<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended August 31, 1997
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 0-19393
MANAGED CARE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3338328
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
7600 North 16th Street
Suite 150
Phoenix, Arizona 85020
(Address of principal executive offices)
(Zip Code)
602-331-5100
(Registrant's telephone number, including area code)
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 _______
-----
There were 4,389,855 shares of common stock outstanding as of October 15,
1997.
<PAGE>
TABLE OF CONTENTS
Page
Part I FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets........................................3
Consolidated Statements of Operations..............................4
Consolidated Statements of Cash Flows..............................5
Notes to Unaudited Consolidated Financial Statements...............6
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................7-10
Part II OTHER INFORMATION
Item 1.Legal Proceedings................................................10
Item 4.Submission of Matters to a Vote of Security Holders..............10
Item 6.Exhibits and Reports on Form 8-K.................................10
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 31, May 31,
1997 1997
------------ ------------
<S> <C> <C>
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents, including restricted cash of $ 6,234,000 and $ 5,304,000 $ 7,293,000 $ 7,212,000
Short-term investments 1,502,000 1,503,000
Accounts and notes receivable and unbilled services, net 4,773,000 3,998,000
Related party accounts and notes receivable 15,000 26,000
Prepaid expenses and other current assets 1,488,000 1,735,000
Deferred income taxes, net 933,000 971,000
------------ ------------
Total current assets 16,004,000 15,445,000
Notes receivable 255,000 315,000
Related party notes receivable 712,000 941,000
Property and equipment, net 4,067,000 3,723,000
Performance bonds 3,738,000 3,737,000
Goodwill, net 3,100,000 3,191,000
Other assets 618,000 665,000
------------ ------------
$ 28,494,000 $ 28,017,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 443,000 $ 350,000
Accrued medical claims 6,622,000 7,080,000
Risk pool payable 2,253,000 2,035,000
Related party risk pool payable 291,000 301,000
Accrued expenses 3,084,000 2,668,000
Current portion of long-term debt 200,000 200,000
------------ ------------
Total current liabilities 12,893,000 12,634,000
Long-term debt 17,000 67,000
Related party long-term debt 3,723,000 3,643,000
Deferred income taxes, net 203,000 203,000
------------ ------------
Total liabilities 16,836,000 16,547,000
------------ ------------
Commitments - -
Stockholders' Equity:
Voting preferred stock, $1,000 par value
Authorized, issued and outstanding - 6.85 shares 7,000 7,000
Common stock, $0.01 par value
Authorized - 10,000,000 shares
Issued and outstanding - 4,390,000 shares 44,000 44,000
Capital in excess of par value 14,497,000 14,497,000
Accumulated deficit (2,890,000) (3,078,000)
------------ ------------
Total stockholders' equity 11,658,000 11,470,000
------------ ------------
$ 28,494,000 $ 28,017,000
============ ============
3
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
August 31, August 31,
1997 1996
------------- -------------
<S> <C> <C>
Revenues $ 14,742,000 $ 17,535,000
------------- -------------
Direct cost of operations 11,780,000 14,078,000
Marketing, sales and administrative 2,757,000 4,532,000
------------- -------------
Total costs and expenses 14,537,000 18,610,000
------------- -------------
Operating income (loss) 205,000 (1,075,000)
------------- -------------
Interest income 191,000 69,000
Interest expense (91,000) (36,000)
------------- -------------
Net interest income 100,000 33,000
------------- -------------
Income (loss) before income taxes 305,000 (1,042,000)
Provision (benefit) for income taxes 117,000 (50,000)
------------- -------------
Net income (loss) $ 188,000 $ (992,000)
============= =============
Net Income (loss) per share $ 0.04 $ (0.23)
============= =============
Weighted Average Common and Common
Equivalent Shares Outstanding 4,502,000 4,365,000
============= =============
</TABLE>
4
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
----------------------------
August 31, August 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 188,000 $ (992,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Bad debt expense - 567,000
Depreciation and amortization 422,000 422,000
Loss on sale of property and equipment 4,000 -
Deferred income taxes 38,000 -
Changes in assets and liabilities:
Accounts receivable and unbilled services (775,000) (1,778,000)
Prepaid expenses and other current assets 247,000 (162,000)
Accounts payable 93,000 2,146,000
Accrued medical claims (458,000) 1,139,000
Risk pool payable 218,000 261,000
Related party risk pool payable (10,000) 18,000
Accrued expenses 416,000 543,000
Loss contract reserve - (400,000)
Other changes in assets and liabilities 47,000 -
------------- ------------
Net cash provided by operating activities 430,000 1,764,000
------------- ------------
Cash flows from investing activities:
Purchase of property and equipment (680,000) (933,000)
Proceeds from sale of property and equipment 1,000 -
Purchase of short-term investments - (500,000)
Proceeds from maturity/sale of short-term investments 1,000 1,369,000
Net payments of notes receivable 300,000 -
Increases in assets securing performance bond (1,000) (112,000)
------------- ------------
Net cash used in investing activities (379,000) (176,000)
------------- ------------
Cash flows from financing activities:
Due to Medicus Systems Corporation - (145,000)
Net increase (decrease) in long-term debt 30,000 (1,250,000)
------------- ------------
Net cash provided by (used in) financing activities 30,000 (1,395,000)
------------- ------------
Net increase in cash and cash equivalents 81,000 193,000
Cash and cash equivalents, beginning of period 7,212,000 3,804,000
------------- ------------
Cash and cash equivalents, end of period $ 7,293,000 $ 3,997,000
============= ============
</TABLE>
5
The accompanying notes are an integral part of these statements.
<PAGE>
MANAGED CARE SOLUTIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS
- ---------------------------
In management's opinion, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) considered necessary for a fair statement of the results for the
interim periods presented. The results of operations for the period ended
August 31, 1997 are not necessarily indicative of the results to be expected
for the full year. The interim consolidated financial statements should be
read in conjunction with Managed Care Solutions, Inc. ("MCS" or "Company")
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the year ended May 31, 1997.
NOTE 2 - NET INCOME PER SHARE
- -----------------------------
Net income (loss) per common share has been computed by dividing net income
(loss) by the weighted average common equivalent shares outstanding during the
period. Common stock equivalents include shares issuable on the exercise of
stock options and warrants when dilutive, using the treasury stock method from
date of grant.
The following is the computation of the reconciliation of the numerators and
denominators of net income per common share and net income per common share,
assuming dilution in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 was issued in
February 1997 and is effective for financial statements for both interim and
annual periods ending after December 15, 1997.
<TABLE>
Supplemental earnings per share:
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------
August 31, 1997 August 31, 1996
------------------------------------- --------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Net income per common share:
Income available to common stockholders $188,000 4,390,000 $0.04 $(992,000) 4,365,000 $(0.23)
Effect of dilutive securities:
Stock options and warrants - 112,000 - -
-------- --------- --------- ----------
Net income per common share, assuming
dilution:
Income available to common stockholders
and assumed conversions $188,000 4,502,000 $0.04 $(992,000) 4,365,000 $(0.23)
======== ========= ===== ========= ========= ======
</TABLE>
NOTE 3 - RESTRICTIONS ON FUND TRANSFERS
- ---------------------------------------
Certain of the Company's operating subsidiaries are subject to state
regulations, which require compliance with certain net worth, reserve and
deposit requirements. To the extent the operating subsidiaries must comply
with these regulations, they may not have the financial flexibility to
transfer funds to the parent organization, MCS. Net assets of subsidiaries
(after inter-company eliminations) which, at August 31, 1997, may not be
transferred to MCS by subsidiaries in the form of loans, advances or cash
dividends without the consent of a third party is referred to as "Restricted
Net Assets". Total Restricted Net Assets of these operating subsidiaries were
$8,575,000 at August 31, 1997, with deposit and reserve requirements
(performance bonds) representing $3,738,000 of the Restricted Net Assets and net
worth requirements, in excess of deposit and reserve requirements, representing
the remaining $4,837,000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
Managed Care Solutions, Inc. ("MCS" or the "Company") is involved in a variety
of health care programs, many of which serve indigent and Medicaid
populations. The Company's operations include a long-term care Arizona based
health maintenance organization ("HMO") subsidiary, Ventana Health Systems
("Ventana"); an Arizona based primary and acute care HMO subsidiary, Arizona
Health Concepts ("AHC"); management contracts pursuant to which the Company
administers privately owned HMOs located in Hawaii, Michigan, New Mexico, and
Texas; the management of healthcare services for an indigent population for
the County of San Diego; a contractual arrangement with the State of Indiana
Medicaid Agency; a subsidiary providing home healthcare and community worker
services to Ventana; and an Ancillary Services Division which manages
arrangements in which hospitals deliver clinical services on-site at nursing
homes.
Results of Operations
Revenues decreased to $14,742,000 for the three-month period ended
August 31, 1997 from $17,535,000 for the comparable period in fiscal year 1997.
For the three-month periods ended August 31, 1997 and 1996, revenues consisted
of $5,435,000 and $5,283,000, respectively, from fees received for management
of health plans not owned by the Company and $9,307,000 and $12,252,000,
respectively, from capitation revenue received by Ventana and AHC. Management
fee revenue from non-owned plans increased 3% for the three months ended
August 31, 1997 over the comparable period in the prior year, while capitation
revenue from Ventana and AHC decreased 24%.
AHC revenues decreased by $2,638,000 primarily as a result of transition of
members in Maricopa County to a different plan on December 1, 1996. For the
three-month periods ended August 31, 1997 and 1996 average member months for AHC
were approximately 6,720 and 11,760, respectively. Ventana revenues decreased
by $307,000 primarily due to a decrease in membership. For the three-month
period ended August 31, 1997 average member months were approximately 1,050
versus 1,150 for the comparable period in fiscal year 1997.
Direct cost of operations decreased to $11,780,000 for the three-month period
ended August 31, 1997 from $14,078,000 for the comparable period in
fiscal year 1997. For the three-month periods ended August 31, 1997 and 1996
direct cost of operations consisted of $3,937,000 and $2,914,000, respectively,
related to fees generated from management of health plans not owned by the
Company and $7,843,000 and $11,164,000, respectively, from operating expenses
of Ventana and AHC. The direct cost of operations to manage plans as a
percentage of related revenue decreased to 72% during the three-month period
ended August 31, 1997, from 82% for the comparable period in the prior year.
The decrease was primarily due to the termination of unprofitable contracts
during the second quarter of fiscal year 1997, termination of approximately
10% of employees in July 1996 as part of a workforce reduction plan and
efforts to minimize operating costs. Direct costs as a percentage of related
revenue for the three-month period ended August 31, 1997 and 1996 were 84% and
83%, respectively, for Ventana and 85% and 91%, respectively, for AHC. The
decrease in direct cost of operations for Ventana and AHC reflect the decrease
in average member months from the three-month period ended August 31, 1996 to
the comparable period in fiscal year 1998.
In conjunction with the acquisition of AHC in March 1996, the Company recorded
a loss contract reserve of $542,000, including anticipated contract losses of
$440,000 for the period June 1, 1996 to September 30, 1996. The Company
charged operating losses incurred totaling $330,000 for the three-month period
ended August 31, 1996, against this reserve. As a result, these contract losses
are not fully reflected in the Company's operating results for the three-month
period ended August 31, 1996.
7
<PAGE>
Marketing, sales and administrative expenses decreased from $4,532,000 for the
three-month period ended August 31, 1996 to $2,757,000 for the three-month
period ended August 31, 1997. This decrease is primarily the result of the
termination of unprofitable contracts during the second quarter of
fiscal year 1997, the workforce reduction plan implemented in July 1996 and
efforts to minimize operating costs.
Net interest income for the three-month period ended August 31, 1997 was
$100,000 which is primarily related to investments held by Ventana and AHC
partially offset by interest expense on the Company's outstanding convertible
debt. For the three-month period ended August 31, 1996, net interest income
was $33,000 related to short-term investments of the Company. Net interest
income has increased during the three-month period ended August 31, 1997 versus
the comparable period in the prior fiscal year as a result of the growth in
cash and cash equivalents and short-term investments.
Income tax rate was 38% and 5% for the three-month period ended
August 31, 1997 and 1996, respectively. The variance between the rates is
primarily caused by a need to provide a valuation allowance on deferred tax
assets of the Company for the three-month period ended August 31, 1996.
Net income was $188,000 for the three-month period ended August 31, 1997
versus a net loss of $992,000 for the comparable period in the prior
fiscal year. The primary reasons for the change in profitability were costs in
the 1996 period related to terminated contracts in Colorado, Illinois and
Missouri and costs associated with employees terminated as part of the
workforce reduction effort in July 1996.
In March 1997, the Company entered into an administrative services agreement
with Rio Grande HMO, Inc., a subsidiary of Blue Cross and Blue Shield of
Texas, Inc. ("BCBSTX"), to participate in the STAR+Plus Program of the Texas
Department of Human Services. The STAR+Plus Program is a demonstration
project in Harris County, Texas that will provide comprehensive managed health
care services to aged, blind and disabled Medicaid beneficiaries, including
those needing long-term care services. Rio Grande HMO, Inc. is one of three
contractors selected to participate in this $300 million per year program
covering over 60,000 individuals. This program is scheduled to begin
enrollment in December 1997.
In June 1997, AHC was selected as one of the prepaid health plans to manage
the delivery of health care services in Arizona's Medicaid program for three
years with two additional one-year extensions. The contract became effective
on October 1, 1997 and covers two counties in northwest Arizona. The current
enrollment of AHC is approximately 7,000 members.
In June 1997, the Company entered into an administrative services agreement
with Lovelace Health Systems ("Lovelace"), a New Mexico subsidiary of CIGNA
Healthcare Corporation. The Company provides management services to Lovelace
to support its Medicaid managed care contract with the State of New Mexico's
Human Services Department. Lovelace was one of three organizations awarded a
two-year contract with the state to provide comprehensive managed health care
services to an aggregate of over 245,000 Medicaid eligible recipients
statewide. Effective October 1, 1997, Lovelace enrolled over 25,000 members
during two of four enrollment phases, which continue through May 1998.
8
<PAGE>
Liquidity and Capital Resources
During the three-month period ended August 31, 1997, the Company's cash and
cash equivalents increased $81,000 to $7,293,000 on August 31, 1997, including
an increase in restricted cash of $930,000. Operating activities provided
$430,000 for the three-month period ended August 31, 1997, versus $1,764,000
for the same period in the prior fiscal year. The primary sources of cash
during the three-month period ended August 31, 1997 were income from
operations, growth in risk pool payables and prepaid expenses partially offset
by increase in accounts receivable and unbilled services. During the
comparable period in the prior year, cash was provided by the growth in
current liabilities, partially offset by the loss from operations and growth
in prepaid expenses and accounts receivable.
Investing activities used $379,000 for the three-month period ended
August 31, 1997 versus $176,000 for the comparable period of the prior
fiscal year. During the three-month period ended August 31, 1997, cash was
used to purchase $680,000 of property and equipment primarily for the
Albuquerque, Houston and Phoenix offices which included computer system
upgrades. During the same period $300,000 was provided by net payments on notes
receivable.
Financing activities provided $30,000 for the three-month period ended
August 31, 1997 versus using $1,395,000 for the comparable period of the prior
fiscal year during the first quarter of fiscal year 1997. Principal payments
on long-term debt as well as payments to Medicus Systems Corporation were
the primary uses of funds.
Certain of the Company's operating subsidiaries are subject to state
regulations which require compliance with certain net worth, reserve and
deposit requirements. To the extent the operating subsidiaries must comply
with these regulations, they may not have the financial flexibility to
transfer funds to MCS. Net assets of subsidiaries (after inter-company
eliminations) which, at August 31, 1997, may not be transferred to MCS by
subsidiaries in the form of loans, advances or cash dividends without the
consent of a third party are referred to as "Restricted Net Assets". Total
Restricted Net Assets of these operating subsidiaries was $8,575,000 at
August 31, 1997, with deposit and reserve requirements (performance bonds)
representing $3,738,000 of the Restricted Net Assets and net worth
requirements, in excess of deposit and reserve requirements, representing the
remaining $4,837,000. Funds provided by Ventana to MCS under loan agreements
totaled $743,000 at August 31, 1997. VHS provided these loans in the normal
course of operations. All such agreements were pre-approved as required by
Arizona Health Care Cost Containment System Administration.
Based on its current projections of existing contracts, which include
substantial capital expenditures in connection with its Rio Grande HMO and
Lovelace Health Systems contracts, the Company believes that its cash and
capital resources should be sufficient to meet its financial requirements in
fiscal 1998. The Company is currently pursuing new contracts to provide
management services in new and existing markets. If the Company is successful
in securing any of these opportunities it may require additional financing to
cover start-up costs and capital equipment. MCS is actively negotiating with
two corporations engaged in related health care businesses who have expressed
a desire to invest in MCS common stock and/or enter into credit agreements
with MCS. While the Company believes one or both of these transactions will
be completed during the quarter ending November 30, 1997, there can be no
assurance that either will be successful. If neither of these transactions is
completed, the Company will be required to seek alternative financing while
continuing its efforts to increase revenues and minimize operating costs.
9
<PAGE>
Forward-Looking Information
This report contains statements that may be considered forward-looking, such
as the discussion of the Company's strategic goals, new contracts and cash
flow. These statements speak of the Company's plans, goals or expectations,
refer to estimates, or use similar terms. Actual results could differ
materially from the results indicated by these statements because the
realization of those results is subject to many uncertainties.
Some of these uncertainties that may affect future results are discussed in
more detail above. All forward-looking statements included in this document
are based upon information presently available, and the Company assumes no
obligation to update any forward-looking statement.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Redpath Computer Services, Inc. and Isotech Marketing, Inc., Arizona
corporations that had filed for protection under Chapter 11 of the Bankruptcy
Code, had filed an action against the Company and Ventana, among other
defendants, seeking substantial damages for alleged breach of contract,
copyright infringement, and conversion of software and unfair competition.
During September 1997, Redpath and Isotech abandoned their claim against
Ventana, released the Company and its affiliates from liability and agreed to
voluntarily dismiss their claims in federal court. Ventana made no payments to
Redpath or Isotech to induce this dismissal.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders during the
Company's Annual Meeting of Stockholders held October 10, 1997:
Votes Cast Authority
Description of Matter For Withheld
- --------------------- ---------- ---------
Election of Directors:
Richard C. Jelinek 4,193,932 2,209
William G. Brown 4,193,870 2,271
Risa Lavizzo-Mourey 4,193,932 2,209
Henry Kaldenbaugh 4,193,932 2,209
John Lingenfelter 4,193,791 2,350
James A. Burns 4,193,932 2,209
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Fourth Amendment to contract between registrant and
AlohaCare
(10.2) Sixteenth Amendment to contract between the registrant
and San Diego County, California
(10.3) Amendment to registrant's Employee Stock Purchase Plan
(27) Financial data schedule
(b) Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
MANAGED CARE SOLUTIONS, INC.
By: /s/ James A. Burns
-----------------------------------------------------
James A. Burns, President and Chief Executive Officer
By: /s/ Michael J. Kennedy
-----------------------------------------------------
Michael J. Kennedy, Chief Financial Officer
Dated: October 15, 1997
11
<PAGE>
Exhibit 10.1
FOURTH AMENDMENT
This amendment amends the Administrative Services Agreement between AlohaCare
and Managed Care Solutions of Delaware ("MCS") dated April 25, 1994, as amended
on August 25, 1995, September 25, 1995, and October 22, 1996, as follows:
The first sentence of Section III.C.1.a, as amended by the October 22, 1996
amendment, which reads: "AlohaCare shall pay MCS an administrative fee of
[***************]," is deleted in its entirety and is replaced with the
following:
a. Effective July 1, 1997 AlohaCare shall pay MCS an administrative fee
based on the total number of enrolled QUEST and QUEST-Net members, in
accordance with the following schedule:
ENROLLED MEMBERS PER MEMBER MONTHLY ADMINISTRATIVE FEE
---------------- -------------------------------------
[************] [******]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
[******] [********]
The administrative fee schedule set forth above shall be applied each and every
month, as illustrated by the following hypothetical example:
If in July AlohaCare's QUEST and QUEST-Net enrolled membership is [******]
member months, then the administrative fee payable to MCS by AlohaCare shall
be [*******] (the product of [*******************]). If in August AlohaCare's
QUEST and QUEST-Net enrolled membership is [*********] member months, then
the administrative fee payable to MCS by AlohaCare shall be [*********] (the
product of [****************]).
*Confidential treatment is requested.
<PAGE>
Page Two
Amendment Four
June 24, 1997
The Administrative Fee set forth above shall apply to administrative services
for the Acute Care and Behavioral Health Care QUEST and QUEST-Net pro-grams of
AlohaCare, but shall not apply to Dental program administration, Aged, Blind and
Disabled (ABD) program administration, Long Term Care (LTC) program
administration, or any other program not currently operational within AlohaCare.
An agreement concerning administrative fees for such new Dental, ABD, LTC or
other currently non-operational programs of AlohaCare shall be negotiated
between AlohaCare and MCS and be made an amendment to this Agreement.
The Administrative Fee structure as set forth above shall be effective from
July 1, 1997 until June 30, 1999. The Administrative Fee shall be adjusted
upward on each anniversary of the effective date of this Amendment by the
following formula: The applicable per member-per month figure will be multiplied
by a fraction the numerator of which being the consumer price index figure for
Honolulu, Hawaii most recently published by the United States Department of
Labor, Bureau of Labor Statistics and the denominator being such consumer price
index figure for the same month of the immediately preceding year.
Profit or Loss (as defined below) incurred by MCS in an AlohaCare contract year
pursuant to this Agreement shall not exceed [***********]. Profit or Loss shall
be allocated between MCS and AlohaCare as follows:
PROFIT/LOSS PERCENT TO MCS MCS PROFIT/LOSS
----------- -------------- ---------------
[************] [******] [********]
[************] [****] [*******]
[************] [****] [*******]
[************] [***] [*]
Within 60 days after the end of the AlohaCare contract year, MCS or AlohaCare as
the case may be, shall pay to the other party any amount due pursuant to this
amendment.
"Costs" shall mean all out-of-pocket expenses paid or incurred by MCS in
providing administrative services to AlohaCare in an AlohaCare contract year in
accordance with generally accepted accounting principles (GAAP).
"Fees" shall mean all administrative fees paid to MCS by AlohaCare in an
AlohaCare contract year pursuant to this Agreement.
*Confidential treatment is requested.
<PAGE>
Page Three
Amendment Four
June 24, 1997
"Profit" and "Loss" shall mean an amount resulting from subtracting
[********************* *********************].
MCS shall not be at risk for losses of AlohaCare or any AlohaCare risk pool or
participate in profits of AlohaCare or of any AlohaCare risk pool.
MCS shall be paid an Incentive Payment at the end of each contract year in an
amount up to [****] of the Fees. The terms and conditions governing the
Incentive Payment shall be determined by MCS and AlohaCare and made an amendment
to this Agreement.
The Profit and the Incentive Payment in an AlohaCare contract year shall not
exceed an amount equal to [***] times the number of member months sustained by
AlohaCare for such contract year.
The remaining provisions of Section III.C.1.a and unamended provisions of the
Agreement, as amended on August 25, 1995 and September 25, 1995, shall remain in
full force and effect.
This amendment shall be effective as of July 1, 1997.
ALOHACARE MANAGED CARE SOLUTIONS
- --------- ----------------------
By /s/ Jory Watland By /s/ James Burns
Its President Its President & CEO
Date June 27, 197 Date June 26, 1997
*Confidential treatment is requested.
<PAGE>
Exhibit 10.2
COUNTY CONTRACT NUMBER #43497
AGREEMENT
AGREEMENT between the COUNTY OF SAN DIEGO hereinafter called COUNTY and
MANAGED CARE SOLUTIONS, INC.
8840 Complex Drive Suite 300
San Diego CA 92123
(619) 492-4422 FAX (619) 565-4091
hereinafter referred to as CONTRACTOR for County of San Diego, Department of
Health Services, Community Health Services, Perinatal Care Network.
- --------------------------------------------------------------------------------
WITNESSETH:
WHEREAS CONTRACTOR is specially trained and possesses certain skills,
experience, education and compentency to perform certain special services, and
COUNTY desires to engage CONTRACTOR for such special services upon the terms
provided and,
WEHREAS, pursuant to the provisions of the California Government Code Section
26227, The Board of Supervisors of COUNTY is authorized to enter a contract for
such services.
WHEREAS, the County, by San Diego County Charter, Section 705 has authority to
obtain bids or quotations and award a contract for software systems and other
services and has by Article V or the San Diego County Administrative Code,
Section 93.1 (a) authorized the Purchasing and Contracting Director to award a
contract for
OPERATION AND ADMINISTRATION OF THE PERINATAL CARE TOLL-FREE TELEPHONE SERVICES
NOW THEREFORE the parties hereto do mutually agree to the terms and conditions
as attached and set forth in:
SECTION TITLE
A Special Terms and Conditions
B Standard Terms and Conditions
C Statement of Work
D Budget
E CHC proposal dated October 17, 1996 as modified by CHC Best
and Final Offer dated December 16, 1996
CHC Revised Best and Final Offer dated December 17, 1996
IN WITNESS THEREOF COUNTY AND CONTRACTOR have executed this AGREEMENT to be
effective:
January 1, 1997
<TABLE>
<CAPTION>
CONTRACTOR: COUNTY:
<S> <C>
BY: /s/ Michael Tweedell Date: 12/17/96 BY: /s/ William L. Napier Date: 12/18/96
-------------------- ---------------------
NAME: Michael D. Tweedell NAME: William L. Napier
- -------------------------------------------------------------------------------------------
TITLE: Senior Vice President TITLE: Purchasing and Contracting Director
- --------------------------------------------------------------------------------
County Counsel Approval: N/A Auditor-Controller Approval: N/A
- --------------------------------------------------------------------------------
CH43497.AGR December 17, 1996
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIXTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
COUNTY OF SAN DIEGO CONTRACT NUMBER 41217
THIS SIXTEENTH AMENDMENT is to the Agreement made between the COUNTY of San
Diego (hereinafter referred to as "COUNTY") and MANAGED CARE SOLUTIONS, FORMERLY
MEDICUS Systems Corporation located at 8840 Complex Drive, San Diego, CA 92123
(hereinafter referred to as "Contractor") for the administration of the COUNTY
of San Diego, COUNTY Medical Services Program.
WITNESSETH
WHEREAS, Contractor possesses certain skills, experience, education and
competency to perform certain special services, and COUNTY desires to engage
Contractor for such special services upon the terms provided; and
WHEREAS, the COUNTY Director of Purchasing and Contracting, pursuant to action
of the Board of Supervisors, Item 22 on February 21, 1989, awarded a contract to
the Contractor to provide administration of the COUNTY Medical Services (CMS)
Program, for an initial term through June 30, 1992 with an option to extend for
two additional two-year terms; and
WHEREAS, the COUNTY, by action of the Board of Supervisors, Item 56 on
February 13, 1990, authorized the Director of Purchasing and Contracting to
approve, authorize, and execute a sole source amendment to the COUNTY Contract
with MEDICUS Systems Corporation for day-to-day operations and claims payment
related to AB75 and SB12/612; and
WHEREAS, the COUNTY, by action of the Board of Supervisors, Item 12 on
June 12, 1990, authorized the extension of CMS Program contracts for the three-
month period, July 1, 1990 through September 30, 1990; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 5 on
September 12, 1990, authorized the extension of CMS Program contracts for the
9 month period, October 1, 1990 through June 30, 1991; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 39A on
February 26, 1991, directed the Chief Administrative Officer to terminate the
CMS Program by close of business March 5, 1991, effective March 16, 1991, unless
adequate funds were made available from the State; and
<PAGE>
SIXTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 31 on
March 5, 1991, set aside action taken on February 26, 1991 to terminate the CMS
Program by March 5, 1991, and instructed the Chief Administrative Officer to
send out notices to terminate the CMS contracts by the end of the day on
March 8, 1991, effective March 19, 1991, unless the State provided the COUNTY
with binding assurances that it would provide the COUNTY with revenues in the
amount of at least $16,000,000 to pay for the CMS program for the remaining of
FY 90-91; and
WHEREAS, the Superior Court in San Diego COUNTY on March 18, 1991 ordered a stay
of the Notices of Termination; and
WHEREAS, the State reduced its allocation to the San Diego COUNTY CMS Program
for Fiscal Years 1990-91 and 1991-92; and
WHEREAS, a variety of functions are required to be performed by the
CONTRACTOR to close out the CMS Program; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 6 on
June 24, 1991, authorized the extension of CMS Program contracts for the two
month period, July 1, 1991 through August 31, 1991; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 39 on
July 23, 1991 authorized extension of CMS Program contracts through
June 30, 1992; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 38 on
June 2, 1992 authorized extension of CMS Program contracts through
June 30, 1993; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Item 2, on
October 6, 1992, authorized provision of clinic services to HIV+ patients
through CMS community clinics; and
WHEREAS, the COUNTY by action of the Board of Supervisors, Minute Order #6 on
February 2, 1993, authorized expansion of the Perinatal Care Network (PCN)
Referral Services; and
WHEREAS, the COUNTY by action of the Board of Supervisors on June 29, 1993,
authorized extension of CMS Program contracts through June 30, 1994 (Items #63
and #17), as well as extension of the Perinatal Care Network (Items #17 and
#13), and clinic services for HIV+ patients (Item #20);
WHEREAS, the COUNTY by action of the Board of Supervisors on June 21, 1994,
authorized extension of the CMS Program contracts through June 30, 1995 (Item
#28), extension of the contract with MEDICUS for the Perinatal Care Network
Program (Item #17), and extension of the CARE ACT contracts with the clinics and
with MEDICUS for clinic services for HIV+ patients (Item #34);
<PAGE>
WHEREAS, the COUNTY by action of the Board of Supervisors on June 27, 1995,
authorized extension of the CMS Program contracts through June 30, 1996 (Item #
9), extension of the contract with MEDICUS for the Perinatal Care Network
Program (Item # 6), and extension of the CARE ACT contracts with the clinics and
with MEDICUS for clinic services for HIV+ patients (Item # 9);
WHEREAS, the COUNTY by action of the Board of Supervisors on March 19, 1996,
authorized extension of the CARE ACT contracts with the clinics and with MEDICUS
for clinic services for HIV+ patients (Item # 20);
WHEREAS, THE COUNTY BY ACTION OF THE BOARD OF SUPERVISORS ON DECEMBER 3, 1996,
AUTHORIZED EXTENSION OF THE COUNTY MEDICAL SERVICES' ADMINISTRATIVE CONTRACT
WITH MANAGED CARE SOLUTIONS (ITEM # 20);
NOW, THEREFORE, the parties hereto do mutually agree to the terms and conditions
as attached and set forth in this SIXTEENTH Amendment to the agreement.
1. SECTION 2 WORK TO BE PERFORMED BY CONTRACTOR is amended as to the
following sections under RFP 90231 Statement of Work. These are amended to
reflect mutually agreed upon operational changes to performance
requirements; and are hereby amended as follows:
6. SYSTEM OVERVIEW
6.8 CONTRACT CLOSE-OUT
------------------
COUNTY AND CONTRACTOR HAVE NEGOTIATED A FIRM FIXED PRICE FOR
MONTH-TO-MONTH SERVICES BEYOND JUNE 30, 1997, AS WELL AS A
THREE MONTH CLOSE OUT PERIOD BEYOND JUNE 30, 1997. IF
EXERCISED BY THE COUNTY, COUNTY SHALL NOTIFY CONTRACTOR AT
LEAST 45 CALENDAR DAYS IN ADVANCE OF ITS INTENT TO EXERCISE
ANY OPTION TO EXTEND THIS AGREEMENT. CONTRACTOR SHALL PROVIDE
THE COUNTY WITH AT LEAST 120 CALENDAR DAYS PRIOR NOTICE,
SHOULD CONTRACTOR DESIRE TO TERMINATE THIS AGREEMENT.
8.1 OVERALL SYSTEM MANAGEMENT
<PAGE>
8.1.2 ADMINISTRATIVE CONTRACTOR RESPONSIBILITIES
------------------------------------------
d. THE PROVISION TO PROVIDE 200 HOURS OF NON-MANAGEMENT
COUNTY REPORT ASSISTANCE IS DELETED; HOWEVER, CONTRACTOR
SHALL PARTICIPATE AS REASONABLY REQUESTED BY THE COUNTY
IN RESEARCH AND EVALUATIVE STUDIES DESIGNED TO SHOW THE
EFFECTIVENESS AND/OR EFFICIENCY OF THE COUNTY MEDICAL
SERVICES PROGRAM. Institutionalized reports related to
the program are operational and are not considered
non-management reports. (e.g. AB8, Legislation, Board
inquiries, etc.)
8.7 CLAIMS PROCESSING
8.7.2 ADMINISTRATIVE CONTRACTOR RESPONSIBILITIES
------------------------------------------
c. Provide a settlement and distribution of the funds in
each pool within the following days of the end of the
fiscal year: Hospital Pool = ON OR BEFORE
SEPTEMBER 30TH; Primary Care Pool = ON OR BEFORE
SEPTEMBER 30th; Specialty Pool = ON OR BEFORE
SEPTEMBER 30TH. This is to be done according to the pre-
determined formula specified in the provider contracts.
2. SECTION 5 CONTRACT TYPE AND PAYMENT is hereby amended in its entirety as
follows:
This Agreement shall be of two types, a cost reimbursement for all capital
equipment acquisitions and a fixed price with redetermination for all
other Contractor cost.
All capital equipment, equipment that has a value of $1000.00 or greater
and a life of three years or greater, shall be pre-approved by the COUNTY,
shall be competitively acquired, and invoiced within 30 days after receipt
and acceptance. All capital equipment shall be kept in good working order
and maintained by the Contractor. It shall be properly tagged as COUNTY
fixed assets, and returned or disposed of in accordance with COUNTY fixed
assets procedures. COUNTY shall reimburse the CONTRACTOR the cost provided
the item does not exceed the funds available in the agreed upon capital
acquisition amount for the period. The agreed upon capital acquisition
amount for the transition period and first year through June 30, 1990 is
$101,760.00. The agreed upon capital acquisition amount for the period
July 1, 1990 through June 30, 1991 is $15,000.00; the amount for
July 1, 1991 through June 30, 1992 is $15,000.00; the amount for
July 1, 1992 through June 30, 1993 is $15,000.00; the amount for
July 1, 1993 through June 30, 1994 is $15,000; the amount for July 1, 1994
through June 30, 1995 is $15,000; the amount for July 1, 1995 through
June 30, 1996 is $15,000; the amount for July 1, 1996 through
JUNE 30, 1997 IS $33,000. The COUNTY shall reimburse 100 percent of
capital equipment invoices. All other terms of Section B, Item 29, page
B-7 of RFP 90231 remain in effect. For AB75 and SB12/612 Related Work,
the COUNTY and CONTRACTOR agree to an additional $25,000.00 for capital
acquisition from April 1, 1990 through June 30, 1990.
<PAGE>
All other cost such as labor, material, rents and leases, consultant
services, etc. for providing the specified services shall be reimbursed at
firm fixed price prorated for monthly payments. The firm fixed price for
the transition period is $210,040.00. This price is to be prorated as
follows: through May 31, 1989, $60,040.00 and through June 30, 1989,
$150,000.00. The firm fixed price with redetermination for the first year
is $2,661,600.00. This price is to be prorated at one twelfth of the total
for each of the twelve months from July 1 to June 30 in the amount of
$221,800.00 per month. The firm price for the work specified in "Statement
of Work for AB75 and SB12/612 Related Programs" (attached to the First
Amendment) is $334,063.00 for the period March 1, 1990 through
June 30, 1990. This price is prorated for each of the four months from
March 1, 1990 to June 30, 1990 in the amount of $83,515.75 per month.
The firm fixed price for all specified services in Section 2, as amended,
for the first year is $2,661,600 plus $334,063 for a total of $2,995,663.
This amount is to be prorated as follows: July 1989 through
February 1990, $221,800 per month; March 1990 through June 1990, $221,800
plus $83,515.75 for a total of $305,315.75 per month.
The firm fixed price for administration of the CMS Program for the period
July 1, 1990 through September 30, 1990 is $723,821 (25% of $2,895,287);
this price is to be prorated at one-third of the total for each of the
three months from July 1 to September 30, 1990, in the amount of $241,274
per month.
The firm fixed price for administration of the CMS Program for the period
October 1, 1990 through June 30, 1991 is $2,171,465 (the 9 month portion
of $2,895,287); this price is to be prorated for each of the 9 months from
October 1 to June 30, in the amount of $241,274 per month; except in the
event the CMS Program is terminated prior to the end of FY 1990-91, where
upon 10 days written notification, the firm fixed price will be prorated
on a daily rate in the amount of $7906 through June 30, 1991.
<PAGE>
The firm fixed price for administration of the CMS Program for the period
July 1, 1991 through August 31, 1991 is $482,548 (the 2 month portion of
$2,895,287); this price is to be prorated for each of the 2 months from
July 1, to August 31, 1991 in the amount of $241,274 per month.
The firm fixed price for administration of the CMS Program for the period
September 1, 1991 through June 30, 1992 is $2,412,739 (the 10-month
portion of $2,895,287); this price is to be prorated for each of the ten
months from September 1, 1991 to June 30, 1992 in the amount of $241,274
per month. In the event the CMS Program is terminated prior to the end of
FY 1991-92, upon 10 days written notification by the Director of Health
Services, Contractor will be paid an additional three months at $241,274
per month for closeout activities pending further negotiations.
The firm fixed price for administration of the CMS Program for the period
July 1, 1992 through June 30, 1993 is $2,895,287; this price is to be
prorated for each of the twelve months in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the period
July 1, 1993 through June 30, 1994 is $2,895,287; this price is to be
prorated for each of the twelve months in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the period
July 1, 1994 through June 30, 1995 is $2,895,287; this price is to be
prorated for each of the twelve months in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the period
July 1, 1995 through June 30, 1996 is $2,895,287; this price is to be
prorated for each of the twelve months in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the period
July 1, 1996 through December 31, 1996 is $1,447,644; this price is to be
prorated for each of the six months in the amount of $241,274 per month.
THE FIRM FIXED PRICE FOR ADMINISTRATION OF THE CMS PROGRAM FOR THE PERIOD
JANUARY 1, 1997 THROUGH JUNE 30, 1997 IS $1,214,814; THIS PRICE IS TO BE
PRORATED FOR EACH OF THE SIX MONTHS IN THE AMOUNT OF $202,469 PER MONTH.
IF EXERCISED AT THE COUNTY'S OPTION, THE COUNTY MAY CONTRACT FOR
MONTH-TO-MONTH ADMINISTRATION OF THE CMS PROGRAM AFTER JUNE 30, 1997 AT
THE FIRM FIXED PRICE OF $194,283 PER MONTH.
<PAGE>
IF EXERCISED AT THE COUNTY'S OPTION, THE FIRM FIXED PRICE FOR
ADMINISTRATION OF THE CMS PROGRAM FOR LAST THREE MONTHS OF SERVICE, TO
INCLUDE RECONCILING AND FINAL CLOSE OUT OF THE PROGRAM, IS $524,709; THIS
PRICE IS TO BE PRORATED FOR EACH OF THE THREE MONTHS IN THE AMOUNT OF
$174,903 PER MONTH.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) is $155,000
(25% of $620,000) for the period July 1, 1990 through September, 1990.
This price is prorated for each of the three months from July 1, 1990 to
September 30, 1990 in the amount of $51,666 per month.
<PAGE>
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) is $465,000
(9 months portion of $620,000) for the period October 1, 1990 through
June 30, 1991. This price is prorated for each of the nine months from
October 1, 1990 to June 30, 1991 in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1991 through August 31, 1991 is $103,333 (2 months portion
of $620,000). This price is prorated for each of the two months from
July 1, 1991 to August 31, 1991 in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period September 1, 1991 through June 30, 1992 is $516,667 (the 10-month
portion of $620,000). This price is prorated for each of the ten months
from September 1, 1991 to June 30, 1992 in the amount of $51,666 per
month. In the event the CMS Program is terminated prior to the end of FY
1991-92, upon 10 days written notification by the Director of Health
Services, Contractor will be paid an additional three months at $ 51,666
per month for closeout activities pending further negotiations.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1992 through June 30, 1993 is $620,000. This price is
prorated for each of the twelve months in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1993 through June 30, 1994 is $620,000. This price is
prorated for each of the twelve months in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1994 through June 30, 1995 is $620,000. This price is
prorated for each of the twelve months in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1995 through June 30, 1996 is $620,000. This price is
prorated for each of the twelve months in the amount of $51,666 per month.
<PAGE>
The firm price for the work specified in "Statement of Work for AB75 and
SB12/612 Related Programs" (attached to the First Amendment) for the
period July 1, 1996 through December 31, 1996 is $309,996. This price is
prorated for each of the six months in the amount of $51,666 per month.
THE FIRM PRICE FOR THE WORK SPECIFIED IN "STATEMENT OF WORK FOR AB75 AND
SB12/612 RELATED PROGRAMS" (ATTACHED TO THE FIRST AMENDMENT) FOR THE
PERIOD JANUARY 1, 1997 THROUGH JUNE 30, 1997 IS $309,996. THIS PRICE IS
PRORATED FOR EACH OF THE SIX MONTHS IN THE AMOUNT OF $51,666
PER MONTH.
IF EXERCISED AT THE COUNTY'S OPTION, THE COUNTY MAY CONTRACT FOR
MONTH-TO-MONTH ADMINISTRATION OF THE AB75 AND SB12/612 RELATED PROGRAMS
AFTER JUNE 30, 1997 AT THE FIRM FIXED PRICE OF $51,666 PER MONTH.
IF EXERCISED AT THE COUNTY'S OPTION, THE FIRM PRICE FOR THE WORK SPECIFIED
IN "STATEMENT OF WORK FOR AB75 AND SB12/612 RELATED PROGRAMS" (ATTACHED TO
THE FIRST AMENDMENT) FOR THE LAST THREE MONTHS OF SERVICE IS $154,998.
THIS PRICE IS PRORATED FOR EACH OF THE THREE MONTHS IN THE AMOUNT OF
$51,666 PER MONTH.
The firm fixed price for all specified services in Section 2, as amended,
for the three month period, July 1, 1990 to September 30, 1990 is $723,821
plus $155,000 for a total of $878,821. This amount is to be prorated for
each of the three months from July 1, 1990 to September 30, 1990 in the
amount of $241,274 plus $51,666 for a total of $292,940. These amounts are
distinct and separate from any amounts invoiced by the Contractor related
to the Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network claims packaging and billing
services") or the [Computer System] Personal Property Lease and Option to
Buy.
<PAGE>
The firm fixed price for all specified services in Section 2, as amended,
for the nine month period, October 1, 1990 to June 30, 1991 is $2,171,465
plus $465,000 for a total of $2,636,465. This amount is to be prorated for
each of the nine months from October 1, 1990 through June 30, 1991 in the
amount of $241,274 plus $51,666 for a total of $292,940; except in the
event the CMS Program is terminated prior to the end of FY 1990-91, where
upon 10 days written notification, the firm fixed price will be prorated
on a daily rate in the amount of $7906 plus $51,666 per month through
June 30, 1991. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), or the [Computer System]
Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as amended,
for the two month period, July 1, 1991 to August 31, 1991 is $482,548 plus
$103,333 for a total of $585,881. This amount is to be prorated for each
of the two months from July 1, 1991 through August 31, 1991 in the amount
of $241,274 plus $51,666 for a total of $292,940.
The firm fixed price for all specified services in Section 2, as amended,
for the ten month period, September 1, 1991 to June 30, 1992 is $2,412,739
plus $516,667 for a total of $2,929,406. This amount is to be prorated for
each of the ten months from September 1, 1991 through June 30, 1992 in the
amount of $241,274 plus $51,666 for a total of $292,940. In the event the
CMS Program is terminated prior to the end of FY 1991-92, upon 10 days
written notification, the firm fixed price of $292,940 per month will be
prorated for an additional three months pending further negotiations.
These amounts are distinct and separate from any amounts invoiced by the
Contractor related to the Second Amendment ("Computer Software Use and
Services"), the Fifth Amendment ("Perinatal Provider Network Claims
Packaging and Billing Services"), or the [Computer System] Personal
Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as amended,
for the two month period, July 1, 1991 to August 31, 1991 is $482,548 plus
$103,333 for a total of $585,881. This amount is to be prorated for each
of the two months from July 1, 1991 through August 31, 1991 in the amount
of $241,274 plus $51,666 for a total of $292,940. The firm fixed price for
all specified services in Section 2, as amended, for the ten month period,
September 1, 1991 to June 30, 1992 is $2,412,739 plus $516,667 for a total
of $2,929,406. This amount is to be prorated for each of the ten months
from September 1, 1991 through June 30, 1992 in the amount of $241,274
plus $51,666 for a total of $292,940. In the event the CMS Program is
terminated prior to the end of FY 1991-92, upon 10 days written
notification, the firm fixed price of $292,940 per month will be prorated
for an additional three months pending further negotiations. These amounts
are distinct and separate from any amounts invoiced by the Contractor
related to the Second Amendment ("Computer Software Use and Services"),
the Fifth Amendment ("Perinatal Provider Network Claims Packaging and
Billing Services"), or the [Computer System] Personal Property Lease and
Option to Buy.
<PAGE>
The firm fixed price for all specified services in Section 2, as amended,
for the period July 1, 1992 through June 30, 1993 is $2,895,287 plus
$620,000 for a total of $3,515,287. This amount is to be prorated for each
of the twelve months in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services, or the [Computer System] Personal Property Lease and
Option to Buy.
The firm fixed price for all specified services in Section 2, as amended,
for the period July 1, 1993 through June 30, 1994 is $2,895,287 plus
$620,000 for a total of $3,515,287. This amount is to be prorated for each
of the twelve months in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services", Section 13 "CARE ACT/CMS Supplemental Pool Services",
or the [Computer System] Personal Property lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as amended,
for the period July 1, 1994 through June 30, 1995 is $2,895,287 plus
$620,000 for a total of $3,515,287. This amount is to be prorated for each
of the twelve months in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services", Section 13 "CARE ACT/CMS Supplemental Pool Services",
or the [Computer System] Personal Property lease and Option to Buy.
<PAGE>
The firm fixed price for all specified services in Section 2, as amended,
for the period July 1, 1995 through June 30, 1996 is $2,895,287 plus
$620,000 for a total of $3,515,287. This amount is to be prorated for each
of the twelve months in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services", Section 13 "CARE ACT/CMS Supplemental Pool Services",
or the [Computer System] Personal Property lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as amended,
for the period July 1, 1996 through December 31, 1996 is $1,447,644 plus
$309,996 for a total of $1,757,640. This amount is to be prorated for each
of the six months in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services", Section 13 "CARE ACT/CMS Supplemental Pool Services",
or the [Computer System] Personal Property lease and Option to Buy.
THE FIRM FIXED PRICE FOR ALL SPECIFIED SERVICES IN SECTION 2, AS AMENDED,
FOR THE PERIOD JANUARY 1, 1997 THROUGH JUNE 30, 1997 IS $1,214,814 PLUS
$309,996 FOR A TOTAL OF $1,524,810. THIS AMOUNT IS TO BE PRORATED FOR EACH
OF THE SIX MONTHS IN THE AMOUNT OF $202,469 PLUS $51,666 FOR A TOTAL OF
$254,135 PER MONTH. IF EXERCISED A THE COUNTY'S OPTION, THE FIRM FIXED
PRICE FOR MONTH-TO-MONTH ADMINISTRATION OF THE CMS PROGRAM AND THE AB75
AND SB12/612 AND RELATED PROGRAMS IS $194,283 PLUS $51,666 FOR A TOTAL OF
$245,949 PER MONTH. IF EXERCISED AT THE COUNTY'S OPTION, THE FIRM FIXED
PRICE FOR THE LAST THREE MONTHS OF SERVICE IS $524,709 PLUS $154,998 FOR A
TOTAL OF $679,707. THIS AMOUNT IS TO BE PRORATED FOR EACH OF THREE MONTHS
IN THE AMOUNT OF $174,903 PLUS $51,666 FOR A TOTAL OF $226,569 PER MONTH.
THESE AMOUNTS ARE DISTINCT AND SEPARATE FROM ANY AMOUNTS INVOICED BY THE
CONTRACTOR RELATED TO THE SECOND AMENDMENT ("COMPUTER SOFTWARE USE AND
SERVICES"), THE FIFTH AMENDMENT ("PERINATAL PROVIDER NETWORK CLAIMS
PACKAGING AND BILLING SERVICES"), SECTION 12 "MEDI-CAL RECOVERY SERVICES",
SECTION 13 "CARE ACT/CMS SUPPLEMENTAL POOL SERVICES", OR THE [COMPUTER
SYSTEM] PERSONAL PROPERTY LEASE AND OPTION TO BUY. EFFECTIVE
JANUARY 1, 1997, THE PERINATAL CARE NETWORK SERVICES CONTAINED WITHIN THIS
CONTRACT WERE TERMINATED.
<PAGE>
The price is subject to redetermination any time the number of full time
employees increases or decreases by three or more for any given month.
Prior approval of the COUNTY is required for changes that will result in a
redetermination of price. MONTHLY STAFFING LEVELS ARE CONTAINED IN THE
MANAGED CARE SOLUTIONS PROPOSAL DATED JANUARY 28, 1997. The above
redetermination does not apply to the claims processing requirement as
MEDICUS warrants to take whatever action necessary to insure claims are
paid in a timely manner during the first year of this Agreement at no
additional cost to the COUNTY.
Delete the 95 percent payment of services in Item 29. The COUNTY shall
reimburse the Contractor 100 percent of the monthly invoice providing the
service is satisfactory to the COUNTY and in no event reimburse less than
95 percent.
Amounts invoiced but not reimbursed shall be reimbursed within 90 days or
the COUNTY must provide within the 90 days a detailed reason why the funds
are being held and when payment can be expected. In no event shall funds
be withheld more than 180 days, except for those subject Section B, Item
19. All other terms of Section B, Item 29, page B-7 of RFP 90231 remain in
effect.
2. SECTION 10 COMPUTER SOFTWARE USE AND SERVICES, 10.2 and 10.3 are amended
as to payment and to term, respectively, as follows:
10.2 PAYMENT
-------
The maximum costs to be expended by Contractor for the software and
related services is $453,586 for the period May 25, 1990 through
June 30, 1991 (as detailed in Exhibit A); and $72,000 for the period
July 1, 1991 through June 30, 1992 (as detailed in Exhibit "A-1"); and
$100,000 for July 1, 1992 through June 30, 1993 (as detailed in Exhibit
"A-2"); and $100,000 for July 1, 1993 through June 30, 1994 (as detailed
in Exhibit "A-3"); and $133,250 for July 1, 1994 through June 30, 1995 (as
detailed in Exhibit "A-4"); $135,000 for July 1, 1995 through
June 30, 1996 (as detailed in Exhibit "A-5"); and $64,000 for July 1, 1996
through December 31, 1996 (as detailed in Exhibit "A-6"); AND $54,000 FOR
JANUARY 1, 1997 THROUGH JUNE 30, 1997 (AS DETAILED IN EXHIBIT "A-6"); AND,
IF EXERCISED AT THE COUNTY'S OPTION, AFTER JUNE 30, 1997 A MONTH-TO-MONTH
COST APPROVED BY THE COUNTY AVERAGING $9,000 PER MONTH. COUNTY agrees to
pay Contractor, without deduction, reservation or offset, within 30 days
of receipt of an invoice from the Contractor. All such Contractor invoices
shall include receipts and documentation of receipt and acceptance of
components of the application software and other related expenses. The
payments shall be paid to Contractor at the address of Contractor set
forth herein or to such other place as Contractor may from time to time
designate in writing.
<PAGE>
10.3 TERM
----
The term of Section 10 shall continue until JUNE 30, 1997 WITH THE OPTION
FOR MONTH-TO-MONTH EXTENSIONS AFTER JUNE 30, 1997, AS WELL AS A THREE
MONTH OPTION PERIOD FOR FINAL RECONCILIATION AND FINAL CLOSE OUT OF THE
PROGRAM.
3. SECTION 12 MEDI-CAL RECOVERY SERVICES, 12.2., is amended as to payment as
follows:
12.2 CONTRACT TYPE AND PAYMENT
-------------------------
The fee payable to the Contractor with respect to Medi-Cal payments
received by COUNTY as a result of Contractor's scope of work delineated in
Section 12.1, "MEDI-CAL RECOVERY SERVICES", for all but inpatient hospital
services, shall be a percentage of the recoveries according to the
following schedule:
For health care services rendered during Fiscal Year 1991/92
(July 1, 1991 to June 30, 1992), 25% of recoveries.
For health care services rendered during Fiscal Year 1992/93
(July 1, 1992 to June 30, 1993), 15% of recoveries, with a
guaranteed first dollar from these recoveries up to $149,600 to
cover staff and system start-up costs for FY 92-93. This amount
will be part of the 15% and will be payable during FY 1993-94;
however, if recoveries are less than $149,600, COUNTY will not be
responsible for supplementing this amount and Contractor will
recover only up to actual dollars recovered. For health care
services rendered during FY 92-93, 25% of recoveries, for recoveries
received during FY 94-95, FY 95-96 and FY 96-97.
For health care services rendered during Fiscal Year 1993-94
(July 1, 1993 to June 30, 1994), 15% of recoveries received during
FY 93-94; and 75% of the first $100,000 recovered and 25% of
remaining recoveries, for recoveries received during FY 94-95;
25% of recoveries received during FY 95-96, and FY 96-97.
For health care services rendered during Fiscal Year 94-95
(July 1, 1994 to June 30, 1995), 25% of recoveries received during
FY 94-95, FY 95-96, and FY 96-97.
<PAGE>
For health care services rendered during Fiscal Year 95-96
(July 1, 1995 to June 30, 1996), 25% of recoveries received during
FY 95-96 and FY 96-97.
FOR HEALTH CARE SERVICES RENDERED DURING FISCAL YEAR 96-97
(JULY 1, 1996 TO JUNE 30, 1997), 25% OF RECOVERIES RECEIVED DURING
FY 96-97 OR AFTER FY 96-97.
Payment of Contractor's fees shall be made to Contractor directly from the
Medi-Cal recovery account. On a monthly basis, Contractor shall submit an
invoice to the Department of Health Services, providing documentation of
funds recovered during the period and Contractor's fee amount for the
period. Upon approval of the invoice by the Contract Administrator,
Contractor will transfer amount from the Medi-Cal recovery account.
In the event the Contractor bills Medi-Cal for inpatient services, and the
recovery is provided directly to a hospital, the Contractor and
hospital(s), with COUNTY concurrence, will determine the applicable fee.
4. SECTION 13 CARE ACT/CMS SUPPLEMENTAL POOL SERVICES, 13.2 and 13.3 is
amended as to payment and term; and is hereby amended to read as follows:
13.2 CONTRACT TYPE AND PAYMENTS
--------------------------
Costs for services provided under Section 13 shall be reimbursed at a firm
fixed price prorated for monthly payments. The firm fixed price for the
period July 1, 1992 through June 30, 1993 is $45,323; for the period
July 1, 1993 through June 30, 1994, the firm fixed price is $57,356; for
the period July 1, 1994 through June 30, 1995, the firm fixed price is
$81,676; for the period July 1, 1995 through March 31, 1996, the firm
fixed price is $72,219; for the period April 1, 1996 through
December 31, 1996, the firm fixed price is $72,219; FOR THE PERIOD
JANUARY 1, 1997 THROUGH MARCH 31, 1997, THE FIRM FIXED PRICE IS $45,614;
AND FOR THE PERIOD APRIL 1, 1997 THROUGH JUNE 30, 1997, THE FIRM FIXED
PRICE IS $32,733. This price is to be prorated at one-twelfth of the total
for each of the twelve months from July 1, 1992 to June 30, 1993 in the
amount of $3,776.92 per month; prorated for each of the twelve months from
July 1, 1993 through June 30, 1994 in the amount of $4,779.67 per month;
prorated for each of the twelve months from July 1, 1994 through
June 30, 1995 in the amount of $6,806 per month; prorated for each of the
nine months from July 1, 1995 through March 31, 1996 in the amount of
$8,024 per month; and prorated for each of the nine months from
April 1, 1996 through December 31, 1996 in the amount of $8,024 per
month; UPON EXECUTION OF THIS AMENDMENT, CONTRACTOR WILL BE PAID A
LUMP SUM OF $8,024; THEREAFTER PRORATED FOR EACH OF THE THREE MONTHS FROM
JANUARY 1, 1997 THROUGH MARCH 31, 1997 IN THE AMOUNT OF $12,530 PER MONTH;
AND PRORATED FOR EACH OF THE THREE MONTHS FROM APRIL 1, 1997 THROUGH
JUNE 30, 1997 IN THE AMOUNT OF $10,911 PER MONTH.
<PAGE>
13.3 TERM
----
The term of Section 13 shall continue through JUNE 30, 1997.
5. The changes specified above constitute the only amendments to the
Agreement dated May 30, 1989, as amended by the First Amendment dated
April 9, 1990, the Second Amendment dated May 30, 1990, the Third
Amendment dated July 12, 1990, the Fourth Amendment dated
September 17, 1990, the Fifth Amendment dated October 31, 1990, the Sixth
Amendment dated March 19, 1991, the Seventh Amendment dated
June 26, 1991, the Eighth Amendment dated August 30, 1991, the Ninth
Amendment dated June 22, 1992, the Tenth Amendment dated
October 6, 1992, the Eleventh Amendment dated April 7, 1993, the
Twelfth Amendment dated July 7, 1993, the Thirteenth Amendment dated
July 5, 1994, the Fourteenth Amendment dated July 31, 1995, AND THE
FIFTEENTH AMENDMENT DATED APRIL 16, 1996. All other terms and conditions
of the Agreement, as previously amended remain unchanged and in full force
and effect.
<PAGE>
Exhibit 10.3
FIRST AMENDMENT TO THE
MANAGED CARE SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Managed Care Solutions, Inc. Employee Stock Purchase Plan (the
"Plan"), as approved by Managed Care Solutions, Inc. (the "Corporation"),
effective June 1, 1996, is hereby amended by action of the Board of Directors
(the "Board") of the Corporation, pursuant to the authority of Section 17 of the
Plan, as follows:
1. Section 2(a) is amended to read as follows:
"(a) employees who are not employed as of the first day (June 1st or
December 1st) of an offering period;"
In addition, the first sentence of the second paragraph of Section 2 is
amended by substituting the phrase "offering period" for the phrase "Plan Year"
and by deleting the phrase "within one year of the termination date."
2. The following new paragraphs are added to the end of Section 3:
"Effective December 1, 1997, there shall be two six-month offerings in lieu
of a single offering in each Plan Year. The first six month offering
(the "transitional offering") shall commence on December 1, 1997, and terminate
on May 31, 1998. The term of the transitional offering shall coincide with the
last six months of the offering which commenced on June 1, 1997 (the "original
1997 offering"), which shall not be affected by the transitional offering. If
the total number of shares with respect to which options are exercised under
both offerings would otherwise exceed the maximum number of shares offered
under the Plan, then options under the original 1997 offering shall be exercised
first.
Each employee who is eligible to participate in the transitional offering
and who has elected to participate in the original 1997 offering may revoke his
election to participate in the original 1997 offering in whole or in part (but
shall not be required to do so in order to participate in the transitional
offering), and, notwithstanding Section 6, such revocation shall not be deemed a
withdrawal of funds; provided, however, that the percentage withheld from the
employee's Base Compensation that is applied to the original 1997 offering and
the transitional offering, if applicable, shall each be a whole percentage, and
the sum of such percentages shall not exceed 10%; and provided further that the
maximum dollar amount withheld from an employee's Base Compensation and applied
to the transitional offering shall not exceed $25,000 minus the amount withheld
from the employee's Base Compensation and applied to the original 1997 offering.
<PAGE>
Commencing June 1, 1998, there shall be two separate six month offerings
in each Plan Year, the first (the "June offering") commencing on June 1 and
terminating on November 30, and the second (the "December offering") commencing
on December 1 and terminating on May 31. The number of shares offered in the
June offering shall be 100,000, and the number offered in the December offering
shall be 100,000 reduced by the number actually sold in the June offering. Each
eligible employee may make a separate election to participate in the June and
December offerings, provided that the maximum dollar amount of Base Compensation
withheld during the period of the December offering shall be reduced by the
purchase price of stock actually purchased by the employee pursuant to the
June offering."
3. The second sentence of Section 4 is amended by substituting the phrase
"first day of the offering period (June 1st or December 1st)" for the phrase
"first day of the Plan Year (June 1st)."
4. Section 7 is amended by substituting the phrase "offering period" for
the phrase "Plan Year" throughout, and by deleting the parenthetical phrase
"(and/or the first day of each Plan Year thereafter during the offering
period)."
5. The first sentence of Section 9 is amended to read as follows: "The
purchase price for each share purchased will be the lesser of 85% of the fair
market value (as defined in Section 11) on the first day of the offering period
(or the nearest prior business day) or 85% of the fair market value at the time
the option is exercised (the last day of the offering period, or the nearest
prior business day) (such price hereinafter referred to as the "Subscription
Price"), when there are sufficient funds in the employee's account to purchase
one or more full shares."
<PAGE>
6. Section 13 is amended by substituting the phrase "the beneficiary
designated by the employee" for the phrase "the employee's estate"; and further
amended by the addition of the following sentences to the end of said Section:
"Each employee shall have the right to designate one or more beneficiaries,
including primary and contingent beneficiaries, to receive his benefits under
the plan in the event of his death, and to change his designated beneficiary
from time to time without consent of prior beneficiaries; provided, however,
that all designations and changes of beneficiaries shall be in writing, in the
form specified by the Committee, and shall have no effect until actually
received by the Corporation in proper form. If an employee has no designated
beneficiary, or if all of his designated beneficiaries predecease him, his
designated beneficiary shall be his estate."
7. This amendment shall not require the approval of the Corporation's
stockholders, and shall be effective on the date on which it is approved by the
Board of Directors. Except as otherwise amended herein, the Plan shall remain in
full force and effect, except that the Committee is authorized to make any
additional changes to the Plan of an administrative or ministerial nature which
may be appropriate to implement the change to six-month offering periods.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
executed this 25th day of July, 1997.
MANAGED CARE SOLUTIONS, INC.
By: /s/Michael J. Kennedy
-----------------------
Its: Chief Financial Officer
<PAGE>
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<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<EXCHANGE-RATE> 1
<CASH> 7,293,000
<SECURITIES> 1,502,000
<RECEIVABLES> 5,325,000
<ALLOWANCES> 552,000
<INVENTORY> 0
<CURRENT-ASSETS> 16,004,000
<PP&E> 6,046,000
<DEPRECIATION> 1,979,000
<TOTAL-ASSETS> 28,494,000
<CURRENT-LIABILITIES> 12,893,000
<BONDS> 0
0
7,000
<COMMON> 44,000
<OTHER-SE> 11,607,000
<TOTAL-LIABILITY-AND-EQUITY> 28,494,000
<SALES> 14,742,000
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<CGS> 0
<TOTAL-COSTS> 14,537,000
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<INTEREST-EXPENSE> 91,000
<INCOME-PRETAX> 305,000
<INCOME-TAX> 117,000
<INCOME-CONTINUING> 188,000
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