ADMINISTRATIVE SERVICES AGREEMENT

 

                                                                   EXHIBIT 10.16

                        ADMINISTRATIVE SERVICES AGREEMENT
                              BETWEEN ALOHACARE AND
                          MANAGED CARE SOLUTIONS, INC.

                  This Administrative Services Agreement is made and entered
to be effective as of the 1st day of January, 1994 by and between ALOHACARE, a
Hawaii not-for-profit corporation and MANAGED CARE SOLUTIONS, INC., an Arizona
business corporation duly authorized to conduct business as a foreign
corporation in Hawaii ("MCS") .

                               W I T N E S S E T H

                  WHEREAS, AlohaCare was formed by certain community health
centers and other Hawaii-based health care providers for the purpose of
operating as a qualified health plan under the State of Hawaii Health QUEST
Program;

                  WHEREAS, AlohaCare desires to submit a proposal to provide
medical, limited dental and behavioral health services under the QUEST Project;
and

                  WHEREAS, AlohaCare desires to engage MCS to prepare its
proposal to participate as a qualified health plan under the QUEST Project and
to provide administrative services in connection with the operation of the
AlohaCare Program in the event Alohacare is awarded a contract under the QUEST
Project.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:

         I.       DEFINITIONS

                  A.       AlohaCare Program. "AlohaCare Program" shall mean

all administrative and medical care delivery components and systems available
through AlohaCare as necessary for AlohaCare to provide or arrange for the
provision of the required medical, dental and behavioral health services to
QUEST Project eligible persons who receive coverage through AlohaCare.

                  B.       QUEST Project. "QUEST Project" shall mean the State
of Hawaii Demonstration Project for the provision of medical, dental and
behavioral health services through a managed care delivery system to individuals
covered by the State's Medicaid Aid to Families with Dependent Children
(AFDC-related) programs, General Assistance program and State Health Insurance
Program.

                  C.       Covered Services. "Covered Services" shall mean those
medical, dental and behavioral health services to which Members are entitled
under the QUEST Program as detailed in the Request for Proposal and in any
contract between DHS and AlohaCare.

                  D.       Department of Human Services ("DHS"). "DHS" shall
mean the State of Hawaii Department of Human Services which is responsible for
the administration of the QUEST Project.

                           E.       Implementation Date. "Implementation Date"
shall mean the date the AlohaCare Program becomes operational and Alohacare
is obligated to commence the provision of covered Services to Members.

                           F.       "Participating Providers". "Participating
Providers" shall mean duly licensed physicians, other health professionals,
facilities, and healthcare providers which have entered into a contract with
AlohaCare for the provision of Covered

Services to Members.

                           G.       Request For Proposal ("RFP") . "RFP" or
"Request For Proposal" shall refer to the Hawaii Health QUEST Request For
Proposal for QUEST Health Plan and any amendments thereto, a copy of which is
annexed hereto and made a part hereof as Exhibit "A".

                           H.       Recipients or Members. "Recipients" or
"Members" shall refer to those individuals who are eligible for coverage under
the QUEST Project and who have enrolled in the AlohaCare Program.

         II.      MCS RESPONSIBILITIES

                  A.       Preparation of Proposal.

                           1.       Generally. The parties acknowledge MCS has
prepared AlohaCare's proposal to participate as a qualified health plan under
the QUEST Project, and has submitted the same to DHS on February 4, 1994. MCS
represents that the proposal meets all material proposal requirements set forth
in the RFP and any other applicable DHS rules and regulations. MCS shall, on
behalf of AlohaCare, respond in a timely manner to any and all DHS requests for
additional information or clarification of proposal terms, subject to
AlohaCare's written approval of any such response.

                           2.       Negotiations With DHS. MCS shall provide all
necessary assistance and support to AlohaCare in its negotiations with DHS 
concerning the QUEST Project.

                  B.       Pre-Operational Duties. In the event AlohaCare is
awarded a contract by DHS to participate in the QUEST Project, MCS shall perform
all necessary pre-operational services so that

AlohaCare may commence operation as a qualified health plan on or before August
1, 1994. MCS shall deliver to AlohaCare on or before July 1, 1994 a detailed
written status report setting forth in detail the organizational and
administrative systems and provider contractual relationships in place for
AlohaCare to meet its obligations under the QUEST Project and to contain
healthcare costs, and the remaining tasks to be completed before the QUEST
Implementation Date and thereafter. MCS shall ensure that all tasks are
completed before the Implementation Date which are necessary so that the
AlohaCare will operate in material conformance with the requirements of the RFP,
DHS rules and regulations, any contract between AlohaCare and DHS, and this
Agreement. Pre-operational services shall include, but not be limited to:

                           1.       Office site and equipment selection;

                           2.       Installation of computer hardware, software
                                    and related equipment;

                           3.       Staff selection and training;

                           4.       Development of plan policy and procedures;

                           5.       Development of adequate provider network
                                    including but not limited to:

                                    a.       Negotiations.

                                    b.       Credentialing.

                                    c.       Contracting.

                           6.       Education of providers and their staff
                                    regarding QUEST and AlohaCare programs.

                           7.       Establishment of utilization and quality
                                    assurance programs.

                           8.       Acting as a liaison with DHS including
                                    negotiation of any and all contracts.

                           9.       Preparation of member handbooks,
                                    identification cards and other required
                                    items.

                           10.      Preparation of provider handbooks and other
                                    required items.

                  C.       Administrative Services. MCS shall provide all
administrative services that are necessary to the operation of the AlohaCare
Program or which are required by the RFP, any contract between DHS and AlohaCare
and as fully set forth herein. MCS's responsibilities shall specifically
include, but not be limited to, the following:

                           1.       General Management Duties. MCS shall be
responsible for the day-to-day management of the AlohaCare Program. MCS shall
take any and all actions which are necessary or proper for the administration
and management of the AlohaCare Program, so long as such actions are consistent
with, and not in conflict with, the provisions of this Agreement, the RFP, any
contract between DHS and AlohaCare or the express direction of the AlohaCare
President or Board of Directors. MCS shall act as a liaison between DHS and
AlohaCare. MCS shall employ such individuals as are necessary to carry out its
duties under this Agreement, including at least the following:

                                    a.       Executive Director;

                                    b.       Medical Director.

                  The Executive Director, the Medical Director and such other
individuals whose job responsibilities so require, shall at all times dedicate
their full time on-site in Hawaii during the Pre-Operational Phase and through
the term of this Agreement. It is understood that MCS intends to employ certain
other individuals in the administration of the AlohaCare Program at sites which
are not in the State of Hawaii.

                  The selection of persons to fill the positions of the
Executive Director and Medical Director must be approved by the AlohaCare Board
of Directors, which approval will be granted or denied within a reasonable
time. MCS shall promptly replace any person who is employed in the management
and administration of the AlohaCare Program upon request of the AlohaCare Board
of Directors for good cause as determined by the AlohaCare Board of Directors in
its reasonable discretion.

                           2.       Contracting With Providers. MCS shall be
responsible for recruiting, negotiating and contracting on behalf of AlohaCare
with such providers of medical, dental and behavioral health services as
necessary to provide all Covered Services to members as required by the RFP and
any contracts between DHS and AlohaCare. Provider contracts shall be between
AlohaCare and the providers and all such contracts must be executed by an
AlohaCare officer. While it is understood that there is no absolute guarantee
that MCS will be able to contract on behalf of AlohaCare

with all such providers, MCS shall make every possible effort to recruit and
contract with such necessary providers and shall dedicate sufficient Resources
so as to ensure that all possible efforts to contract with such providers have
been undertaken. Subject to the foregoing, MCS shall be responsible for ensuring
that Covered Person have access to a sufficient number of Participating Provides
in appropriate locations in accordance with DHS standards and reasonable
standards established by AlohaCare. At a minimum, MCS shall contract with a
sufficient number of licensed providers to ensure appropriate access of Members
to the following types of Covered Services:

                           a.       Inpatient hospital services;

                           b.       Outpatient hospital services;

                           c.       Twenty-four (24) hour, seven days per week
                                    emergency services;

                           d.       Urgent care services;

                           e.       Ambulance services;

                           f.       Primary care physician services;

                           g.       Physician specialty services;

                           h.       Pharmacy Services;

                           i.       Laboratory services;

                           j.       Radiology services;

                           k.       Physical occupational, audiology and speech
                                    and language therapy services;

                           l.       Limited dental services;

                           m.       Behavioral health services (e.g.

                                    psychiatrists, psychologists, social
                                    workers, counselors and nurses trained in
                                    psychiatry);

                           n.       Ancillary services (e.g. optometrists,
                                    podiatrists, nurse practitioners and nurse
                                    mid-wives);

                           o.       Home health services;

                           p.       Durable medical equipment and medical
                                    supplies; and

                           q.       Transportation services.

                  All contracts with Participating Providers shall be in a form
and contain such provisions as are acceptable to AlohaCare and AlohaCare's legal
counsel and shall set forth the method and amount of reimbursement to
Participating Providers, and shall specify that the providers shall be subject
to all requirements contained in the RFP, any contract between DHS and AlohaCare
and all applicable provisions of this Agreement. It is intended that the
corporate members of AlohaCare whose service areas are within AlohaCare's QUEST
Service Area shall be Participating Providers in the AlohaCare Program, subject
to meeting AlohaCare's credentialing standards.

                  3.       Claims processing and Payment. MCS shall pay claims
to providers for all Covered Services rendered to Members in accordance with
contracts entered into between Participating Providers and AlohaCare, and in
accordance with the RFP, any contract between DHS and AlohaCare and this
Agreement. The amount

of reimbursement to providers shall take into account any co-payment, deductible
or co-insurance amounts which Members are required to pay by DHS under the QUEST
Project. Unless otherwise directed by AlohaCare, MCS and the Medical Director
shall have the authority and discretion to interpret the requirements of the
RFP, the contract between DHS and AlohaCare and provider contracts with respect
to payment of claims to providers. Claims payments shall be made by checks or
drafts signed by MCS as AlohaCare's dispersing agent out of the account
established in accordance with Section II.C.5. hereof.

                  4.       Internal Controls. MCS will maintain and implement
internal controls to ensure the integrity of all receipts and disbursements made
by MCS pursuant to this Agreement. This will include, but not be limited to,
internal control procedures to ensure compliance with the following standards:

                           a.       QUEST benefits are disbursed only for
                                    eligible Members.

                           b.       Amounts are paid for procedures covered by
                                    the QUEST Project in appropriate amounts and
                                    supported by appropriate documentation.

                           c.       Amounts are paid only for services rendered
                                    to Members by qualified healthcare
                                    professionals.

                           d.       There are no duplicate payments.

                           e.       Coordination of benefits, including

                                    subrogation, if necessary, with other
                                    payors, whether public or private, is
                                    performed effectively and in accordance with
                                    QUEST Project requirements.

                           f.       Claims are paid consistent with applicable
                                    pre-certification, authorization or
                                    concurrent review requirements.

                           g.       Claims are processed pursuant to appropriate
                                    procedure and/or diagnosis codes, with
                                    system protections to detect upcoding or
                                    unbundling of procedures.

Upon request, MCS will provide AlohaCare or AlohaCare's designee with a written
description of all such internal control procedures including internal review
routines.

                  5.       Bank Account. MCS shall establish and maintain a bank
account in the name of AlohaCare with ("the Bank") for the purpose of depositing
all receipts from any source therein, including capitation payments and
reinsurance payments from DHS, and for paying all expenses of the AlohaCare
Program, including payment of provider claims. The following procedures will be
used to handle the account:

                           a.       On a scheduled basis, checks and applicable
                                    explanations of benefits will be produced by
                                    MCS from the claims approved.

                           b.       Funding of the account will take place on a
                                    daily basis by depositing all receipts from
                                    any source therein, including capitation and
                                    reinsurance payments from DHS.

                           c.       Copies of the monthly account
                                    reconciliation, check register and listing
                                    of payments broken out by category will be
                                    forwarded to the President of AlohaCare
                                    monthly.

                  6.       Plan Benefits Litigation. If a demand is asserted or
litigation proceedings or arbitration is commenced ("Plan Benefits Litigation")
by a Member or healthcare provider to recover QUEST benefits against MCS,
AlohaCare or both parties, the following shall apply:

                           a.       If either MCS or AlohaCare becomes aware of
                                    the asserted Plan Benefits Litigation, it
                                    shall promptly notify the other party.
                                    AlohaCare shall, with MCS' advice and input,
                                    determine whether to pay the disputed claims
                                    or proceed with Plans Benefit Litigation.

                           b.       In the event AlohaCare determines to proceed
                                    with Plan Benefits Litigation, AlohaCare
                                    shall retain counsel and direct the response
                                    to the Plan Benefits

                                    Litigation. AlohaCare shall be responsible
                                    for assuming the cost attributable to Plan
                                    Benefits litigation, except where MCS elects
                                    or is required due to a conflict of interest
                                    to retain separate counsel, and subject to
                                    MCS meeting the standard of performance set
                                    forth in Section V.A.

                  7.       Coordination of Benefits, Third Party Liabilities.
MCS shall be responsible for coordination of benefits and third-party recoveries
as required under the provisions of the RFP and under any contract between DHS
and AlohaCare. MCS shall, specifically, be responsible for the following:

                           a.       Recovering medical expenses incurred by
                                    Members from all third-party liability
                                    resources on behalf of AlohaCare and
                                    depositing such amounts recovered in the
                                    bank account described in paragraph I. C. 5
                                    above;

                           b.       Establishing and maintaining a file of
                                    Members third-party liability information;

                           c.       Receiving third-party liability information
                                    from DHS and updating the Members' files on
                                    a timely basis;

                           d.       Informing DHS of third-party liability

                                    information discovered during the course of
                                    business operations;

                           e.       Providing DHS with monthly reports of the
                                    total amounts recovered from third-parties
                                    and providing DHS upon demand, medical
                                    expense and third-party liability recoveries
                                    by Members;

                           f.       Submitting fee-for-service claims for
                                    Members with "free no-fault" motor vehicle
                                    insurance coverage; and

                           g.       Developing procedures for determining when
                                    to pursue third-party liability recovery,
                                    which procedures shall be subject to the
                                    approval of AlohaCare.

                  8.       Case Management. MCS shall be responsible for
performing case management services in accordance with the RFP and in accordance
with all contracts between DHS and AlohaCare. MCS shall ensure that each Member
has chosen or is assigned a primary care provider who shall assess the Member's
health care needs and shall provide services to meet those needs either directly
or through referrals to other providers participating in the AlohaCare Program.
MCS shall implement a system for the direction, coordination, monitoring and
tracking of the Covered Services rendered to each member. The case management
system shall include, but not be limited to, the following:

                           a.       Ensuring that all medically necessary

                                    services are accessible and can be provided
                                    on a timely basis so that continuity of care
                                    is achieved;

                           b.       Providing Members with clear and adequate
                                    information on how to obtain services;

                           C.       Ensuring that Members receive adequate
                                    information to allow them to make medically
                                    informed decisions about their health needs;

                           d.       Assisting Members to obtain the services
                                    prescribed by their primary care providers
                                    and assuring that the services are received
                                    and provided in a timely manner; and

                           e.       Assisting Members with understanding and
                                    following the medical care prescribed for
                                    them.

                  9.       Facilitation of Services. MCS shall take the
following actions with respect to the AlohaCare Program to facilitate the
provision of Covered Services by Participating Providers:

                           a.       Providing AlohaCare and Participating
                                    Providers with on-line computer access to
                                    Member enrollment and eligibility
                                    information;

                           b.       To the extent on-line computer access to

                                    Member enrollment and eligibility
                                    information is not available, verifying by
                                    telephone, the eligibility of persons
                                    claiming to be Members; and

                           c.       Maintaining a telephone hotline as required
                                    by Section 41.110 of the RFP for the
                                    purpose of determining enrollment and
                                    eligibility information upon admission to
                                    an emergency facility or hospital
                                    emergency room.

                  10.      Program Coverage Information. MCS shall prepare and
forward to AlohaCare and all Participating Providers, a summary of Covered
Services which are required to be provided under the QUEST Project. Such summary
shall include schedules of Covered Services and any applicable exclusions or
limitations affecting the provision of covered services, applicable copayments,
co-insurance and deductibles, and any other information relevant to the
rendering of Covered Services by providers.

                  11.      Ouality Assurance. MCS shall be responsible for
developing and maintaining a Quality Assurance Program in compliance with the
requirements of the RFP, and with any contract between DHS and AlohaCare. At a
minimum of the Quality Assurance Program shall conform in all respects to the
requirements set forth in Section 40.520 of the RFP.

                  12.      Utilization Management. MCS shall be responsible for
developing and maintaining a Utilization Management

Program in compliance with the requirements of the RFP, and with any contract
between DHS and AlohaCare. The Utilization management Program shall determine
whether the level, type and cost of benefits provided are appropriate to the
health care needs of Members on an on-going basis.

                  13.      Credentialing. MCS shall credential and recredential
each Participating Provider rendering healthcare services to Members as
described in the AlohaCare RFP proposal. MCS shall require each Participating
Provider to comply with such procedures and guidelines prior to obtaining and
maintaining the status as a Participating Provider. MCS shall insure that, at
all times during the term of this Agreement, each Participating Provider
rendering healthcare services to Members is duly licensed in accordance with the
appropriate State Licensure Board and that failure to maintain such licensure
shall result in prompt termination by MCS of such Participating Provider.

                  14.      Information Systems. MCS shall develop and maintain
as of the Implementation Date an automated management information system as
necessary for the efficient operation of the AlohaCare Program and as required
by the RFP, any contract between DHS and AlohaCare and this Agreement.

                  15.      Reports to DHS. MCS shall be responsible for making
any and all reports to DHS which are required by the RFP, by any and all
contracts between DHS and AlohaCare and by this Agreement. Reports shall be made
at such times as are required by DHS and such reports shall be in a format
acceptable to DHS and

AlohaCare. Such reports shall include, but not be limited to the following:

                           a.       Encounter data as described in Section
                                    40.820 of the RFP;

                           b.       Reports regarding the Quality Assurance
                                    Program as required by Section 40.540 of
                                    the RFP;

                           c.       Reports regarding changes in Recipient
                                    status as required by Section 41.010 of the
                                    RFP;

                           d.       Reports regarding coordination of benefits
                                    and third-party liability as required by
                                    Section 40.730 of the RFP; and

                           e.       Reports regarding financial information as
                                    required by Section 40.900 of the RFP.

                  16.      Reports to AlohaCare. MCS shall report to the
President arid Board of Directors of AlohaCare on a regular basis and at such
times as are reasonably requested by the President or Board of Directors of
AlohaCare. MCS shall report to AlohaCare on any and all matters relating to the
administration of the AlohaCare program as requested by the President on the
Board of Directors for AlohaCare. At a minimum, the following reports shall be
provided on a monthly basis by the 20th day of the month for the preceding
month:

                           a.       Claims payments by vendor.

                           b.       Reports relating to the Bank Account as
                                    required by Section II.C.5. of this

                                    Agreement.

                           c.       All reports required to be forwarded to DHS
                                    as set forth in Section II.C.11. of this
                                    Agreement.

                           d.       Summary of utilization data and utilization
                                    management activities for the previous
                                    month.

                           e.       Summary of quality assurance data and
                                    activities for the previous month.

                           f.       AlohaCare financial statements prepared in
                                    accordance with generally accepted
                                    accounting principles.

                           g.       Enrollment data by primary care provider.

                           h.       Summary of Member and provider complaints
                                    and responsive action initiated.

                  Additionally, MCS shall submit the following reports to the
President and Board of Directors of AlohaCare on a quarterly and annual basis in
a format acceptable to AlohaCare which summarizes:

                           a.       Utilization and enrollment data by aid
                                    category and island.

                           b.       Claim lag reports.

                           c.       Specific procedure utilization reports.

                           d.       Such other reports as are reasonably
                                    requested by AlohaCare.

                  17.      Fixed Assets. MCS shall be responsible for

purchasing, at its own expense, the equipment, fixtures and supplies as are
necessary and proper to the efficient operation and administration of the
AlohaCare Program or which are required to comply with the requirements of the
RFP, any contract between DHS and AlohaCare and this Agreement. Such fixed
assets shall include any computer hardware and software information systems
necessary for the administration of the AlohaCare Program or necessary to comply
with the reporting requirements herein. A list of such assets and the budgeted
cost for the purchase of the same is set forth in Exhibit C.

                  18.      Member Services. MCS shall be responsible for
providing all Member services as are necessary to the administration of the
AlohaCare Program or as are required by the RFP, any and all contracts between
DHS and AlohaCare and this Agreement. Such Member services shall include, but
not be limited to:

                           a.       Enrollment of Recipients as required by
                                    Section 40.300 of the RFP.

                           b.       Preparation and dissemination of educational
                                    materials as required by Section 41.200 of
                                    the RFP.

                  19.      Performance Bond. In the event AlohaCare is awarded a
QUEST contract by DHS, MCS shall arrange to obtain a performance bond for
AlohaCare as required by Section 61.700 of the RFP. MCS shall assume the
financial responsibility for $200,000 of the amount of such performance bond or
other credit facility obtained in lieu of said performance bond.

                  20.      Insurance Requirements.

                           a.       AlohaCare Professional Liability Insurance.
During the term of this Agreement, AlohaCare shall maintain, at its sole cost
and expense, a policy of HMO-type professional liability insurance acceptable to
MCS with coverage limits in the minimum amount of $1,000,000 per incident and
$1,000,000 in the annual aggregate. MCS shall be named as an additional insured
on said professional liability insurance policy. In addition, AlohaCare shall
purchase a "tail policy" with the same policy limits following the effective
date of termination of the foregoing policy in the event the policy is a "claims
made" policy.

                           b.       MCS Comprehensive Insurance. MCS and
AlohaCare each shall maintain, at the sole cost and expense of each, throughout
the term of this Agreement, a policy of general liability insurance acceptable
to the other party in the minimum amount of $1,000,000 per occurrence and
$1,000,000 in the annual aggregate. Each shall name the other party as an
additional insured on said policy.

                           c.       Proof of Insurance. Each party shall furnish
the other with evidence of such insurance, including certificates of insurance
and complete copies of insurance policies, upon the other's request. Each party
shall provide the other with a minimum of 30 days prior written notice in the
event any of the insurance policies required by this Agreement are canceled,
changed or restricted in any way.

                           21.      Complaint Resolution Procedure. MCS shall
maintain a complaint resolution procedure to process Member and provider
complaints. MCS' complaint resolution procedure is described in Exhibit H.

                           22.      Member Satisfaction. MCS shall administer
periodically, but no less frequently than annually, Member satisfaction surveys
intended to measure the level of satisfaction of members perceived in receiving
Covered Services from Participating Providers. The development and
administration of such surveys shall be at the sole cost of MCS. The form of
Member satisfaction surveys shall be subject to the approval of AlohaCare. The
survey information so obtained shall be used as a method of measuring the
effectiveness of MCS.

         III.     ADMINISTRATIVE FEE

                  A.       Preparation of Proposal. AlohaCare shall pay to MCS
$15,000 for services rendered in preparation of the AlohaCare QUEST proposal, to
be paid upon DHS acceptance of the final proposal and confirmation from DHS that
said proposal is complete and complies with DHS requirements.

                  B.       Pre-Operational Phase. AlohaCare shall pay to MCS for
services rendered in the pre-operational phase in accordance with the budget set
forth in Exhibit A to this Agreement.

                  C.       Operational Phase. MCS shall be paid an
administrative fee as set forth below once the AlohaCare Program becomes
operational:

                           1.       Base Administrative Fee. If AlohaCare is
awarded a QUEST contract, it shall pay a monthly administrative fee as follows:

                           a.       If enrollment is less than 15,000 members
(all membership is measured in terms of "member months"), then AlohaCare shall
pay MCS $30,000 plus the Per Member per Month (PMPM) fee shown in Paragraph
C.1.b below.

                           b.       Once enrollment exceeds 15,000 member
months, then AlohaCare shall pay MCS only the PMPM fee listed below:

                           First 10,000 Member Months            $12.00 PMPM
                           Next 20,000 Member Months              10.50 PMPM
                           Member Months in excess of 30,000       9.00 PMPM

         Member months are calculated by dividing the total number of days in a
given month that Members were eligible by the number of days in that month.

         The current month's administrative fee will be paid before the tenth
day of the month. The administrative fee for the first month of the contract
will be estimated and adjusted in the following month to reflect actual per
member per month figures.

         MCS shall be responsible, in return for receiving the administrative
fee, to assume all costs associated with the administration of the AlohaCare
Program, except for the following expenses which shall be the responsibility of
AlohaCare:

                           a.       Covered Services.

                           b.       Legal Services of AlohaCare.

                           c.       Actuarial services of AlohaCare.

                           d.       Expenses relating to the corporate
                                    existence of AlohaCare.

                           e.       Audit and Tax services of AlohaCare.

                  2.       Shared Risk Arrangement. The parties agree to share
risk in the manner set forth on Exhibit B.

                  3.       DHS Reports. MCS shall be responsible for the full
amount of any penalty assessed by DHS for failure to submit any report or
reports required by the RFP or by any contract between DHS and AlohaCare in a
timely or accurate fashion including, but not limited to, financial information
required under Section 40.900 of the RFP, encounter data required under Section
40.820 of the RFP, reports regarding quality assurance under Section 40.500 of
the RFP, reports regarding changes in Member status required under Section
41.010 of the RFP and reports regarding coordination of benefits and third-
party liability as required under Section 40.730 of the RFP.

         IV.      TERM AND TERMINATION.

                  A.       Term. This Agreement shall be effective on the date
of its execution first set forth above and shall be effective during the period
necessary to complete and submit the AlohaCare QUEST proposal to DHS. In the
event AlohaCare is awarded a QUEST contract by DHS, this Agreement shall
continue and shall be in full force and effect through the duration of the
contract between DHS and AlohaCare, but not to exceed a period of two years from
the Implementation Date, unless this Agreement is terminated sooner as set forth
below in Section IV.B. below.

                  B.       Termination. This Agreement may be terminated upon
the following:

                     1.    Automatically in the event AlohaCare is notified by 
                           DHS that its proposal to DHS to participate as a
                           qualified health plan under the QUEST project has not
                           been accepted;

                     2.    Upon notice by AlohaCare to MCS in the event of the 
                           sale of a controlling interest in MCS or sale of
                           substantially all of MCS's assets to a party who is
                           not an MCS shareholder at the time this Agreement is
                           executed.

                     3.    Upon notice by AlohaCare, in the event any officer, 
                           director or principal shareholder of MCS is suspended
                           or excluded from participating in any federal or
                           state program in any state, or in the event MCS's
                           financial condition is such that an independent
                           auditor has concluded or would conclude, upon review,
                           that MCS is unable to continue in business as a going
                           concern.

                     4.    At any time upon the written mutual consent of both 
                           parties.

                     5.    Upon the failure of either party to correct any 
                           failure to perform under the terms of this Agreement
                           after 60 days written notice from the other party.

                     6.    In the event the contract between DHS and AlohaCare 
                           is terminated for any reason or

                           AlohaCare's participation in the QUEST Project is
                           otherwise terminated, in which case termination shall
                           be effective as of the termination date of
                           AlohaCare's participation in the QUEST Program.

                     7.    Immediately upon the filing of a bankruptcy petition 
                           by either party or upon the failure of either party
                           to obtain any license, registration or approval
                           required under state or federal law that is material
                           to the operation of the AlohaCare Program.

                C.   Obligations in Event of Termination.

                     1.    Upon termination of this Agreement, AlohaCare shall 
purchase the fixed assets acquired by MCS as described in Exhibit C at a price
equal to the book value of such assets; provided that AlohaCare shall not be
obligated to purchase fixed assets at book value in the event termination is
pursuant to Section IV B.1, B.2, B.3, B.5 (i.e., if termination is the result of
an MCS default), or B.7 above.

                     2.    In the event of termination of this Agreement for any
reason, MCS shall cooperate with the person or entity selected by AlohaCare to
assume administration of the AlohaCare Program.

                     3.    Upon request of the AlohaCare, MCS will process 
claims incurred after the Implementation Date, and prior to the effective date
of termination, for a period of six months. During

such six month period, AlohaCare shall pay MCS a claims processing fee of $1.00
per claim.

                     4.    In the event of termination of this Agreement MCS 
shall provide AlohaCare with all copies of records in MCS, possession directly
and specifically relating to the AlohaCare Program and the QUEST Project and
which are necessary for the continued operation of the AlohaCare Program, or
shall forward such records to any successor administrator as directed by
AlohaCare. Records shall be provided in electronic form, disk or tape medium,
and/or hard copy, as determined by AlohaCare. MCS shall not retain copies of any
records relating to the AlohaCare Program and the QUEST Project in any format.

           V.   MISCELLANEOUS

                A.   Standard of Performance. In carrying out its obligations 
under this Agreement, MCS shall discharge its duties with the skill, care,
prudence and diligence under the circumstances then prevailing that a prudent
healthcare benefits administrator acting in a like capacity and familiar with
such matters would have used.

                B.   Confidentiality. MCS agrees to safeguard the 
confidentiality of all data pertaining to this Agreement and Covered Services
rendered to Members. All work product, files, data, reports, contracts,
agreements, ledgers, materials and other information related to the AlohaCare
Program, including all enrollment and claims data, are the property of AlohaCare
and shall be deemed confidential and may not be disclosed by MCS without the

written consent of AlohaCAre, except in fulfillment of the requirements of this
Agreement or upon lawful order of a court or public authority which order
compels obedience under penalty of contempt or fine or impairment or loss of the
right to do business. In the event of any requested disclosure, MCS shall
immediately notify AlohaCare in writing detailing the circumstances and extent
of such requested disclosure. Work product shall mean all information, or data,
whether expressed in writing, orally, electronically or otherwise, which is
conceived, developed or acquired by either party as a result of or in connection
with the AlohaCare Program.

                C.   Relationship of the Parties. In the performance of the 
work, duties and obligations of the parties pursuant to this Agreement, the
parties shall, at all times, be acting and performing as independent
contractors. No relationship of employer and employee, or partners or joint
venturers is created by this Agreement, and neither party may therefore make any
claim against the other party for social security benefits, workers'
compensation benefits, unemployment insurance benefits, vacation pay, sick
leave or any other employee benefit of any kind. In addition, neither party
shall have any power or authority to act for or on behalf of, or to bind the
other except as herein expressly granted, and no other or greater power or
authority shall be implied by the grant or denial of power or authority
specifically mentioned herein.

                D.   Assignment/Subcontracting. Neither party shall have the 
right to assign, delegate or subcontract any of its rights or

obligations hereunder without the prior written consent of the other party.

                E.   Notices. Except as set forth herein, all notices required 
or permitted to be given hereunder, shall be in writing and shall be sent by
United States mail, certified or registered, return receipt requested, postage
prepaid, to the parties hereto at their respective addresses set forth on the
signature page hereto, or such other address as may be fixed in accordance with
the provisions hereof. Except as set forth herein, if mailed in accordance with
the provisions of this paragraph, such notice shall be deemed to be received
three (3) business days after mailing.

                F.   Headings. The headings of the various sections of this 
Agreement are inserted merely for the purpose of convenience and do not
expressly or by implication limit, define or extend the specific terms of the
section so designated.

                G.   Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, nor be
construed to be, a waiver of any subsequent breach thereof.

                H.   Applicable Law. This Agreement shall be governed in all 
respects by the laws of the State of Hawaii, without regard to Hawaii's choice
of law statutes or decision.

                I.   Invalid Provisions.  If, for any reason, any provision of 
this Agreement is or shall be hereafter determined by law, act, decision, or
regulation of a duly constituted body or authority, to be in any respect
invalid, such determination shall

not nullify any of the other terms and provisions of this Agreement and, unless
otherwise agreed to in writing by the parties, then, in order to prevent the
invalidity of such provision or provisions of this Agreement, the said provision
or provisions shall be deemed automatically amended in such respect as may be
necessary to conform this entire Agreement with such applicable law, act,
decision, rule or regulation.

                J.   No Third-Party Beneficiary. This Agreement is entered into 
by and between AlohaCare and MCS and for their benefit. There is no intent by
either party to create or establish third-party beneficiary status or rights or
their equivalent in any Member, subcontractor, or other third party, and no such
third party shall have any right to enforce any right or enjoy any benefit
created or established under this Agreement.

                K.   Exhibits. The exhibits attached to this Agreement are an 
integral part of this Agreement and are incorporated herein by reference.

                L.   Board of Directors. The AlohaCare By-Laws shall provide 
that during the term of this Agreement, one person designated by MCS shall be
elected as a member of the Board of Directors of AlohaCare, so long as MCS has
not defaulted in the performance of its obligations hereunder.

                M.   Approval By DHS. This contract is subject to the approval 
of DHS. This contract shall become null and void to the extent that it, at any
time, does not receive such approval by DHS.

                N.   Arbitration. In the event that any dispute relating to 
this Agreement arises between MCS and AlohaCare, the dispute shall be
resolved by binding arbitration in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association. In no event may the
arbitration be initiated more than one year after the date one party first gave
written notice of the dispute to the other party. The arbitration shall be held
in Honolulu, Hawaii or in such other location as the parties may mutually agree
upon. The arbitrator shall have no power to award punitive or exemplary damages
or vary the terms of this Agreement and shall be bound by controlling law.

                0.   Compliance with Law. MCS represents and warrants that MCS 
and its operations, programs, policies, guidelines and procedures are currently
in compliance with, and throughout. the term of this Agreement, shall remain, in
compliance with all applicable federal, state, local laws and regulations. MCS
shall maintain any and all licenses necessary to perform under the terms of this
Agreement. MCS shall provide prompt notice to AlohaCare in the event it is
advised by any regulatory body that its operations are not in compliance with
applicable law or regulations.

                P.   Exclusivity. Without the prior written consent of 
AlohaCare, during the term of this Agreement, MCS shall not contract, either
directly or indirectly, with any other party to provide services in connection
with the QUEST Project.

                Q.   Review and Audit. MCS will at all times make available for 
review and audit by either AlohaCare or its designee its files, books,
procedures and records (including computer

terminal access to same) pertaining to the AlohaCare Program or the services
provided by MCS under this Agreement. In addition, MCS shall make available for
interview with the auditor those personnel with material involvement or
responsibility with respect to the services provided by MCS under this
Agreement. In the event such an audit reveals deficiencies or default, in the
judgment of the auditor, related to the management or administration functions
of MCS, MCS shall promptly develop a detailed action plan to cure such
deficiency or default. A copy of the action plan shall be submitted to
AlohaCare, and MCS, within a reasonable time as determined by the auditor, shall
implement at its own cost, all reasonable enhancements, improvements, procedures
or corrections identified as a result of the audit. MCS shall also provide
AlohaCare with MCS' unaudited financial statements on a quarterly basis and a
copy of an annual audited financial statement within 90 days of the close of
each fiscal year. This provision shall survive the termination of this Agreement
for a period of two years, except that MCS's financial statement need only be
provided for periods during the term hereof.

                R.   Entire Agreement; Amendment.  This Agreement and all
exhibits hereto shall constitute the entire agreement relating to the subject
matter hereof between the parties hereto, and supersedes all other agreements,
written or oral, relating to the subject matter hereof. This Agreement may be
amended by mutual agreement of the parties, provided that such amendment is
reduced to writing and signed by both parties.

           IN WITNESS WHEREOF, the parties have executed this Agreement to be 
effective as of the day and year first set forth above.

ALOHACARE                                   ATTEST

By  /s/ Michael D. Tweedell 
   --------------------------------         ------------------------------------
     Michael D. Tweedell                                 Secretary
     President

Date:   April 25, 1994
      -----------------------------

ADDRESS FOR NOTICES:

- - -----------------------------------

- - -----------------------------------

- - -----------------------------------

MANAGED CARE SOLUTIONS, INC.

By  /s/ Blaine Bergeson   
   --------------------------------         ------------------------------------
     Blaine Bergeson                                     Secretary
     Chief executive officer

Date:   April 25, 1994
      -----------------------------

ADDRESS FOR NOTICES:

- - -----------------------------------

- - -----------------------------------

- - -----------------------------------

 

Basic Info X:

Name: ADMINISTRATIVE SERVICES AGREEMENT
Type: Administrative Services Agreem
Date: Aug. 29, 1996
Company: LIFEMARK CORP /DE/
State: Delaware

Other info:

Date:

  • 1st day of January , 1994
  • February 4 , 1994
  • August 1 , 1994
  • July 1 , 1994
  • 20th day of the month
  • April 25 , 1994

Organization:

  • Administrative Services Agreement
  • State of Hawaii Health
  • A. AlohaCare Program
  • State of Hawaii Demonstration Project
  • State Health Insurance Program
  • C. Covered Services
  • D. Department of Human Services
  • State of Hawaii Department of Human Services
  • Hawaii Health QUEST Request For Proposal for QUEST Health Plan
  • C. Administrative Services
  • General Management Duties
  • AlohaCare Board of Directors
  • h. Pharmacy Services
  • Plans Benefit Litigation
  • Third Party Liabilities
  • d. Informing DHS
  • e. Providing DHS
  • Facilitation of Services
  • State Licensure Board
  • Board of Directors for AlohaCare
  • AlohaCare Professional Liability Insurance
  • MCS Comprehensive Insurance
  • Proof of Insurance
  • Legal Services of AlohaCare
  • C. Obligations in Event of Termination
  • Standard of Performance
  • G. Waiver of Breach
  • L. Board of Directors
  • Board of Directors of AlohaCare
  • Rules of Commercial Arbitration of the American Arbitration Association

Location:

  • Arizona
  • United States
  • State of Hawaii
  • Honolulu

Money:

  • $ 200,000
  • $ 1,000,000
  • $ 15,000
  • $ 30,000
  • $ 12.00
  • $ 1.00

Person:

  • Michael D. Tweedell
  • Blaine Bergeson