Agreement, that the parties are unable to resolve in
accordance with Section 10.1, will be settled by binding arbitration in
accordance with the Commercial Arbitration Rules (hereinafter referred to as
the "Rules") of the American Arbitration Association (hereinafter referred to
as "AAA") as modified and supplemented by the procedures set forth in
Subsections 10.2.1 through 10.2.10 as follows. Judgement upon the award
rendered by the arbitrator may be entered in, and enforced by, any court having
jurisdiction thereof.
10.2.1 SPECIFIC DEMAND AND COUNTERCLAIM. The demand for arbitration and
any counterclaim will specify in reasonable detail the facts and legal
grounds forming the basis for the filing party's request for relief, and
will include a statement of the total amount of damages claimed, if any,
and any other remedy sought by that party.
10.2.2 APPOINTMENT OF ARBITRATOR. The parties will attempt to select by
agreement a single neutral arbitrator to hear the dispute, controversy,
or claim, which arbitrator need not be affiliated with the AAA. If the
parties fail to agree on a single neutral arbitrator within ten (10) days
after the filing of the demand for arbitration, a single neutral
arbitrator will be appointed in accordance with the Rules of the AAA.
10.2.3 PROVISIONAL REMEDIES AVAILABLE FROM COURT. Pending the arbitral
tribunal's determination of the merits of a dispute, claim, or
controversy, either party may apply to any court having jurisdiction to
seek injunctive or other extraordinary relief.
10.2.4 LOCATION OF ARBITRATION. The arbitration proceeding will take
place in Dallas, Texas.
10.2.5 LIMITATION ON AUTHORITY OF ARBITRATOR. The arbitrator will not
have authority to award damages in excess of the amount or other than the
types allowed by Section 9.2 and may not, in any event make any ruling,
finding or award that does not conform to the terms and conditions of
this Agreement.
10.2.6 LIMITED DISCOVERY. Discovery will be limited to the request for
and production of documents, depositions, and interrogatories.
Interrogatories will be allowed only as follows: a party may request the
other party to identify by name, last known address, and telephone
number: (i) all persons having knowledge of facts relevant to the
dispute, controversy, or claim, and a brief description of that person's
knowledge; (ii) any expert(s) who may be called as an expert witness, the
subject matter about which the expert is expected to testify, the mental
impressions and opinions held by the expert, and the facts known by the
expert (regardless of when the factual information was acquired) which
relate to or form the basis for the mental
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impressions and opinions held by the expert; and (iii) any expert(s) used
for consultation, who is not expected to be called as an expert
witness, if the consulting expert's opinions or impressions have been
reviewed by an expert witness. All discovery will be guided by the
Federal Rules of Civil Procedure. All issues concerning discovery upon
which the parties cannot agree will be submitted to the arbitrator for
determination.
10.2.7 PARTY MAY REQUEST WRITTEN FINDINGS AND CONCLUSIONS. Upon the
request of a party, the arbitrator's award will include written findings
of fact and conclusions of law.
10.2.8 FEES AND EXPENSES SHARED. Each party will bear its own attorneys'
fees and its own costs and expenses (including filing fees), and will
also bear one-half of the total arbitrator's and other administrative
fees of arbitration.
10.2.9 ENFORCEMENT. Other than those matters involving injunctive or
extraordinary relief as a remedy, or any action necessary to enforce the
award of the arbitrator, the provisions of this Section 10.2 are a
complete defense to any Proceeding instituted by, or on behalf of, either
party against the other party in any court or before any administrative
or arbitral tribunal with respect to any dispute, controversy, or claim
arising out of or related to this Agreement or the creation, validity,
interpretation, breach, or termination of this Agreement.
10.2.10 TERMINATION RIGHTS NOT AFFECTED BY ARBITRATION. Nothing in this
Section 10.2 prevents the parties from exercising the termination rights
set forth in this Agreement.
ARTICLE XI. MISCELLANEOUS
11.1 BINDING NATURE AND ASSIGNMENT. This Agreement shall be binding on the
parties and their respective successors and permitted assigns. Neither party
may assign this Agreement without the prior written consent of the other party.
11.2 NOTICES. Whenever under this Agreement one party is required or permitted
to give notice to any other party, the notice shall be deemed given when
delivered in hand or when mailed by United States mail, registered or certified
mail, return receipt requested, postage prepaid and addressed as follows:
In the case of EDS:
Electronic Data Systems Corporation
5400 Legacy Drive
Plano, Texas 75024
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Attn: President, Commercial Insurance SBU
Facsimile Number (214) 604-8763
With a copy (which shall not constitute effective notice) to:
Electronic Data Systems Corporation
13736 Riverport Drive
Maryland Heights, Missouri 63043
Attention: Contracts (Distribution Code: 1163)
Facsimile Number: (314) 344-5138
In the case of HCCC:
HealthCare COMPARE Corp.
3200 Highland Avenue
Downers Grove, Illinois 60515
Attn: President
With a copy sent to the attention of the Legal Department at the same
address.
11.3 COUNTERPARTS. This Agreement may be executed in several counterparts all
of which taken together shall constitute one single agreement between the
parties.
11.4 HEADINGS. The article, section and paragraph headings are for reference
and convenience only and shall not enter into the interpretation of this
Agreement.
11.5 RELATIONSHIP OF PARTIES. The parties in furnishing services to each other
under this Agreement are acting only as independent contractors.
Notwithstanding any other provision in this Agreement to the contrary, nothing
herein is intended or will be construed to establish any agency, employment,
partnership or joint venture relationship between the parties. Neither party
undertakes by this Agreement or otherwise to perform any obligation of the
other whether regulatory or contractual or to assume any responsibility for the
other party's business or operations. Unless otherwise provided in this
Agreement, each party has the sole right and obligation to supervise, manage,
contract, direct, procure, perform or cause to be performed all work to be
performed by that party pursuant to this Agreement.
11.6 NO THIRD PARTY BENEFICIARIES. Except as provided in Section 19.3 of
Schedule D, this Agreement is entered into by and between the parties hereto
solely for their benefit. Except as provided in Section 19.3 of Schedule D,
the parties have not created or established any third-party beneficiary status
or rights in any person or entity not a party hereto including, without
limitation, any Service Bureau Client, any System Lease Client or any other
client or customer of HCCC, and no such third party shall have any right to
enforce any right or enjoy any benefit created or established under this
Agreement.
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11.7 HIRING OF EMPLOYEES. Except as otherwise agreed in writing, during the
period this Agreement is in effect and for a period of three (3) years
thereafter, HCCC and EDS agree to refrain from hiring any officer or employee
employed then or within the preceding twelve (12) months by the other party or
a subsidiary of the party. However, this Section 11.7 shall not apply in the
event an employee responds to a public advertisement or other widely
disseminated employment notice and such employee is hired as a result of such
response.
11.8 APPROVALS AND SIMILAR ACTIONS. Where agreement, approval, acceptance,
consent or similar action is required by any provision of this Agreement, such
action shall not be unreasonably delayed or withheld.
11.9 FORCE MAJEURE. Each party shall be excused from performance for any
period and to the extent that the party is prevented from performing any
services, in whole or in part, as a result of delays caused by the other party,
an act of God, war, civil disturbance, court order, labor dispute, third party
nonperformance or other cause beyond that party's reasonable control, including
failures or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment and such nonperformance shall not be a default or
a ground for termination.
11.10 SEVERABILITY. Should any provision of this Agreement be declared or
found to be illegal, unenforceable or void, both parties shall be relieved of
all obligations arising under that provision. Should the provision not relate
to the payments to be made to EDS and should the remainder of this Agreement
not be affected by the declaration or finding and capable of substantial
performance, each provision not so affected shall be enforced to the extent
permitted by law.
11.11 AMENDMENT; WAIVER. This Agreement may be amended only by mutual written
agreement of the parties. No delay or omission by either party to exercise any
right or power shall impair such right or power or be construed as a waiver. A
waiver by any of the parties of any of the covenants to be performed by the
other or any breach shall not be construed to be a waiver of any succeeding
breach or of any other covenant.
11.12 MEDIA RELEASES. All media releases, public announcements and public
disclosures by either party relating to this Agreement or the subject matter of
this Agreement including, without limitation, promotional or marketing material
but not including any announcement intended solely for internal distribution or
any disclosure required by legal, accounting or regulatory requirements beyond
the reasonable control of the party shall be coordinated with and approved by
the parties prior to the release.
11.13 ENTIRE AGREEMENT. This Agreement, including Schedules A, B, C, D and E,
each of which is incorporated herein, and any amendments hereto, constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes the 1989
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Agreement, the TSO Agreement and any other prior or contemporaneous
understandings, whether oral or written, regarding the subject matter hereof.
11.14 SURVIVAL. The provisions of Articles V, VIII, X and XI and Sections 7.4,
7.5, 7.6, 9.2, 9.3 and 9.4 of this Agreement and Section 19 of Schedule D shall
survive termination or expiration of this Agreement.
11.15 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws, other than choice of law rules, of the State of
Texas.
IN WITNESS WHEREOF, EDS and HCCC have each caused this Agreement to be
signed and delivered by its duly authorized representative.
ELECTRONIC DATA SYSTEMS HealthCare COMPARE Corp., on behalf of itself,
CORPORATION OUCH and AFFORDABLE
By: By:
-------------------------- -----------------------------------------
John Crysler, President Patrick G. Dills, Executive Vice President
Date: Date:
----------------------- ----------------------------------------
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SCHEDULE A
MARKETING
I. MARKETING. During the term of this Agreement, each party shall:
(a) Promote and market the products and services offered by the
parties for the benefit of HCCC and EDS to clients of HCCC and EDS.
(b) Assist the other party in promoting and marketing the
products and services offered by the parties for the benefit of HCCC
and EDS to potential new clients of HCCC and EDS.
(c) Advise the other party of prospective clients and their
interests in the benefits of the products and services offered by
such other party.
(d) Perform mutually agreed upon joint market research to develop
facts and information regarding prospective clients.
(e) Develop mutually agreed upon promotional materials.
(f) Host visits to existing HCCC, EDS and/or client sites by
prospective clients for the purpose of describing the EDS Systems
and the services provided by HCCC and EDS.
(g) Perform other mutually agreed upon marketing activities.
II. COORDINATION. Each party shall designate one (1) of its employees to be
a marketing coordinator who shall be responsible for the coordination of
marketing activities under this Agreement. The Account Manager may be
designated as EDS' marketing coordinator. The HCCC Manager may be
designated as HCCC's marketing coordinator. The marketing coordinators
will meet as agreed upon to develop marketing plans and strategies and to
better coordinate the joint marketing opportunities and activities of HCCC
and EDS.
III. MARKETING EXPENSES. Each party shall bear its own respective costs and
expenses arising out of any marketing activities under this Agreement.
However, with the prior written agreement of both parties, specific
expenses incurred by a party may be shared in an agreed upon proportion by
the other party.
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SCHEDULE B
HCCC BUSINESS ENVIRONMENT
I. CLIENT SERVICE OPTIONS
HCCC clients may select either of the following two system access
options:
A. SERVICE BUREAU CLIENTS.
Service Bureau Clients will submit to HCCC medical
bills which will be entered into the EDS Systems by
HCCC staff, reviewed by HCCC staff and/or the EDS
Systems, and repriced by the EDS Systems. HCCC staff
will notify Service Bureau Clients of the results of
the review and repricing process.
B. SYSTEM LEASE CLIENTS.
System Lease Clients will utilize the EDS Systems
directly and employ their own staff to enter medical
bills and review certain medical bills. EDS will
operate the EDS Systems and HCCC will administer the
EDS Systems and provide training in EDS Systems use
for staff of System Lease Clients.
II. SYSTEM FEATURES
The TPS reviews and reprices medical bills including hospital
inpatient and outpatient, professional, pharmacy, administrative,
and other billings for workers' compensation, group health,
automobile, and may include other insurance programs. Bills are
compared with state fee schedules, state rules and regulations,
Preferred Provider Organization ("PPO") contract pricing or usual
and customary pricing, as appropriate, and repriced in accordance
with the lowest applicable pricing. The TPS detects both
duplicate bills and individual services billed, as well as certain
billing infractions (e.g., unbundling, mutually exclusive
procedures). The TPS also applies utilization management
pre-certification recommendations.
III. REQUIRED SYSTEM INTERFACES
The following interfaces are required between the TPS and various
HCCC systems to provide services to HCCC and HCCC's clients:
B-1
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A. HCCC CORPORATE PROVIDER DATABASE.
For the AFFORDABLE Medical Networks, HCCC's corporate provider database
contains the information necessary to populate the TPS' provider file which
receives demographic information, network affiliation(s) and associated
contract rates. Alternatively, and until implementation of the provider
database/TPS interface, provider information is entered directly into the
TPS' provider file.
B. HCCC'S CORPORATE CLIENT DATABASE.
HCCC's corporate client database contains the information for Service
Bureau Clients necessary to populate the TPS' client file which receives
information pertaining to HCCC's fee structure, key contact personnel,
rules by which to review medical bills, and employer identification (if
applicable). Alternatively, and until implementation of the client
database/TPS interface, client information is entered directly into the
TPS' client file.
C. HCCC UTILIZATION/MEDICAL MANAGEMENT SYSTEM.
HCCC's utilization/medical management system contains pre-certification
recommendations for select services. This information is transmitted to
the TPS which reviews bills for consistency with pre-certification
recommendations.
D. HCCC ACCOUNTING SYSTEM.
HCCC's accounting system receives the results of each medical bill review
performed by the TPS for Service Bureau Clients. The accounting system
records the amount to be invoiced to HCCC's Service Bureau Clients and
applies cash received from such clients.
E. CLIENT CLAIM AND FINANCIAL SYSTEMS.
Clients' claim and financial systems receive the results of each medical
bill review from the TPS. This information allows clients to update
their claim files and generate payments to providers. Clients' claim
systems also furnish the TPS with claim information used to validate
medical bill information during bill review.
B-2
<PAGE> 22
F. OTHER SYSTEMS.
Other EDS Systems interfaces or modifications to existing interfaces may be
developed from time to time under the terms of Schedule D to support the
business requirements of HCCC and HCCC's clients.
B-3
<PAGE> 23
SCHEDULE C
HCCC SYSTEM OBLIGATIONS
During the term of this Agreement, HCCC shall perform the following:
1. Provide EDS staff who are required to perform services at HCCC's offices
with office space, office furnishings, office equipment (excluding
personal computers), and office related services including janitorial
service, telephone service and utilities and any other services which HCCC
determines are reasonably necessary to perform the services required under
this Agreement. All office space, furnishings, equipment and services to
be provided under this paragraph will be comparable to that which HCCC
provides HCCC colleagues in equivalent positions. As required to perform
services under this Agreement, authorized EDS staff shall have necessary
access to the work area and equipment assigned to such EDS staff in HCCC's
offices seven (7) days a week, twenty-four (24) hours a day; provided,
however, that such EDS staff shall comply with all relevant HCCC policies
and procedures.
2. Store all back-up data files maintained by HCCC pursuant to Section 5.1
of this Agreement or reasonably required by EDS to be maintained on HCCC's
premises for effective EDS Systems performance.
3. Pay all taxes, leases, insurance, maintenance, depreciation and other
associated costs for HCCC owned hardware and pay the costs associated with
HCCC-leased hardware as provided in the applicable equipment lease. For
Service Bureau Clients only, HCCC shall retain all responsibility for
current and future end-user hardware including, but not limited to,
terminals, printers, controllers, and personal computers.
4. Continue to provide all communications lines, modems, interface
equipment, terminals, and other equipment and services provided under the
1989 Agreement for access to and utilization of the EDS telecommunications
network and EDS Systems. HCCC also shall provide, or cause to be
provided, all modems, interface equipment, terminals, and other equipment
at the offices of HCCC and the System Lease Clients necessary to access
and utilize the EDS telecommunications network and the EDS Systems. EDS
and HCCC shall confer and mutually agree upon the selection of such
equipment. Upon request by HCCC, EDS will provide such equipment upon
mutually agreeable terms and at EDS' usual and customary fees.
5. Provide to EDS, upon EDS' reasonable request data processing related
forms and supplies required for EDS to perform its services under this
Agreement.
6. Provide for or pay for costs associated with the delivery of data and
other input and for distribution of reports and other output between EDS
print facilities and HCCC locations.
C-1
<PAGE> 24
7. Provide EDS with written business requirements for EDS Systems
modifications in a format which is agreed to by the parties. HCCC will
involve EDS in the development of a project schedule, including
implementation dates, for all EDS Systems modifications required by HCCC.
8. HCCC will provide EDS with timely management decisions, information,
approvals, and acceptances as reasonably required for EDS to perform its
services under this Agreement.
9. Provide EDS with information regarding the priority levels of requested
EDS Systems modifications and involve EDS in the establishment of such
priority levels.
10. Perform timely acceptance testing for EDS Systems modifications completed
by EDS and, upon acceptance of such modifications, authorize EDS to load
the accepted EDS Systems modifications into the production environment.
11. Maintain, update and assume responsibility for the accuracy of, the
following EDS Systems files and other EDS Systems reference sources,
including any updates thereto required to be compatible with the GMIS
licensed software:
a) Provider file*+
b) Client file*
c) Examiner file*
d) Procedure file
e) Diagnosis file
f) Severity file
g) Medium file
h) Pricing file
- Fee Schedule pricing
- PPO pricing*+
i) Message file
j) Authorization file
k) U/R String file
l) Stop table
m) Geno tables
n) Condition Code Narrative file
o) Work Scheduler file*
p) Duplicate Code Grid
q) Reporting Matrix file
* File also maintained by HCCC System Lease Clients.
*+ File also maintained by HCCC System Lease Clients for non-PPO
providers and/or external PPO networks.
12. Perform all HCCC functions required to implement fee schedule pricing
values within thirty (30) days of fee schedule receipt by HCCC, automate
fee schedule rules and regulations within sixty (60) days of fee schedule
receipt by HCCC, and implement
C-2
<PAGE> 25
billing infraction software revisions within ninety (90) days of fee
schedule receipt by HCCC. HCCC will provide notice to EDS of any new or
revised fee schedules received by HCCC within five (5) days of receipt, and
delivery of written business requirements within a reasonable time;
provided, however, that if HCCC's delivery of written business requirements
to EDS occurs more than ten (10) days after HCCC's receipt of the fee
schedules, the applicable fee schedule implementation deadline set forth in
this Section 12 and in Schedule D, Section 7 shall be extended by a number
of days equal to the number of days by which HCCC's delivery of written
business requirements to EDS exceeds the ten (10) day time period. HCCC
will develop and maintain in a mutually agreed upon format a delivery
tracking report for all pricing obligations pursuant to this Section 12 and
provide a copy to the Account Manager on a weekly basis.
13. Develop and maintain user procedure manuals for use by HCCC and System
Lease Clients.
14. Acquire data from expert system vendors to maintain and update the EDS
Systems files referred to in Section 11 above.
15. Inspect and review all reports produced by EDS and provide EDS with
prompt documentation of all discrepancies.
16. Provide input data to be processed by the EDS Systems in a mutually
acceptable format and media and cause the System Lease Clients to do
likewise.
17. Enter into separate written agreements with Service Bureau Clients and
System Lease Clients, such agreements to include obligations of confidence
and nondisclosure no less stringent than those included in this Agreement
and otherwise be consistent with the terms and conditions of this
Agreement.
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SCHEDULE D
EDS SYSTEM SERVICES
During the term of this Agreement, EDS shall perform the following services.
Unless otherwise specified, fees for such EDS services are included in the fees
set forth in Schedule E hereof.
1. Provide output from (i) the TPS consistent with past practice under the
1989 Agreement or other mutually agreed upon format which is consistent
with supporting HCCC's business environment described in Schedule B and in
accordance with the associated System Documentation developed by EDS
hereunder pursuant to Section 12 of Schedule D and (ii) other EDS Systems
in accordance with the associated System Documentation or other mutually
acceptable format which is consistent with supporting HCCC's business
environment described in Schedule B. Prior to providing any new output,
EDS will provide HCCC with an opportunity to review and comment on EDS'
proposed format and media for such output. Any new requirements for
interfacing the EDS Systems to various HCCC or HCCC client systems will be
mutually agreed to by the parties.
2. Accept input from HCCC and HCCC clients into the EDS Systems in a
mutually acceptable format and media.
3. Provide HCCC with a weekly status report for modifications to the EDS
Systems designed and developed during the term of this Agreement. The
status report will include a current development and implementation
schedule and any other information which HCCC may reasonably request.
4. Prior to incurring any costs related to modifications of the EDS Systems
for which EDS will request payment from HCCC, EDS will submit a written
estimate to the HCCC Manager for approval.
5 Provide routine EDS Systems maintenance and modifications to maintain and
update the EDS Systems in support of HCCC's "core" Bill Review product(s).
Routine EDS Systems maintenance includes:
a) Usual and Customary pricing data tape loads;
b) Fee Schedule pricing data tape loads;
c) PPO pricing data tape loads;
d) PPO provider data tape loads;
e) GMIS licensed software database loads;
D-1
<PAGE> 27
f) Benefit file loads (unless otherwise agreed by the parties);
g) System file loads (procedure, pricing, message, diagnosis, etc.);
h) Modification of severity edits; and
i) Other similar maintenance to existing EDS Systems functionality.
Modifications to maintain and update the EDS Systems in support of
HCCC's "core" Bill Review product(s) will be performed in accordance with a
standard methodology which is mutually agreed upon by the parties and includes:
a) Automation of fee schedule pricing routines;
b) Automation of PPO pricing routines;
c) Automation of fee schedule rules and regulations;
d) Automation of other state regulated requirements,
including reporting;
e) Change of sorting sequences in any exception or
control report;
f) Correction of malfunctioning system logic;
g) Addition of information available in the database
on a report currently being produced;
h) Development and implementation of EDS Systems
modifications that increase revenue for both EDS and HCCC;
i) Development and implementation of EDS Systems
modifications requested by HCCC or HCCC's clients that are
required to retain existing business or are considered value
added services to attract prospective clients and are mutually
agreed upon by HCCC and EDS;
j) Development of new interfaces between the EDS
Systems and various HCCC and HCCC client systems which require
only minor changes to existing formats; and
k) Other mutually agreed upon EDS Systems
modifications.
6. Provide major EDS Systems modifications requested by HCCC. EDS may
request payment for such services from HCCC at EDS' usual and customary
fees or such other fees as the parties may agree upon. Major EDS Systems
modifications are modifications which are not included in Section 5 above
and which are substantial changes affecting the fundamental structure or
design of the EDS Systems. Major EDS Systems modifications will be
performed in accordance with a standard methodology which is mutually
agreed upon by the parties.
7. Subject to Section 12 of Schedule C, perform all EDS functions required
to implement fee schedule pricing values within thirty (30) days of fee
schedule receipt by HCCC, automate fee schedule rules and regulations
within sixty (60) days of fee schedule receipt by HCCC, and implement
billing infraction software revisions within ninety (90) days of fee
schedule receipt by HCCC, unless an alternate implementation schedule is
agreed upon by the parties.
D-2
<PAGE> 28
8. Provide technical customer service support for System Lease Clients and
support to HCCC's training staff for training of System Lease Clients'
staff.
9. Conduct unit testing and integrated EDS Systems testing on all EDS
Systems modifications and load the EDS Systems modifications into the
model office environment upon successful completion of the unit testing.
10. Provide model office implementation dates for all EDS Systems
modifications within seven (7) business days after business requirements
have been completed and signed off by HCCC and EDS, unless an extended
time frame is mutually agreed upon; provided, however that the
implementation date provided by EDS may be revised if there is a
subsequent change in the business requirements.
11. Upon request by HCCC, prepare written material related to the EDS Systems
and the EDS Systems' functionality to be included in HCCC's responses to
Requests for Proposals (RFPs) in order to promote and market the EDS
Systems and services provided under this Agreement. EDS shall submit such
written material on or before the deadline included in HCCC's request.
12. HCCC and EDS acknowledge that TPS (as previously modified under the 1989
Agreement) has not been documented by HCCC and EDS. It is HCCC and EDS'
desire that both a Reports Manual and a System Design Definition Document
(collectively, the "TPS Documentation") which accurately reflect the
correct performance of the then-current version of TPS used by HCCC and
EDS under this Agreement be developed over time. To this end, EDS has
identified certain documentation for another version of TPS (the "Existing
TPS Documentation") that may be used, in part, by EDS to create the TPS
Documentation. Recognizing the substantial resources required to document
the version of TPS used by HCCC and EDS under this Agreement and HCCC and
EDS' limited resources available for such an effort, HCCC and EDS agree to
develop the TPS Documentation as system modifications and major system
modifications are developed under this Agreement. Under this approach,
HCCC and EDS will develop new or revised TPS Documentation for each such
modification and the affected base TPS program modules as such
modifications are being developed while extracting and using, to the
extent reasonably feasible, portions of the Existing TPS Documentation
applicable to the affected base TPS program modules. Such new or revised
TPS Documentation will include the associated business and technical
designs developed by HCCC and EDS and approved by the HCCC Manager through
the change system request ("CSR") process used by HCCC and EDS to develop
such modifications. Notwithstanding the foregoing, HCCC and EDS agree
that TPS Documentation for the following portions of the TPS will be
developed on or before March 1, 1997: the Injury Record Process, PPO
Pricing, Electronic Data Interchange Output Records,
D-3
<PAGE> 29
HCCC Pre-Certification Recommendations/TPS Interface, the Huron
Application, the Fee Schedule and Pricing Subsystem, the Provider File
Application and the Client File Application (collectively
"Applications"). On or before March 1, 1996, EDS will prepare and
deliver to the HCCC Manager a comprehensive summary level project
work plan for the development of TPS Documentation for the Applications.
Furthermore, the HCCC Manager and the Account Manager shall meet at a
mutually agreed upon time no later than September 1, 1998 to: (i) review
what portions of the TPS have not yet been documented and (ii) negotiate
a schedule for completing TPS Documentation for such portions of the TPS,
it being acknowledged, however, that HCCC and EDS shall not document any
portions of the then-current version of TPS not being used by HCCC
and EDS under this Agreement.
EDS will provide HCCC one copy of the initial TPS Documentation (but not
the Existing TPS Documentation) in human-readable form. HCCC may copy
the TPS Documentation, in whole or in part, solely for HCCC's internal
business purposes. HCCC will retain and reproduce any copyright or
proprietary notices in their original form on all copies (including
partial copies) made by HCCC. The original and all complete and partial
copies of the TPS Documentation will be the sole property of EDS and will
be subject to the terms and conditions of this Agreement. On a scheduled
basis every third month after HCCC's receipt of the initial TPS
Documentation and on a non-scheduled basis at HCCC's reasonable request,
EDS will provide HCCC one copy of the then-current TPS Documentation in
human-readable form. Promptly following receipt of the then-current TPS
Documentation, HCCC will either return to EDS or destroy the prior
version of the TPS Documentation, including all complete and partial
copies thereof. Upon termination or expiration of this Agreement, HCCC
will return all TPS Documentation in its possession to EDS and certify to
EDS in writing the same has been returned, unless such documentation has
been licensed thereafter by HCCC pursuant to Section 7.5.
13. Store HCCC's medical bill history data on-line for a period of thirty-six
(36) months. Medical bill history data beyond thirty-six (36) months
shall be retained by EDS indefinitely in a storage medium determined by
EDS that permits timely access and retrieval of the data.
14. Store any magnetic tapes, disc packs, or other electronic media
containing HCCC data which may be in the possession or custody of EDS in
compliance with a retention schedule to be developed by the parties prior
to the Effective Date of this Agreement. The retention schedule may be
revised from time to time upon agreement of the parties. If any
applicable law or regulation requires retention of HCCC data beyond the
time specified in the retention schedule, EDS will comply with such
requirements upon mutually acceptable terms and conditions.
D-4
<PAGE> 30
15. Provide HCCC with timely management decisions, information, and approvals
as reasonably required under this Agreement.
16. Comply with the service level guidelines set forth in Attachment 1 to
this Schedule D in performing services for all HCCC clients, except that
EDS will comply with the service level guidelines set forth in Attachment
2 to this Schedule D in performing services for Liberty Mutual Managed
Care, Inc.
17. Produce periodic reports of the services provided under this Agreement to
include, at a minimum, all reports listed on Attachment 3 to this Schedule
D or the functional equivalents of such report(s).
18. Provide the following services and capabilities in support of HCCC's
analytical needs through November 14, 1995. Thereafter, such services and
capabilities will be provided automatically on a year-to-year basis until
terminated by either party with at least ninety (90) calendar days written
notice prior to expiration of the then current period.
a) Initial training for HCCC's users identified to EDS from time to time
on the following:
(i) Time-sharing Option ("TSO") usage
(ii) Job Control Language ("JCL")
(iii) IPC Processing Standards
b) Assigning the users identified to EDS from time to time EDS*NET and
other applicable log-on identification numbers with appropriate access
codes.
c) Access to the IPC via EDS*NET at a minimum during the On-Line
Scheduled Hours of Availability set forth in Attachment I to this
Schedule D.
d) Access to applications resident in the IPC which EDS is not restricted
from providing HCCC access.
e) Access to applications resident in the IPC which EDS is restricted
from providing HCCC access after obtaining rights to permit HCCC access
or to applications not resident in the IPC after EDS obtains such
applications. However, EDS will make such "restricted" applications
available at a charge agreed upon by HCCC and EDS.
f) Transferring files between the mainframe and HCCC's personal
computers.
D-5
<PAGE> 31
g) Data storage using Direct Access Storage Devices ("DASD") and
cartridge storage management through the use of EDS' tape management
system and DASD backup/storage functions.
h) Providing HCCC space resource management.
i) Technical support for job submissions and execution as reasonably
required including use of EDS' job scheduling system, support from the
EDS HCCC on-site account personnel for guidance and problem resolution,
mainframe SAS, JCL, and EDS utilities assistance, and access to the IPC
Help Desk twenty-four (24) hours a day.
j) Project assistance including project access code assignments,
tracking, and reporting, project account codes available as required, TSO
log-on identification numbers within twenty-four (24) hours upon EDS
receiving an authorized request, and monthly project accounting reports
by project detailing resource usage and charges.
k) Access to a configuration manager to assist in the control of source
programs and JCL.
19. Obtain the right under the master software license agreement between EDS
and GMIS, Inc. ("GMIS") to install GMIS' ClaimCheck P&C(R) claims auditing
system ("ClaimCheck P&C") for use by HCCC and System Lease Clients. A
description of ClaimCheck P&C, provided to EDS by GMIS, is set forth in
Attachment IV to this Schedule D. In conjunction with such use, EDS will
also:
a) Provide to HCCC reasonable notice in advance of any maintenance
releases to ClaimCheck P&C and install such releases as they are
made available to EDS by GMIS.
b) Provide to HCCC reasonable notice in advance of any new
ClaimCheck P&C products, modules, enhancements, or features that
may be provided by EDS and the terms, including price, upon which
EDS will provide services utilizing such new products, modules,
enhancements, or features.
c) Provide to HCCC one (1) copy of current versions of user
documentation for ClaimCheck P&C as such documentation is made
available to EDS by GMIS.
d) Maintain ClaimCheck P&C so that it operates in accordance with
the then-current user documentation for ClaimCheck P&C.
D-6
<PAGE> 32
19.1 Special Terms and Conditions. EDS will include the following
provisions as obligations of GMIS under the master software license
agreement between EDS and GMIS:
a) GMIS will provide implementation and on-going support to EDS/HCCC
throughout the duration of HCCC's use of ClaimCheck P&C, including
updates required to reflect changes in applicable state laws and
regulations. GMIS will use its best efforts to provide such updates
to EDS within sixty (60) days after GMIS receives such changes, and in
any case, GMIS will provide such updates to EDS within ninety (90)
days after GMIS receives such changes. GMIS will diligently monitor
such changes, and will continue to subscribe to appropriate
publications, services, and mailings which provide notice of such
changes to GMIS and other interested parties. EDS or HCCC also may,
but are not required to, provide notice of such changes to GMIS. GMIS
will modify ClaimCheck P&C for HCCC as reasonably requested by HCCC
from time to time to customize such data base edits as cannot be
customized on-site by EDS or HCCC and occurring no more than once per
database release. HCCC will pay GMIS for such modifications at GMIS'
then-standard time and material rates, or as otherwise agreed in
writing by GMIS and HCCC. GMIS will complete, and deliver to EDS,
each such modification within one hundred twenty (120) days after GMIS
and HCCC agree on the specifications and charges for such
modification.
b) GMIS will, at no additional charge, provide standard documents and
information in connection with any pending or threatening litigation
involving claims for which HCCC used ClaimCheck P&C non-customized
logic. GMIS will respond to such requests for documents and
information within ten (10) business days after receipt thereof unless
physician review is required. If physician review is required, GMIS
will facilitate a timely review and keep EDS and HCCC updated on the
progress of the review. If HCCC requires GMIS to review case-specific
records, or to create case-specific documentation, or to appear in
connection with any pending or threatened litigation involving claims
for which HCCC used ClaimCheck P&C, GMIS will be reimbursed by HCCC
for reasonable cost of time, travel, and travel-related expenses
incurred by GMIS staff or one of its consultants.
19.2 Term of Use. Except as otherwise provided herein, HCCC will use
ClaimCheck P&C through June 30, 2000. HCCC and EDS may extend use of
ClaimCheck P&C thereafter by mutual agreement in writing. HCCC and EDS
may terminate use of ClaimCheck P&C at any time by mutual agreement in
writing. Notwithstanding the foregoing, EDS will provide HCCC with at
least sixty (60) days prior written notice that GMIS will discontinue
ClaimCheck P&C. In such
D-7
<PAGE> 33
event, HCCC's use of ClaimCheck P&C hereunder also will terminate,
unless otherwise agreed by the parties.
19.3 Proprietary Rights and Confidentiality.
a) HCCC acknowledges that ClaimCheck P&C is the proprietary and
confidential property of GMIS, is not, nor will be, part of the EDS
Systems, and that HCCC will have no rights or interests therein except
as described in this Section 19. Violation in any material respect
of any provision of this Section 19.3 may cause irreparable injuries
to EDS, GMIS, or both, and EDS, GMIS, or both, will be entitled to
preliminary injunctive relief and other injunctive relief against any
such violation. Such injunctive relief will be in addition to, and in
no way in limitation of, any and all other remedies or rights to
recover damages EDS, GMIS, or both, will have at law or in equity for
the enforcement of this Section 19.3. Section 5.3 of this Agreement
applies with respect to ClaimCheck P&C.
b) EDS may provide to GMIS, and GMIS may retain, certain log file and
usage information concerning claims processed using ClaimCheck P&C,
subject to GMIS' obligation to maintain such information in confidence
and not to disclose such information without HCCC's prior written
consent.
c) The provisions of this Section 19.3 will survive termination or
expiration of this Agreement.
20. Investigate and correct System Errors according to the process set forth
in Sections 20.1 through 20.3 below. "System Errors" means deficiencies or
errors in a computer program within the EDS Systems that cause it not to
perform substantially in accordance with the then-current associated System
Documentation.
20.1 Notification to EDS by HCCC. The HCCC Manager will deliver to the
Account Manager a written statement and supporting documentation
describing in reasonable detail any suspected System Error. Critical
System Errors may initially be reported by the HCCC Manager via telephone
or in person.
20.2 Investigation and Correction. EDS will use reasonable efforts to
investigate the facts and circumstances related to the suspected System
Error. HCCC will cooperate fully with EDS' investigation. If this
investigation reveals the existence of a System Error, EDS will correct
the System Error or provide a workaround or alternative solution
acceptable to HCCC. A schedule for correcting each System Error and its
priority in relation to the completion of any other reported error will
be
D-8
<PAGE> 34
mutually agreed upon by the HCCC Manager and the Account Manager.
20.3 Billable Investigations. If, on a frequent basis, EDS'
investigation reveals that no System Error exists, HCCC and EDS will
negotiate a reimbursement amount to be paid by HCCC for EDS'
investigation.
21. Except as provided in Section 4 of Schedule C, EDS shall provide and manage
the telecommunications network connections which provide access to the IPC(s)
from the offices of HCCC and System Lease Clients, including the necessary
communications lines and modems, interface equipment, terminals and other
equipment at the IPC(s) necessary to access and utilize the EDS
telecommunications network and EDS Systems. EDS reserves the right, but is not
obligated, to change or upgrade such connections during the term of this
Agreement. Changes or upgrades requested by HCCC may be provided by EDS upon
mutually agreeable terms and at EDS' usual and customary fees.
D-9
<PAGE> 35
SCHEDULE D
ATTACHMENT IV
CLAIMCHECK P&C(R) DESCRIPTION
ClaimCheck P&C, GMIS' clinically oriented claims auditing product, is a fully
automated cost containment program designed to analyze provider bills to ensure
that the correct state fee schedule or CPT-4 codes are used for reimbursement.
The system analyzes relationships between procedure codes and diagnoses, based
on state fee schedule, to determine whether or not the provider has billed
within state fee schedule (and/or CPT-4) guidelines. ClaimCheck P&C's on-line
editing capabilities are designed to detect many different types of code
manipulation practices. ClaimCheck P&C audits all surgical, medical,
radiology, pathology, and laboratory services using a database that includes
over five million auditing rules.
ClaimReview, a claims based utilization review module of ClaimCheck P&C,
evaluates procedures billed for relatedness, medical necessity, and
appropriateness and warns the claim's processor when special actions such as
pre-authorization are required. ClaimCheck P&C also has a comprehensive
reporting module which monitors cost savings and offers a profiling of provider
billing behavior as it relates to code gaming errors and/or billing
inaccuracies.
SOFTWARE FEATURES AND FUNCTIONS
The following is a descriptive summary of major auditing categories and unique
software features available in ClaimCheck P&C:
- - Code Gaming Edits
+Mutually Exclusive Procedures ClaimCheck P&C identifies those
procedures which clinically should not
be done on the same patient during the
same treatment session.
+Incidental Procedures ClaimCheck P&C notifies the user when
a minor procedure has been billed as a
separate procedure when it is
clinically part of a major procedure
that has also been billed.
+Unbundled Procedures ClaimCheck P&C
evaluates the relationships between
procedure codes and determines which
comprehensive procedure code most
accurately represents all of the
procedure codes billed.
DIV-1
<PAGE> 36
+Multi-Channel Laboratory
If the provider has billed for two or
more components Tests of multi-channel
tests, ClaimCheck P&C will either
rebundle the codes into the most
appropriate one or add the most
appropriate code.
- - Single Code Edits
+Assistant Surgeon Based on the clinical intensity of the
procedure ClaimCheck P&C determines if
an assistant surgeon should or should
not be reimbursed or if further
information is needed to evaluate the
need for an assistant surgeon.
+Age & Sex
Based on the claimants' age and gender,
ClaimCheck P&C determines if the
appropriate code has been used. If
there is a more accurate code,
ClaimCheck P&C adds the appropriate
code.
+Cosmetic, Experimental and Claim Check P&C notifies the user of
unusual codes Obsolete Proceduresthat
have been submitted for payment. This
allows the user to implement additional
claims review procedures to assure
payment is accurate.
- - Pre-and Post-Operative Editing ClaimCheck P&C will identify procedures
that have been billed as separate
procedures but should be included in
the global fee of the surgical service
which includes both the pre-operative
and post-operative visits.
- - Bilateral Procedures
ClaimCheck P&C identifies whether or
not the use of the bilateral procedure
modifier is appropriate. Procedures
which cannot be done bilaterally are
identified.
- - Clinical Duplicate Procedures ClaimCheck P&C identifies those
procedures which may appropriately
be performed multiple times in one
treatment session. Those procedures
which cannot be done multiple times in
one session are identified as
duplicates.
DIV-2
<PAGE> 37
- - State Modifiers
Unique state modifiers will be
recognized and used for the financial
editing functions currently available
(assistant surgeon modifiers 80, 81, 82
and multiple procedures modifier 51).
In addition, ClaimCheck P&C allows
users to determine if additional
payment is warranted for modifiers 24,
25, and 79 which report unrelated
services.
- - History Based Editing
ClaimCheck P&C edits history passed to
ClaimCheck P&C for the following edit
types: pre- and post-op care,
duplicates and utilization review
guidelines.
- - ClaimReview
ClaimReview will apply state
utilization review rules. Claims
(bills) will be flagged or denied when
treatment exceeds state fee schedule
guidelines. Rules can be edited based
on a variety of data elements including
provider specialty, frequency of
procedures, diagnosis, length of
treatment, etc.
- - Smart Suspense
This tool allows the user to create
relationships between different types
of claims/bill data. This capability
facilitates the implementation of
claims management policies and
procedures. Relationships can be
established between any of the
following GMIS defined data fields:
diagnosis, procedures, modifiers,
provider specialty plus two additional
fields which can be defined by the
user. Smart Suspense can suspend,
monitor or flag bills which contain
these relationships.
- - Customization
ClaimCheck P&C's technological strength
is in its customization capabilities.
Individual edits can be adjusted by
state and/or customer to meet specific
needs of the state or claims
environment. The majority of
ClaimCheck P&C edits can be changed,
deleted, or new edits added on-site by
the user. The edits that cannot be
customized on-site can be customized by
GMIS.
DIV-3
<PAGE> 38
- - Financial Edits
+ Multiple Procedure Rules Relative value weights will be used by
ClaimCheck P&C to determine the
primary, secondary, and tertiary
procedures. The user will be warned
to adjust payment accordingly.
+ Assistant Surgeon ClaimCheck P&C notifies the user if
payment should be adjusted to reflect
the appropriate reimbursement for an
assistant surgeon.
DIV-4
<PAGE> 39
SCHEDULE D
ATTACHMENT I
SERVICE LEVEL GUIDELINES FOR HCCC CLIENTS
1. EDS shall operate and maintain the TPS with the following service levels.
Performance statistics shall be captured by EDS and reported to HCCC by
the 15th day of the month following the measurement month or the next
business day should the 15th fall on a weekend or holiday.
A) PRODUCTION TPS AVAILABILITY. With respect to the production
version of the TPS, EDS shall maintain Availability (as defined
below) for each of the On-Line component and the Real Time Processor
("RTP") component of the TPS at a level such that the aggregate
number of hours of Availability of such components during each
calendar month are equal to at least 97% of the total of the On-Line
Scheduled Hours of Availability (as defined below) and the RTP
Scheduled Hours of Availability (as defined below) for such month.
EDS shall document such Availability (calculated to the nearest
one-tenth hour) and report it to HCCC on a monthly basis. HCCC may
request, on an exception basis, that EDS operate the On-Line and RTP
components of the production version of TPS at times outside the
scheduled hours. Such requests shall: (i) be made in writing at
least 24 hours in advance; (ii) be complied with by EDS to the
extent that they do not interfere with EDS' other commitments
pursuant to this Agreement or any other of EDS' data center or
customer operations; and (iii) not be included in the determination
of Availability.
B) PRODUCTION TPS AVERAGE ON-LINE RESPONSE TIME. With respect
to the production version of the TPS, EDS shall provide Average
On-Line Response Time (as defined below) during On-Line Scheduled
Hours of Availability equal to or less than three seconds. EDS
shall document and report to HCCC in summary format Average On-Line
Response Time for each calendar month.
C) PRODUCTION TPS AVERAGE RTP RESPONSE TIME. With respect to
the production version of the TPS, EDS shall provide Average RTP
Response Time (as defined below) during RTP Scheduled Hours of
Availability equal to or less than 10 seconds. EDS shall document
and report to HCCC in summary format Average RTP Response Time for
each calendar month.
D) NON-PRODUCTION TPS AVAILABILITY AND RESPONSE TIME. With
respect to the non-production version of the TPS (the "TPS Model
Office"), EDS shall use commercially reasonable efforts to (i)
maintain Availability for each of the On-Line component and the RTP
component of the TPS at a level such that the aggregate number of
hours of Availability for such components during each calendar month
are equal to at least 97% of the total Model Office Scheduled Hours
of Availability (as defined below) for such month, (ii) provide an
Average On-Line Response Time during the Model Office Scheduled
Hours of Availability equal to or less than three seconds and (iii)
provide an Average RTP Response
DI-1
<PAGE> 40
Time during the Model Office Scheduled Hours of Availability equal
to or less than 10 seconds. Since the TPS Model Office is a
non-production environment, (i) EDS will not be required to document
and report associated Availability nor Response Time and (ii) EDS'
failure to actually achieve such Availability and Response Time
goals in any calendar month will not constitute a breach or default
by EDS.
If EDS is not in compliance with the monthly service levels set forth in
subsections a) through c) above during any 2 consecutive calendar months,
EDS will investigate and correct any deficiencies in EDS' service causing
such noncompliance as promptly as reasonably possible. When such
deficiencies have been corrected, EDS will so notify HCCC and demonstrate
compliance with such service levels over the next full calendar month.
2. DATA RECOVERY. EDS shall maintain data recovery procedures, capabilities
and processes which a reasonably prudent operator of a high volume,
computer based services organization would have in order to restore
operations within a reasonable time in the event of a disablement or
disaster occurring to its data processing facilities. HCCC client data
files will be recovered from the most recent set of backup files and
databases.
3. DATA SECURITY. HCCC client data and information shall be secure and the
TPS configured to restrict access by any third party including other HCCC
clients or users of the TPS. Access to HCCC client information shall be
within the direct control of the HCCC client to grant to a third party or
other HCCC clients or users of the TPS. Such access shall be granted
directly by the HCCC client through the use of TPS applications such as
but not limited to the Examiner File or if the HCCC client has provided
written permission for such access or use to EDS.
4. FOREIGN DATA. EDS understands that HCCC clients from time to time shall
provide data and information obtained from a third party ("Foreign Data")
for inclusion in the TPS and that this data and information are
proprietary to the third party. EDS shall take such steps as are
necessary to preserve Foreign Data under its control as it would any data
obtained from HCCC clients. EDS shall maintain the confidentiality of
Foreign Data including without limitation denying access to or use of such
files by HCCC or any other third party in any form or format unless the
HCCC client has itself granted access through TPS applications such as but
not limited to the Examiner File or the HCCC client has provided written
permission for such access or use to EDS.
5. DEFINITIONS. As used in this Attachment I to Schedule D:
a) "Availability" means the availability, from the EDS host
computer (including EDS' telecommunication network, but not
including HCCC's or the sender's telecommunications network or
equipment) of the On-Line component of the TPS or the RTP component
of the TPS, as the case may be, supported by EDS pursuant to this
Agreement.
DI-2
<PAGE> 41
b) "Average On-Line Response Time" means, with respect to each
transaction submitted to EDS over the On-Line component of the TPS,
the average length of time (calculated over a calendar month period)
elapsed between the receipt by EDS at EDS' telecommunications
network boundary node of the last character of input from the sender
and the transmission by EDS from EDS' telecommunications network
boundary node of the first character of output to such sender.
Average On-Line Response Time does not include any response time
over the RTP component of the TPS.
c) "Average RTP Response Time" means, with respect to each
transaction submitted to EDS over the RTP component of the TPS, the
average length of time (calculated over a calendar month period)
elapsed between the receipt by EDS at EDS' telecommunications
network boundary node of the last character of input from the sender
and the transmission by EDS from EDS' telecommunications network
boundary node of the first character of output to such sender.
Average RTP Response Time does not include any response time over
the On-Line component of the TPS.
d) "Model Office Scheduled Hours of Availability" means 7:00
a.m. until 6:00 p.m. (Camp Hill, Pa. time), Monday through Friday,
and 7:00 a.m. until 4:00 p.m. (Camp Hill, Pa. time) Saturday.
e) "On-Line Scheduled Hours of Availability" means 6:00 a.m.
until 9:00 p.m. (Camp Hill, Pa. time), Monday through Friday, and
7:00 a.m. until 4:00 p.m. (Camp Hill, Pa. time), Saturday.
f) "RTP Scheduled Hours of Availability" means 6:00 a.m. until
8:30 p.m. (Camp Hill, Pa. time), Monday through Friday, and 7:00
a.m. until 4:00 p.m. (Camp Hill, Pa. time), Saturday.
Notwithstanding the foregoing, all above scheduled hours of availability
definitions shall exclude (i) periods of time during planned TPS downtime,
as mutually agreed upon by EDS and HCCC, (ii) periods of time for planned
major TPS equipment or software configurations and enhancements, as EDS may
notify HCCC, (iii) scheduled EDS Information Processing Center maintenance,
as EDS may notify HCCC, (iv) periods of time during which EDS is performing
TPS batch processing or other special production jobs at HCCC's request, (v)
the following holidays: New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day, and (vi) other holidays
mutually agreed upon by EDS and HCCC. In addition, EDS may exclude from the
calculation of any Availability any failure to meet any applicable
performance standard if, during, and to the extent that such failure is
related to (i) any matter constituting force majeure (as contemplated by
Section 11.9 of this Agreement), (ii) HCCC's failure to perform its
obligations under this Agreement, or (iii) any significant increases in
processing volumes or business statistics or any significant change in the
nature or scope of services provided under this Agreement (in each case
during a reasonable transition period to be agreed upon by EDS and HCCC.)
DI-3
<PAGE> 42
SCHEDULE D
ATTACHMENT II
SERVICE LEVEL GUIDELINES FOR LIBERTY MUTUAL MANAGED CARE, INC.
1. EDS shall operate and maintain the TPS with the following additional
service levels applicable to Liberty Mutual business as set forth in that
certain agreement between HCCC and Liberty Mutual Managed Care, Inc. dated
January 1, 1995 (hereinafter "Liberty/HCCC Agreement"). Performance
statistics shall be captured by EDS and reported to HCCC by the fifteenth
day of the month following the measurement month or the next business day
should the fifteenth fall on a weekend or holiday.
a) PRODUCTION TPS AVAILABILITY. With respect to the production
version of the TPS, EDS shall maintain Availability (as defined
below) for each of the On-Line component and the Real Time Processor
("RTP") components of the TPS at a level such that (i) the aggregate
number of hours of Availability of such components during each
calendar month are equal to at least ninety-seven percent (97%) of
the total of the On-Line Scheduled Hours of Availability (as defined
below) and the RTP Scheduled Hours of Availability (as defined
below) for such month and (ii) the aggregate number of hours of
Availability of such components during the six (6) calendar month
period beginning on the first day of the calendar month immediately
following the calendar month in which the final Liberty central
billing unit has been implemented under the Liberty/HCCC Agreement
and each successive six (6) calendar month period are equal to at
least ninety-eight percent (98%) of the total of the On-Line
scheduled Hours of Availability and the RTP Scheduled Hours of
Availability for such time period. EDS shall document such
Availability (calculated to the nearest one-tenth hour) and report
it to HCCC on a monthly basis. HCCC may request, on an exception
basis, that EDS operate the On-Line and RTP components of the
production version of TPS at times outside the scheduled hours.
Such requests shall: (i) be made in writing at least twenty-four
(24) hours in advance; (ii) be complied with by EDS to the extent
that they do not interfere with EDS' other commitments pursuant to
this Agreement or any other of EDS' data center or customer
operations; and (iii) not be included in the determination of
Availability.
b) PRODUCTION TPS AVERAGE ON-LINE RESPONSE TIME. With respect
to the production version of the TPS, EDS shall provide Average
On-Line Response Time (as defined below) during On-Line Scheduled
Hours of Availability equal to or less than three (3) seconds. EDS
shall document and report to HCCC in summary format Average On-Line
Response Time for each calendar month.
c) PRODUCTION TPS AVERAGE RTP RESPONSE TIME. With respect to
the production versions of the TPS, EDS shall provide Average RTP
Response Time (as defined below) during RTP Scheduled Hours of
Availability equal to or less than ten (10) seconds. EDS shall
document and report to HCCC in summary format Average RTP Response
Time for each calendar month.
DII-1
<PAGE> 43
d) NON-PRODUCTION TPS AVAILABILITY AND RESPONSE TIME. With
respect to the non-production version of the TPS (the "TPS Model
Office"), EDS shall use commercially reasonable efforts to (i)
maintain Availability for each of the On-Line component and the RTP
component of the TPS at a level such that the aggregate number of
hours of Availability for such components during each calendar month
are equal to at least ninety-seven percent (97%) of the total Model
Office Scheduled Hours of Availability (as defined below) for such
month, (ii) maintain Availability for each of the On-Line component
and the RTP component of the TPS at a level such that the aggregate
number of hours of Availability of such components during the six
(6) calendar month period beginning on the first day of the calendar
month immediately following the calendar month in which the final
Liberty central billing unit has been implemented under the
Liberty/HCCC Agreement and each successive six (6) calendar month
period are equal to at least ninety-eight percent (98%) of the total
of the On-Line Scheduled Hours of Availability and the RTP Scheduled
Hours of Availability for such time period, (iii) provide an Average
On-Line Response Time during the Model Office Scheduled Hours of
Availability equal to or less than three seconds and (iv) provide an
Average RTP Response Time during the Model Office Scheduled Hours of
Availability equal to or less than ten (10) seconds. Since the TPS
Model Office is a non-production environment, (i) EDS will not be
required to document and report associated Availability nor Response
Time and (ii) EDS' failure to actually achieve such Availability and
Response Time goals in any calendar month will not constitute a
breach or default by EDS.
If EDS is not in compliance with the monthly service levels set forth in
subsections a) through c) above during any two (2) consecutive calendar
months or the semi-annual service level set forth in subsection a) above,
EDS will investigate and correct any deficiencies in EDS' service causing
such noncompliance as promptly as reasonably possible. When such
deficiencies have been corrected, EDS will so notify HCCC and demonstrate
compliance with such service levels over the next full calendar month or
semi-annual period, as the case may be.
2. DATA RECOVERY. EDS shall maintain data recovery procedures, capabilities
and processes which a reasonably prudent operator of a high volume,
computer based services organization would have in order to restore
operations within a reasonable time in the event of a disablement or
disaster occurring to its data processing facilities. Liberty data files
will be recovered from the most recent set of backup files and databases.
EDS shall maintain procedures to separate and restore individual customer
data and files where data from multiple customers are stored within common
databases.
3. DATA SECURITY. Liberty data and information shall be secure and the TPS
configured to restrict access by any third party including other customers
or users of the TPS. Access to Liberty information shall be within the
direct control of Liberty to grant to a third party or other customers or
users of the TPS. Such access shall be granted directly by Liberty
through the use of TPS applications such as but not limited to the
Examiner File or if Liberty has provided written permission for such
access or use to EDS.
DII-2
<PAGE> 44
4. FOREIGN DATA. EDS understands that Liberty from time to time shall
provide data and information obtained from a third party ("Foreign Data")
for inclusion in the TPS and that this data and information are
proprietary to the third pary. Such third parties shall include but not
be limited to Foreign Networks as that term is used in the Liberty/HCCC
Agreement. EDS shall take such steps as are necessary to preserve foreign
data under its control as it would any data obtained from Liberty. EDS
shall maintain the confidentiality of foreign data including without
limitation denying access to or use of such files by HCCC or any other
third party in any form or format unless Liberty has itself granted access
through TPS application such as but not limited to the Examiner File or
Liberty has provided written permission for such access or use to EDS.
5. AUDIT. Upon at least thirty (30) days' prior written notice from HCCC,
EDS will provide to Liberty and its auditors and regulators access during
regular business hours to any EDS facility that is used to provide service
to Liberty under these Service Level Guidelines and data and records which
directly relate thereto our support such service. None of such audits
shall extend longer than five (5) consecutive business days. Such access
shall be limited to performing an audit of data related to Liberty and its
business, to verify the integrity of data owned by Liberty and to examine
the systems that support such data, including to the extent directly
applicable to EDS' provision of such services, audits of (i) systems, (ii)
general controls and security procedures, and (iii) disaster recovery
procedures. Liberty will not be entitled to audit (i) EDS financial
information, (ii) services, facilities or functions that do not directly
relate to or support services provided to Liberty, or (iii) information
regarding other EDS customers. Liberty must comply with all reasonable
security and confidentiality procedures established by EDS at any facility
to which access is granted. Audits will not unreasonably interfere with
EDS' normal business operations. HCCC shall pay EDS at its then current
commercial billing rates for any EDS assistance reasonably required by
Liberty and its auditors and regulators in connection with any such audit.
6. DEFINITIONS. As used in this Attachment II to Schedule D:
a) "Availability" means the availability, from the EDS host
computer (including EDS' telecommunication network, but not
including HCCC's or the sender's telecommunications network
equipment) of the On-Line component of the TPS or the RTP component
of the TPS, as the case may be, supported by EDS pursuant to this
Agreement.
b) "Average On-Line Response Time" means, with respect to each
transaction submitted to EDS over the On-Line component of the TPS,
the average length of time (calculated over a calendar month period)
elapsed between the receipt by EDS at EDS' telecommunications
network boundary node of the last character of input from the sender
and the transmission by EDS from EDS' telecommunications network
boundary node of the first character of output to such sender.
Average On-Line Response Time does not include any response time
over the RTP component of the TPS.
DII-3
<PAGE> 45
c) "Average RTP Response Time" means, with respect to each
transaction submitted to EDS over the RTP component of the TPS, the
average length of time (calculated over a calendar month period)
elapsed between the receipt by EDS at EDS' telecommunications
network boundary node of the last character of input from the sender
and the transmission by EDS from EDS' telecommunications network
boundary node of the first character of output to such sender.
Average RTP Response Time does not include any response time over
the On-Line component of the TPS.
d) "Model Office Scheduled Hours of Availability" means 7:00
a.m. until 6:00 p.m. (Camp Hill, PA time), Monday through Friday,
and 7:00 a.m. until 4:00 p.m. (Camp Hill, PA time) Saturday.
e) "On-Line Scheduled Hours of Availability" means 6:00 a.m.
until 9:00 p.m. (Camp Hill, PA time), Monday through Friday, and
7:00 a.m. until 4:00 p.m. (Camp Hill, PA time), Saturday.
f) "RTP Scheduled Hours of Availability" means 6:00 a.m. until
8:30 p.m.(Camp Hill, PA time), Monday through Friday, and 7:00 a.m.
until 4:00 p.m. (Camp Hill, PA time), Saturday.
Notwithstanding the foregoing, all above scheduled hours of availability
definitions shall exclude (i) periods of time during planned TPS
downtime, as mutually agreed upon by EDS and HCCC, (ii) periods of time
for planned major TPS equipment or software configurations and
enhancements, as EDS may notify HCCC, (iii) scheduled EDS Information
Process Center maintenance, as EDS may notify HCCC, (iv) periods of time
during which EDS is performing TPS batch processing or other special
production jobs at HCCC's request, (v) the following holidays: New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and (vi) other holidays mutually agreed upon by EDS and
HCCC. In addition, EDS may exclude from the calculation of any
Availability any failure to meet any applicable performance standard if,
during, and to the extent that such failure is related to (i) any matter
constituting force majeure (as contemplated by Section 11.9 of this
Agreement), (ii) HCCC's failure to perform its obligations under this
Agreement, or (iii) any significant increases in processing volumes or
business statistics or any significant change in the nature or scope of
services provided under this Agreement (in each case during a reasonable
transition period to be agreed upon by EDS and HCCC).
DII-4
<PAGE> 46
SCHEDULE D
ATTACHMENT III
REPORTS
I. SYSTEM CONTROL REPORTS
317 DAILY CLAIMS FLOW REPORT
This report contains three sections: 1) daily claims flow; 2) daily
claims input analysis; and 3) inventory by line of business.
318 DAILY MANAGEMENT SUMMARY REPORT
This report gives a trend in the magnitude of the bill inventory, current
activity, and claim cycle.
319 BATCH ACCEPTANCE REPORT
This report lists all activated batches which were received as initial
input during the current cycle day.
328 DAILY CONDITION CODE ANALYSIS REPORT
This report gives the number of times a given condition (example:
edit/audit) was set for the cycle.
331 DAILY RTP UTILIZATION SUMMARY REPORT
Shows bills processed by real-time processing (RTP).
350 AGE OF CLAIMS IN SYSTEM REPORT
This report is formatted by processing location and the inventory in
these locations divided by user defined system age categories.
351 AGE OF CLAIMS IN LOCATION REPORT
This report is formatted by processing location and the inventory in
these locations is divided by location age categories.
352 CLAIMS AGED ITEM REPORT
This report lists bill information for every claim which has reached the
System or location overage parameters and is dependent on the 350 and 351
reports.
356 GROUP PENDING CLAIMS REPORT
This report identifies all suspended bills for select clients as
designated by CLIENT.
359 DAILY CLAIMS RESUSPENSION REPORT
This report lists all bills that suspended after initial corrections were
applied
DIII-1
<PAGE> 47
to the suspense error set in a previous cycle.
372 DAILY BATCH CONTROL REPORT
This report identifies batches activated in each of the initial entry
locations during the current cycle for which the entering of bills has
not been completed, started or placed on hold.
MCBSR460 RTCP ACCEPTED DATA CORRECTION REPORT
This report shows all of the real time data corrections which were
accepted during the nightly cycle.
MCBSA810 WEEKLY TURNAROUND REPORT
This report includes all finalized bills and the time frame within which
they were processed.
II. PRODUCTIVITY REPORTS
Two reports are generated which reflect examiner productivity:
MCBSA960 WEEKLY EXAMINER PRODUCTIVITY REPORT
This report shows productivity statistics for the EBA and FDE
applications.
MCBSA970 MONTHLY EXAMINER PRODUCTIVITY REPORT
This report shows the same statistics as above on a monthly basis.
III. MAINTENANCE REPORTS
MCBSNPRZ WEEKLY PROVIDER MAINTENANCE REPORT
This report identifies productivity statistics for Provider File
maintenance activities performed by predetermined examiners.
OUCHPROV PROVIDER ERROR REPORT
This report lists errors identified in Provider File maintenance
activities by provider number and error message.
MCBSPZ95 PRICING FILE MAINTENANCE REPORT
This report lists pricing file maintenance transactions input and the
disposition of these transactions.
DIII-2
<PAGE> 48
IV. FINANCIAL REPORTS
EOR Documents
Explanation of Review documents are produced for each finalized bill.
V. REVENUE CALCULATIONS REPORT
SAVINGS REPORT
Identifies HCCC revenue based on CLIENT use of the system.
DIII-3
<PAGE> 49
SCHEDULE E
PRICING FOR EDS SERVICES
I. CALCULATION OF BILL VOLUME
For fees based on Bill Volume, "Bill Volume" means the total number of
Bills finalized by the EDS Systems monthly for all clients of HCCC
including both Service Bureau Clients and System Lease Clients. Bill
Volume shall also include, without limitation, all Liberty Mutual
Managed Care, Inc. ("Liberty") Bills and American International Group
("AIG") pre-cycle and cycle Bills and shall exclude adjustments. Also,
if that certain Workers' Compensation Client Contract between HCCC and
Liberty, effective January 1, 1995 ("Liberty/HCCC Agreement"), is
terminated and either (i) EDS commences providing services to Liberty
pursuant to that certain Workers' Compensation Client Contract, dated as
of June 21, 1995, between EDS and Liberty or (ii) EDS enters into another
direct contract with Liberty, all Bills processed for Liberty by the EDS
Systems or by a separate autonomous system developed for and dedicated to
Liberty will continue to be included in the calculation of Bill Volume
during the remaining term and any renewal terms(s) of this Agreement.
II. FEES
On a monthly basis, HCCC will pay EDS a per Bill fee based on Bill Volume
for such month plus a percentage of AFFORDABLE PPO Savings. The fee
schedule for all HCCC clients, except Liberty, is as follows:
A. BILL VOLUMES BELOW 400,000/MONTH
For any month in which the total Bill Volume is below 400,000, HCCC will
pay EDS monthly fees according to the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
VOLUME PER BILL PRICE(1) AFFORDABLE PPO SAVINGS
------ --------------- ----------------------
<S> <C> <C>
First 149,999 $2.580 1.5%
Each Bill over 149,999 $1.372 1.5%
</TABLE>
B. BILL VOLUMES OF 400,000 OR MORE/MONTH
For any month in which the total Bill Volume is 400,000 or more, HCCC
will pay
- ------------
(1) CPI adjustments for the per bill prices are subject to the provisions
of Section X of this Schedule E.
E-1
<PAGE> 50
EDS monthly fees according to the following schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
VOLUME PER BILL PRICE(1) AFFORDABLE PPO SAVINGS
- ------ --------------- ----------------------
<S> <C> <C>
First 149,999 $2.580 1.5%
Each Bill over 149,999 $1.250 1.5%
</TABLE>
III. LIBERTY SYSTEM FEES
HCCC will pay EDS a fee of $1.225(1) per bill plus one percent (1%) of
AFFORDABLE PPO Savings for Liberty Bills finalized by the EDS Systems
while the Liberty/HCCC Agreement is in effect.
IV. FOREIGN NETWORK FEES
HCCC will pay EDS forty percent (40%) of any percentage of Foreign PPO
Savings fees received by HCCC. For purposes of this Schedule E,
Foreign PPO shall mean any network other than an AFFORDABLE Medical
Network, for which the EDS Systems is utilized by an HCCC client.
V. PERCENTAGE OF PPO SAVINGS CALCULATION
For the purpose of this Schedule E, the percentage of PPO savings for the
AFFORDABLE PPO under Sections II and III and Foreign PPOs under Section
IV shall be calculated as the difference between the recommended provider
payment amount before the application of network contract pricing and the
final recommended payment amount following application of network
contract pricing. The application of network contract pricing
sequentially follows the recommended provider payment amount determined
by duplicate detection, state fee schedules or usual and customary rates,
and enhanced edits/audits.
VI. REALTIME CHARGES
HCCC will pay EDS the following charges for all data submissions unless
otherwise agreed by EDS:
SUBMISSION TYPE PRICE PER SUBMISSION
---------------- --------------------
FDE Submission (Bill Entry) $0.36
Adjs/EBA (Bill Adjudication)/Initial Submission $0.29
Adjs/EBA (Bill Adjudication)/Second and Subsequent Pass(es) $0.15
E-2
<PAGE> 51
VII. QUARTERLY MINIMUM PAYMENT
For each quarter, HCCC shall pay to EDS, pursuant to Sections II, III
and IV of this Schedule, at least the sum of Five Hundred and
Twenty-six Thousand and Seventeen Dollars ($526,017.00) (as adjusted
by Section 6.7 of this Agreement) (the "Quarterly Minimum Payment").
The parties acknowledge their intent that the quarterly periods to be
calculated under this Section carry-over from the 1989 Agreement, i.e.
the first quarterly period under this Agreement shall be deemed to be
the period commencing July 1, 1995 and ending September 30, 1995.
Furthermore, the charges paid by HCCC under the 1989 Agreement
applicable to the quarterly minimum payment for such period shall be
added to the charges paid by HCCC pursuant to Sections II, III and IV
of this Schedule to determine whether or not HCCC has met the
quarterly minimum payment for such period. If, at the
end of any quarter, HCCC has paid less than the Quarterly Minimum
Payment (as adjusted), EDS shall invoice and HCCC shall pay
the difference between the Quarterly Minimum Payment (as adjusted) and
the actual amounts paid pursuant to Sections II, III, and IV of this
Schedule E. EDS shall invoice and HCCC shall pay on the first day of
each month for services to be provided that month 16.6% of the
Quarterly Minimum Payment (as adjusted). In the event that, during
any twelve (12) successive quarters, EDS receives no more than the
Minimum Quarterly Payment (as adjusted) during nine (9) or more
quarters, either party may initiate good faith negotiations for a
modification to this Agreement. The party desiring to initiate such
negotiation shall notify the other party in writing no later than
fifteen (15) days after the receipt by EDS of payment for such ninth
month. Both parties then shall enter into good faith negotiations for
possible modification of this Agreement. However, in the case that
the parties are unable to reach agreement on appropriate modifications,
this Agreement shall continue in effect as is.
VIII. INFORM FEES
A. PAYMENT
Each month HCCC will pay EDS for data storage and space resource
management utilization for the preceding month based on the Storage
Rates set forth below.
At the beginning of each calendar quarter EDS will determine a
Monthly Allowance that will be in effect for such quarter. Each
month HCCC will pay EDS the amount by which the Machine Usage Amount
(as defined below) for the preceding month exceeds the Total
Allowance Available (as defined below) for such preceding month.
E-3
<PAGE> 52
B. MACHINE TIME RATES
Each month, HCCC will pay EDS the following fees for machine time:
CPU Minute (Prime Time) $11.264
CPU Minute (Off Shift) $6.984
Tape Mount (per mount) $0.701
Prime Time is defined as 3:00:00 a.m. to 2:59:59 p.m. Pacific
Standard Time (PST). Off Shift is defined as 3:00:00 p.m. to 2:59:59
a.m. PST. Jobs that span Prime Time and Off Shift time periods will
be prorated to then applicable rates. CPU time covers both multiple
virtual storage (MVS) / enterprise system architecture (ESA) and TSO
time usage.
C. STORAGE RATES
Each month, HCCC will pay EDS the following fees for storage:
Cartridge (On site per day) $0.070
Cartridge (Off site per day - DRA) $0.042
Reel Storage (On site per day) $0.131
DASD (per megabyte per day) $0.041
Permanent DASD Pack - 1.6GB $1,617.752
(3090 Mod 2 Pack per month)
Permanent DASD is billed at the above rate times the fix storage
requirements whether it is used or not. All billings occur based on
actual usage. Therefore, a 1 MB file retained for 1 day would bill
$0.041 at month end.
D. DEFINITIONS
For purposes of this Section VIII of Schedule E, the following
definitions shall apply:
"Average EDS Monthly Claim Processing Revenue" shall mean the amount
equal to amount billed for standard claim processing plus the amount
billed for use of the Real Time Processor for three calendar months
divided by three.
E-4
<PAGE> 53
"Carry Over Credit" shall mean, for any month, the unused Monthly
allowance for such month. However, for any month, the Carry Over
Credit shall not exceed an amount equal to the average of the Monthly
Allowances from the beginning of the Reporting Period through and
including the month in question. Furthermore, the Carry Over Credit
shall not roll from one Reporting Period to the next. Therefore the
Carry Over Credit will be set to zero (0) for the first month of each
Reporting Period.
" Machine Usage Amount" shall mean the cost of machine usage based on
applicable EDS*INFORM and other AD HOC requests applied at the
Machine Time Rates set forth above. Applicable jobs will include
defined standard reports, ad hoc report requests, requests for data
extractions and other jobs necessary to produce the required results.
Machine Usage Amount shall include machine usage time for jobs
created or executed by EDS personnel and agreed to by HCCC.
"Monthly Allowance" shall mean the amount equal to one and one half
percent (.015) times the Average Monthly Claim Processing Revenue
during the calendar quarter preceding the time period for which such
allowance will be in effect, as verified and accepted by HCCC.
"Reporting Period" shall mean the twelve (12) month period from March
1st through the last day of February of the succeeding calendar year.
"Total Allowance Available" shall mean the sum of the Monthly
Allowance for such month and the Carry Over Credit, if any, from the
preceding month.
E. EXAMPLE
Below is an example, for illustration purposes only, of calculating
monthly inform fees.
<TABLE>
<CAPTION>
CLAIM CARRY TOTAL MACHINE PAYMENT CARRY
CALENDAR PROC. MONTHLY OVER ALLOWANCE USAGE DUE OVER
MONTH REVENUE ALLOW. CREDIT AVAILABLE AMOUNT EDS CAP
<S> <C> <C> <C> <C> <C> <C> <C>
OCT-95 $137,000 N/A N/A N/A N/A N/A N/A
NOV-95 145,000 N/A N/A N/A N/A N/A N/A
DEC-95 140,000 N/A N/A N/A N/A N/A N/A
JAN-96 150,000 $2,110 $0 $2,110 $2,100 N/A $2,110
FEB-96 180,000 2,110 10 2,120 1,000 $0 2,110
REPORTING
TOTALS PERIOD 3,100 0
======= =======
</TABLE>
E-5
<PAGE> 54
<TABLE>
<CAPTION>
CLAIM CARRY TOTAL MACHINE PAYMENT CARRY
CALENDAR PROC. MONTHLY OVER ALLOWANCE USAGE DUE OVER
MONTH REVENUE ALLOW. CREDIT AVAILABLE AMOUNT EDS CAP
<S> <C> <C> <C> <C> <C> <C> <C>
MAR-96 210,000 2,110 0 2,110 4,784 2,674 2,110
APR-96 245,000 2,700 0 2,700 3,496 796 2,405
MAY-96 260,000 2,700 0 2,700 2,200 0 2,503
JUN-96 268,000 2,700 500 3,200 5,034 1,834 2,553
JUL-96 310,000 3,865 0 3,865 500 0 2,815
AUG-96 340,000 3,865 2,990 6,855 6,920 65 2,990*
SEP-96 350,000 3,865 0 3,865 4,975 1,110 3,115
OCT-96 380,000 5,000 0 5,000 1,000 0 3,351
NOV-96 400,000 5,000 3,534 8,534 9,367 833 3,534*
DEC-96 420,000 5,000 0 5,000 5,907 907 3,681
JAN-97 450,000 6,000 0 6,000 4,581 0 3,891
FEB-97 480,000 6,000 1,419 7,419 4,795 0 4,067
REPORTING
TOTALS PERIOD 56,659 8,218
======= =======
MAR-97 450,000 6,000 0 6,000 6,490 490 6,000
APR-97 460,000 6,900 0 6,900 4,291 0 6,450
MAY-97 470,000 6,900 2,609 9,509 5,014 0 6,600
JUN-97 485,000 6,900 4,495 11,395 9,752 0 6,675
JUL-97 510,000 7,075 1,643 8,718 5,399 0 6,755
AUG-97 495,000 7,075 3,319 10,394 12,338 1,984 6,808
</TABLE>
* CAPPED
IX. OTHER FEES
A. CONNECTION FEES.
Each month, HCCC shall pay EDS fees for terminal connections as follows:
SERVICE FEE
--------------------------------- ---------
Remote Site Connectivity
(Terminal Only)
9.6 Line $596.26
19.2 Line $743.13
E-6
<PAGE> 55
Custom Network Integration
(CPU to CPU Communications)
AIG - 56kb (Special Decrementing) $3,009.79
MedTrac - 19.2 (Decrementing) $1,022.00
The above fees are subject to discounts for terminal connection sites
that process Bills through the node based on the Bill Volume processed
through the node. The following discounts apply:
AVERAGE BILL VOLUME/DAY DISCOUNT APPLIED
--------------------------------- ----------------
0 - 500 0%
501 - 800 25%
801 - 1,000 50%
1,001 - + 100%
The following discounts apply to the AIG 56kb connection:
<TABLE>
AVERAGE BILL VOLUME/DAY DISCOUNT APPLIED
----------------------- ----------------
<S> <C>
0 - 1,500 0%
1,501 - 2,400 25%
2,401 - 3,000 50%
3,001 - + 100%
</TABLE>
Unless otherwise specified, custom network integrations are not subject to
discount unless Bill input volume processes through the node.
B. MISCELLANEOUS
Each month, HCCC shall pay EDS fees for miscellaneous services as follows:
Print Charges (per Page) $0.0389
Mantime Rates per hour $82.39
Connectivity Public Circuits Competitive Price
Equipment Competitive Price
Print Delivery Competitive Price
Dial Up Competitive Price
E-7
<PAGE> 56
C. GMIS LICENSE
The license which permits use of the GMIS software by HCCC set forth in
Section 19 of Schedule D is subject to the following pricing and payment
terms:
a) HCCC shall pay eighty percent (80%) and EDS shall pay twenty percent
(20%) of the annual GMIS license fee, which is fixed at $125,000 for the
term of the GMIS License Agreement. In addition to this annual GMIS
license fee, there will be an annual incentive license payment if
demonstrated savings generated by the ClaimCheck P&C exceed 5.0%. The
incentive license payment will be based on demonstrated savings generated
by the ClaimCheck P&C as measured over the four month period of March
through June of each calendar year and will be determined annually
following such measurement period by identifying the total incentive
payment amount associated with the actual demonstrated percentage of
savings as set forth below:
DEMONSTRATED SAVINGS TOTAL INCENTIVE PAYMENT AMOUNT
Less than or equal to 5.0% $0
5.1% through 7.5% $40,000
7.6% through 10.0% $50,000
10.1% + $60,000
HCCC shall pay eighty percent (80%) and EDS shall pay twenty percent (20%) of
any incentive license payment due GMIS. EDS will pay GMIS in full upon receipt
of an invoice and will rebill HCCC for the eighty percent (80%) amount.
b) EDS will not charge for the time and materials needed to install or
update the standard GMIS product. Special customization requests may be
subject to charges under this Agreement depending upon the nature of the
request.
X. CPI ADJUSTMENT
The fees set forth in this Schedule E (including the quarterly minimum payment,
but excluding the percentage of PPO savings and the license fees for the GMIS
software) shall be subject to CPI adjustments as set forth in Section 6.7 of
this Agreement, except that the $2.580 per Bill price set forth in Subsections
A and B of Section II will not be adjusted for CPI until January 2001 and the
$1.372, $1.250 and $1.225 per Bill prices set forth in Subsections A and B of
Section II and in Section III will not be adjusted for CPI until January 1997.
The per Bill prices subject to CPI increases in January will not be subject to
the August 1 adjustments set forth in Section 6.7 and will be adjusted annually
on each January 1 following the first year in which such prices are subject to
CPI adjustments. For such deferred adjustments, the Base Index to be used
shall be June 1, 1995.
E-8
<PAGE> 1
Exhibit 11
HEALTHCARE COMPARE CORP.
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Income $ 50,669,000 $ 66,537,000 $ 78,995,000
============== ============= =============
Weighted average number of common
shares outstanding:
Shares outstanding from beginning of
period ............................ 35,033,000 34,034,000 34,635,000
Purchase of treasury stock ......... (867,000) (59,000) (610,000)
Other issuances of common stock .... 255,000 340,000 419,000
Common share equivalents:
Assumed exercise of common stock
options ........................... 581,000 808,000 800,000
-------------- ------------- -------------
Weighted average common and common
share equivalents ................. 35,002,000 35,123,000 35,244,000
============== ============= =============
Net income per share ............... $ 1.45 $ 1.89 $ 2.24
============== ============= =============
</TABLE>
<PAGE> 2
HEALTHCARE COMPARE CORP.
COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Income $ 50,669,000 $ 66,537,000 $ 78,995,000
============ ============= ============
Weighted average number of common
shares outstanding:
Shares outstanding from beginning of
period ............................ 35,033,000 34,034,000 34,635,000
Purchase of treasury stock ......... (867,000) (59,000) (610,000)
Other issuances of common stock .... 255,000 340,000 419,000
Common share equivalents:
Assumed exercise of common stock
options ........................... 702,000 874,000 819,000
------------ ------------- -----------------
Weighted average common and common
share equivalents ................. 35,123,000 $ 35,189,000 35,263,000
============ ============= =================
Net income per share ............... $ 1.44 $ 1.89 $ $2 .24
============ ============= ============
</TABLE>
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements under this caption constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995, which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the captions "Seasonality" and "Other Information".
The Company acquired American Life and Health Insurance Company
("American") and its subsidiary insurance company on February 1, 1996.
American is a small health and life insurer with licenses in 26 states. Under
the terms of the acquisition, which was accounted for as a purchase, the
Company will pay a maximum purchase price of approximately $11.5 million
subject to the satisfaction of certain contingencies.
RESULTS OF OPERATIONS. The following table presents the Company's sources
of revenues and percentages of those revenues represented by certain statement
of operations items.
<TABLE>
<CAPTION>
SOURCES OF REVENUE Years Ended December 31,
1994 % 1995 % 1996 %
($ In Thousands)
----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PPO Services $140,201 75% $165,577 77% $191,008 77%
Fee Schedule Services 14,760 8 17,764 8 26,669 11
Clinical Cost Mgmt. Services 25,425 14 25,909 12 20,861 8
Premiums, Net -- -- -- -- 7,906 3
Government Contract Services 6,220 3 5,088 3 1,360 1
-------- ---- -------- ---- -------- ----
TOTAL $186,606 100% $214,338 100% $247,804 100%
======== ==== ======== ==== ======== ====
PERCENT OF REVENUES Years Ended December 31,
1994 1995 1996
-------- -------- --------
Expenses:
Cost of Services 34% 30% 29%
Selling and Marketing 12 12 12
General and Administrative 5 5 5
Healthcare Benefits -- -- 2
Depreciation and Amortization 6 5 5
Interest Income, Net (3) (4) (5)
-------- -------- --------
Subtotal 54 48 48
-------- -------- --------
Income Before Income Taxes 46 52 52
-------- -------- --------
Net Income 27% 31% 32%
-------- -------- --------
</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
or on a per transaction basis.
<PAGE> 2
Total revenues increased $33,466,000 (16%) from 1995 to 1996 and
$27,732,000 (15%) from 1994 to 1995. 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;
3) New clients; and
4) Premium revenue earned in 1996 by American.
Revenue from PPO services increased significantly from 1994 to 1996 as a
result of increased utilization of the PPO network by existing clients,
expansion of the PPO network and new client additions. Fee schedule services
revenue increased from 1994 to 1996 due to new and expanded contract activity,
particularly with General Motors Corporation and Liberty Mutual Insurance
Company. Revenue from clinical cost management services decreased from 1995 to
1996 and increased slightly from 1994 to 1995 as the mix of clients who utilize
these services has changed. Premium revenue was generated by the insurance
company acquired in 1996. Government contract services revenue decreased from
1994 to 1996 due to the completion of the Company's CHAMPUS contract with the
Department of Defense. Price increases have not been an important factor in
the Company's revenue growth. As with any future event, future revenue growth
may differ substantially from historical levels.
COST OF SERVICES. Cost of services consists primarily of salaries and
related costs for personnel involved in PPO administration, development and
expansion, clinical 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 1994 to 1996 relate to costs associated with the growth
of the Company's fee schedule business and, to a lesser extent, expenses
incurred in the development of the Company's risk-based products. As a
percentage of revenues, however, these costs have decreased from 34% in 1994 to
30% in 1995 and to 29% in 1996 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. To a lesser extent, the increase relates to commissions paid to
agents and third party administrators by the Company's insurance entity. As a
percentage of revenues, selling and marketing expenses have remained 12% from
1994 to 1996.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased
from 1994 to 1996 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
administrate insurance products. As a percentage of revenues, however, these
costs remained 5% from 1994 to 1996.
HEALTHCARE BENEFITS. These expenses relate to medical losses incurred by
insureds of the Company's insurance entity. The medical loss ratio (losses as
a percent of premiums) was 69% for the year ended December 31, 1996. Due to
the small size of the insurance business, this expense is expected to be
volatile until the Company is able to institute all of its managed care
services and cost controls and increase the size of its insurance business.
DEPRECIATION AND AMORTIZATION. These expenses increased significantly from
1994 to 1996 principally as a result of the purchase of additional computer
hardware and software, office equipment and leasehold improvements. As a
percentage of revenues, these costs remained in the 5% to 6% range from 1994 to
1996.
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
<PAGE> 3
represented 3% of revenues in 1994, 4% of revenues in 1995 and 5% of revenues
in 1996 as a result of the increased positive cash flow from operations which
provided additional investable funds.
INCOME TAXES. Income taxes were provided at an effective rate of 38% in
1996 compared to 40% in 1994 and 1995. The higher than statutory rate for 1994
to 1996 includes provisions for state income taxes. The effective tax rate
declined from 1995 to 1996 since the majority of the Company's investable funds
were invested in tax-exempt and tax-advantaged securities.
SEASONALITY. The Company has historically experienced increases in
salaries and related 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. The Company had $160,336,000 of working
capital at December 31, 1996, compared to $157,124,000 at December 31, 1995 and
$78,444,000 at December 31, 1994. Total cash and investments of the Company
amounted to $265,897,000 at December 31, 1996, $221,370,000 at December 31,
1995 and $138,684,000 at December 31, 1994.
During the three year period ended December 31, 1996, the Company
generated $238,763,000 of cash from operating activities. Investment
activities used $52,926,000, $45,489,000 and $30,785,000 in cash during 1996,
1995 and 1994, respectively; reflecting net purchases of investments of
$28,201,000 in 1996, $36,812,000 in 1995 and $22,389,000 in 1994, and capital
expenditures of $14,635,000, $8,677,000 and $8,396,000 in 1996, 1995 and 1994,
respectively. The insurance company acquisition used $10,090,000 of cash in
1996. Financing activities used $41,668,000 of cash in 1996 representing
$61,134,000 in purchases of treasury stock partially offset by $12,738,000 in
proceeds from insuances of common stock and $6,728,000 in proceeds from the
sale of put options. Financing activities generated $9,077,000 in cash during
1995 representing $11,247,000 in proceeds from issuances of common stock
partially offset by $2,170,000 in purchases of treasury stock. Financing
activities used $22,958,000 in cash during 1994 representing $28,222,000 in
purchases of treasury stock partially offset by $4,486,000 in proceeds from
insuances of common stock and $778,000 in proceeds from the sale of put
options.
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.
<PAGE> 4
DERIVATIVE FINANCIAL INSTRUMENTS. As discussed in Note 11 to the
financial statements, the Company uses derivative financial instruments to
reduce interest rate risk and potentially increase the return on invested funds
and to manage the cost of common stock repurchase programs. In addition,
collaterized mortgage securities have been purchased that have relatively
stable cash flow patterns in relation to interest rate changes. Investments in
derivative financial instruments are approved by the Audit Committee or Board
of Directors of the Company.
<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
HealthCare COMPARE Administrative Services, Inc.
Incorporated in Illinois
American Life and Health Insurance Company
Incorporated in Missouri
Cambridge Life Insurance Company
Incorporated in Missouri
CHP Administration, Inc.
Incorporated in California
<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,
33-43806, 33-43807, 33-87986 and 33-62747) of our reports dated February 17,
1997 appearing in and incorporated by reference in the Annual Report on From
10-K of HealthCare COMPARE Corp. for the year ended December 31, 1996.
Deloitte & Touche LLP
Chicago, Illinois
March 27, 1997
<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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/Thomas J. Pritzker
---------------------------------
Thomas J. Pritzker
<PAGE> 2
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Robert J. Becker, M.D.
---------------------------------
Robert J. Becker, M.D.
<PAGE> 3
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Ronald H. Galowich
-------------------------------
Ronald H. Galowich
<PAGE> 4
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Michael J. Boskin
---------------------------
Michael J. Boskin
<PAGE> 5
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Burton W. Kanter
------------------------------
Burton W. Kanter
<PAGE> 6
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ David Simon
-------------------------------
David Simon
<PAGE> 7
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Daniel Brunner
--------------------------
Daniel Brunner
<PAGE> 8
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Robert S. Coleman
--------------------------
Robert S. Coleman
<PAGE> 9
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Harold S. Handelsman
----------------------------
Harold S. Handelsman
<PAGE> 10
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 and Joseph E. Whitters, (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 From 10-K for the fiscal year ended December 31, 1996 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 27, 1997
/s/ Don Logan
-------------------------
Don Logan
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