ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN THE PLAN AND
MANAGED CARE SOLUTIONS, INC.
This Administrative Services Agreement is made and entered in to be
effective as of the 22nd day of May, 1995 by and between Alliance for Community
Health d.b.a. Community Care, a not-for-profit Missouri Corporation (hereinafter
"Plan"), and MANAGED CARE SOLUTIONS, INC. (hereinafter "MCS").
W I T N E S S E T H :
WHEREAS, the Plan was formed by certain health care providers for the
purpose of operating as a qualified health plan under a managed care program
administered by the State Medicaid Agency (SMA) of the State of Missouri,
hereinafter called "The Program".
WHEREAS, the Plan desires to engage MCS to provide administrative
services in connection with the operation of the Plan Program.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
A. The Plan Program. "The Plan Program" shall mean all
administrative and medical care delivery components and systems available
through the Plan as necessary for the Plan to provide or arrange for the
provision of the required medical, dental, and behavioral health services to
those Program eligible recipients who receive coverage through the Plan.
B. The Program. "The Program" shall mean the State of Missouri
Program for the provision of medical, dental, and behavioral health services to
Medicaid recipients in a managed care delivery setting.
C. Covered Services. "Covered Services" shall mean those
medical, dental, and behavioral health services to which Members are entitled
under the Program as detailed in the Request for Proposal and in any contract
between the State Medicaid Agency and the Plan.
D. Implementation Date. "Implementation Date" shall mean the
date the Plan Program becomes operational and the Plan is obligated to commence
the provision of Covered Services to Members.
E. Participating Providers. "Participating Providers" shall
mean duly licensed physicians, hospitals, health professionals, facilities, and
other health care providers
which have entered into a contract with the Plan for the provision of Covered
Services to Members.
F. Request for Proposal ("RFP"). "RFP" or "Request For
Proposal" shall refer to the SMA's Request For Proposal for the Program and any
G. Recipients or Members. "Recipients" or "Members" shall
refer to those individuals who are eligible for coverage under the Program and
who have enrolled in the Plan.
H. State Medicaid Agency. "State Medicaid Agency" (SMA) shall
mean that agency, division or department of State Government responsible for
administration of its State Medicaid Program pursuant to Title XIX of the Social
Security Act and applicable state law.
II. MCS RESPONSIBILITIES
A. Pre-Operational Phase.
1. Generally. The parties acknowledge MCS will
prepare or will assist in the preparation of information and data to participate
as a qualified health plan under the Program during the Pre-Operational Phase
period. MCS shall, on behalf of the Plan, respond in a timely manner to any and
all SMA requests for additional information or clarification of proposal terms,
subject to the Plan's approval of any such response.
2. Negotiations With the SMA. MCS shall provide
assistance and support to the Plan in its negotiations with the SMA concerning
B. Pre-Operational Duties. MCS shall perform necessary
pre-operational services so that the Plan may commence operation as a qualified
health plan on the Implementation Date as established by the SMA. All
pre-operational costs shall be reimbursed in accordance with Section III.A of
this agreement. Pre-operational services shall include, but are not limited to:
1. Office site and equipment selection;
2. Installation of compute hardware, software and
3. Staff selection and training;
4. Development of marketing programs if directed by
5. Development of Plan policy and procedures;
6. Development of provider network, including but
not limited to:
7. Education of providers and their staff regarding
8. Establishment of utilization and quality
9. Acting as a liaison with the SMA including
negotiation of any and all contracts;
10. Preparation of member handbooks and other
11. Preparation of provider handbooks and other
C. Administrative Services. MCS shall provide administrative
services necessary to the operation of the Plan Program or which are required by
the RFP or any contract between the SMA and the Plan, and contracts between the
Plan and Participating Providers. MCS's responsibilities shall include, but not
be limited to, the following:
1. General Management Duties. MCS shall be
responsible for the day-to-day management of the Plan. MCS shall take actions
necessary for the proper administration and management of the Plan Program, so
long as such actions are consistent with, and not in conflict with, the
provisions of this Agreement, the RFP, and any contract between the SMA and the
Plan. MCS shall employ such individuals as are necessary to carry out its duties
under this Agreement.
2. Contracting With Providers. MCS shall be
responsible for recruiting, negotiating, and contracting on behalf of the Plan
with such providers of medical, dental, and behavioral health services as
necessary to provide Covered Services to Members as required by the RFP and any
contracts between the SMA and the Plan. Provider contracts shall be between the
Plan and the Participating Providers. While it is understood that there is no
absolute guarantee that MCS will be able to contract on behalf of the Plan with
all such providers, MCS shall make reasonable efforts to recruit and contract
with such necessary providers and shall dedicate sufficient resources to
contract with such providers.
All contracts with Participating Providers shall be
in a form and contain such provisions as are acceptable to the Plan 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 the SMA and the Plan, and all applicable
provisions of this Agreement.
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 the Plan, the RFP, any contract between
the SMA and the Plan, 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 under the Program. Unless otherwise
directed by the Plan, MCS and the Medical Director shall have the authority and
discretion to interpret the requirements of the RFP, the contract between the
SMA and the Plan, and the contracts between the Plan and providers with respect
to payment of claims to providers. Claims payments shall be made by checks or
drafts signed by MCS as the Plan's dispersing agent out of the account
established in accordance with Section II.C.4. hereof. MCS shall pay claims from
its Phoenix, Arizona Office for at least the first year of this Agreement.
4. Bank Account; Accounting and Finance Duties. MCS
shall establish and maintain a bank account in the name of the Plan with
________________________ ("the Bank") for the purpose of depositing all receipts
from any source therein, including capitation payments and reinsurance payments
form the SMA, and for paying all expenses of the Plan Program, including payment
of provider claims. MCS shall be responsible for performing all day to day
financial and accounting functions of the Plan, including preparation of
financial statements, accounts payable/receivable administration, and banking
arrangements. MCS shall also be responsible for any required financial and
regulatory reporting to the SMA and to the Missouri Department of Insurance.
5. Plan Benefits Litigation. If a demand is asserted
or a litigation/arbitration proceeding is commenced ("Plan Benefits Litigation")
by a Member or health care provider to recover benefits against MCS, the Plan or
both parties, the following shall apply:
a. If either MCS or the Plan becomes
aware of the asserted Plan Benefits
Litigation, it shall promptly notify
the other party. The Plan shall,
with MCS's advice and input,
determine whether to pay the
disputed claims or proceed with Plan
b. In the event the Plan determines to
proceed with Plan Benefits
Litigation, the Plan shall retain
counsel and direct the response to
the Plan Benefits Litigation. The
Plan shall be responsible for
assuming the cost attributable to
Plan Benefits Litigation.
6. Coordination of Benefits; Third Party Liabilities;
Reinsurance. 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 the SMA and the Plan. MCS shall be responsible for the
a. Recovering or coordinating medical
expenses incurred by Members from
3all third-party liability resources
of the Plan and depositing any
amounts recovered in the bank
b. Establishing and maintaining a file
of Members' third-party liability
c. Receiving third-party liability
information from the SMA updating
the Members' files on a timely
d. Informing the SMA of third-party
liability information discovered
during the course of business
e. Providing the SMA with required
reports relating to amounts
recovered from third-parties;
f. Recovering reinsurance revenues
payable to the Plan from the SMA
and/or other Reinsurers.
7. Case Management. MCS shall be responsible for
performing case management services in accordance with the RFP and in accordance
with the contract between the SMA and the Plan. 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 participating providers. MCS shall
implement a system for the directing, coordinating, monitoring and tracking of
the Covered Services rendered to each member. This system shall include, but not
be limited to, the following:
a. Ensuring that medically necessary
services are accessible and can be
provided on a timely basis;
b. Providing Members with clear and
adequate information on how to
c. Assisting Members to obtain the
services prescribed by their primary
care providers and other authorized
8. Facilitation of Services. MCS shall facilitate the
provision of Covered Services by Participating Providers by:
a. Providing the Plan and Participating
Providers with Member enrollment and
eligibility information; and
b. Maintaining telephone lines as
required by the RFP for the purpose
of determining enrollment and
eligibility information upon
admission to an emergency facility
or hospital emergency room.
9. Program Coverage Information. MCS shall prepare
and forward to all Participating Providers, a summary of Covered Services which
are required to be provided under the Plan Program. Such summary shall include
schedules of Covered Services and any applicable exclusions or limitations
affecting the provision of Covered Services, applicable co-payments,
co-insurance and deductibles, and any other information relevant to the
rendering of Covered Services by providers. The summary of Covered Services may
be included in the provider handbook prepared by MCS.
10. Quality 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 the SMA and the Plan. At
a minimum the Quality Assurance Program shall conform to the requirements set
forth in the RFP.
11. 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 the SMA and the
Plan. 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 ongoing basis.
12. Credentialing. MCS shall credential and
recredential each Participating Provider rendering health care services to
Members as described in the Plan's RFP proposal.
13. 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 Plan Program and as
required by the RFP, any contract between the SMA and the Plan, and this
14. Reports to and Liaison with the SMA. MCS shall be
responsible for making reports to the SMA which are required by the RFP and to
act as a liaison to the SMA for the general purpose of regulatory compliance.
Reports shall be made at such times as are required by the SMA and such reports
shall be in format acceptable to the SMA. Such reports shall include, but not be
limited to the following:
a. Encounter data as described in the
b. Reports regarding the Quality
Assurance Program as required by the
c. Reports regarding changes in
Recipient status as required by the
d. Reports regarding coordination of
benefits and third-party liability
as required by the RFP; and
e. Reports regarding financial
information as required by the RFP.
15. Reports to The Plan. MCS shall report to the
President and Board of Directors of the Plan on a regular basis and at such
times as are reasonably requested by the President or Board of Directors of the
Plan. MCS shall report to the Plan on any and all matters relating to the
administration of the Plan Program as requested by the President or the Board of
Directors for the Plan.
16. Member Services. MCS shall be responsible for
providing all Member services as are necessary to the administration of the
Plan's Program or as are required by the RFP, any and all contract between the
SMA and the Plan, and this Agreement. Such Members services shall include, but
not be limited to:
a. Enrollment of Recipients as required
by the RFP.
b. Preparation and dissemination of
educational materials as required by
17. Insurance Requirements.
a. Professional Liability Insurance. During
the term of this Agreement, the Plan 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, the Plan 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
b. Comprehensive Liability Insurance. MCS
and the Plan 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.
18. Complaint Resolution Procedure. MCS shall
maintain a complaint resolution procedure to process Member and Provider
19. Member Satisfaction. MCS shall administer
periodically, but not less frequently than annually, Member satisfaction surveys
to measure the level of satisfaction of
Members receiving Covered Services from Participating Providers. The development
and administration of such surveys shall be at the sole cost of MCS.
III. ADMINISTRATIVE FEE
A. Pre-Operational Phase. The Plan shall pay MCS for services
rendered in the pre-operational phase as follows:
Consulting Labor Costs:
Category Hourly Rate
MCS Principal: President, CEO, Medical Director $140
Other MCS Managers 90
Programmers/Systems Analysis 75
Other non-management professional staff 50
Clerical staff (word processing) 20
Employee Labor, Fringe & Related Costs:
Employees hired to work in St. Louis
specifically for the CC program: At MCS cost + 10%
Outside Consultants At MCS cost, not to
exceed $140 per hour.
Travel & Other Out-of -Pocket Expenses: At MCS cost
Routine Office Supplies, Long Distance Calls from
Arizona, copying costs, and other expendable
items No charge
The pre-operational phase for MCS activity is estimated to consume 1,210 hours
of labor time. Actual MCS labor expended on the project may be more or less than
the estimated 1.210 hours. Estimated cost for MCS activities during the
pre-operational phase is as follows:
Function Labor Cost Out-of-Pocket TOTAL COST Maximum Hours*
- - -------- ---------- ------------- --------- --------------
ing and Network 22,000 4,000 26,000 200
Analysis of cost
and utilization data
for Risk Pool con- 8,000 1,000 9,000 60
Staffing and 72,000 24,000 96,000 950
TOTALS 102,000 29,000 131,000 1,210
* MCS will devote a maximum of 1,210 hours to Community Care's pre-operational
activities for the prices stated herein above. Any hours beyond the 1,210
maximum limit are billable at the hourly rates shown above. If less than 1,210
hours are required for pre-operational activities, MCS shall only bill for
actual hours worked. MCS's pre-operational duties do not include marketing costs
or expenses for outside professionals such as attorneys and actuaries.
B. Operational Phase. The Plan shall pay MCS an administrative
fee as set forth below once the Plan Program becomes operational:
1. Base Administrative Fee. The Plan shall pay a
monthly administrative fee as follows:
First 25,000 members 12.0% of capitation revenue
Next 15,000 members 11.0% of capitation revenue
Next 30,000 members 10.0% of capitation revenue
Members in excess of 70,000 8.8% of capitation revenue
Example: If CC has 50,000 members in any given month, the Management
fee shall be computed as follows:
First 25,000 members 12.0%
Next 15,000 members 11.0%
Next 10,000 members 10.0%
50,000 members 11.3% = weighted average
If Plan enrollment is less than 20,000 member months, the above
schedule shall not apply and Administrative Fees paid to MCS shall be MCS's cost
An average year-to-date Plan capitation revenue per member per month
will be calculated by dividing total year-to-date Plan capitation revenues by
total year-to-date member months. The average year-to-date Plan capitation
revenue per member month will be used in calculating the monthly administrative
fee. Member months are calculated by dividing the total number of days Members
were eligible by the number of days in that month.
The monthly Base Administrative Fee will be estimated and paid before
the tenth day of the month. Any adjustments based on the actual member month
figures will be made to the subsequent month's payment.
MCS shall be responsible, in return for receiving the Base
Administrative Fee, to assume all costs associated with the administration of
the Plan Program, except for the following expenses which shall be the
responsibility of the Plan:
a. Management Information System (see
paragraph 3 and 4 below)
b. Salary, fringe benefits, travel,
educational and all other expenses
of the Chief Executive Officer.
c. Office equipment and furniture.
d. Covered Services;
e. Legal Services of the Plan;
f. Actuarial Services of the Plan;
g. All insurance premiums for the Plan;
h. Board fees, etc.;
i. Expenses relating to the corporate
existence of the Plan;
j. Audit and tax services of the Plan;
k. Advertising and marketing expenses
of the Plan;
l. Any income, property, premium or
other taxes of the Plan and any
assessments or license fees.
m. Any other expenses clearly related
to the business of the Plan as an
independent corporate entity.
2. Shared Risk Agreement. The parties agree to share risk in
the following manner:
The Plan shall institute "Risk Pools" among its providers which
represent specific amounts budgeted for medical costs each Plan fiscal year. If
the combined Plan Risk Pools experience a surplus (i.e., medical costs are less
than the Risk Pool budget), MCS shall receive 10 % of such surplus not to exceed
10% of MCS's Base Administrative Fee. If the combined Plan Risk Pools experience
a deficit (i.e., medical costs are more than the Risk Pool budget), MCS shall be
liable for 10% of such deficit not to exceed 10% of MCS's Base Administrative
Fee. If the Plan fails to institute a Risk Pool budgeting process which, in
MCS's opinion, does not constitute significant risk sharing arrangements with
critical Participating Providers, this shared risk arrangement between MCS and
the Plan shall not be operative.
3. MANAGED CARE ONE MIS System Fee (as defined in the April
24, 1995 MCS proposal, Exhibit 2)
Year One: $2.65 PMPM for all months in which enrollment is
-------- below 40,000 Members and $2.60 PMPM for all
months in which enrollment exceeds 40,000
members. An installation fee $72,000 shall be
payable in two equal installments as follows:
$36,000 no later than June 1, 1995, and, an
additional $36,000 by the latest of the following
dates: August 1, 1995 or the date upon which the
Plan accepts its first enrollment. (the Implementation
After one Year:
Membership Level Year 2 Year 3 Year 4 Year 5
---------------- ------ ------ ------ ------
Less than 40,000 $2.75 $2.85 $3.00 $3.10
40,000 to 49,000 $2.60 $2.70 $2.80 $2.90
50,000 to 59,999 $2.50 $2.60 $2.70 $2.80
60,000 to 69,999 $2.40 $2.50 $2.60 $2.70
70,000 to 79,999 $2.30 $2.40 $2.50 $2.60
80,000 to 99,999 $2.15 $2.25 $2.35 $2.45
100,000 or more $1.95 $2.05 $2.15 $2.25
4. Fees for Other Hardware/Software Not Included in
the MANAGED CARE ONE Package. (as defined in the April 24, 1995 MCS proposal,
Year One: $0.60 PMPM
After Year One:
Membership Level Year 2 Year 3 Year 4 Year 5
---------------- ------ ------ ------ ------
Less than 40,000 $0.60 $0.60 $0.65 $0.70
40,000 to 49,999 $0.55 $0.55 $0.55 $0.60
50,000 to 59,999 $0.50 $0.50 $0.55 $0.55
60,000 to 69,999 $0.45 $0.45 $0.50 $0.50
70,000 to 79,999 $0.40 $0.40 $0.45 $0.45
80,000 to 99,999 $0.30 $0.35 $0.40 $0.40
100,000 or more $0.25 $0.25 $0.30 $0.30
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 the Plan's pre-operational activities and shall then be in
full force and effect through the first five years of the Program.
B. Termination. This Agreement may be terminated upon the
1. Automatically in the event the Plan is
notified by the SMA that its proposal to the
SMA to participate as a qualified health
plan under the Program has not been
2. Upon notice by the Plan, 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.
3. At any time upon the written mutual consent
of both parties.
4. Upon the failure of either party to correct
any failure to perform under the terms of
this Agreement after sixty (60) days written
notice from the other party.
5. In the event the contract between the SMA
and the Plan is terminated for any reason or
the Plan's participation in the Program is
otherwise terminated, in which case
termination shall be effective as of the
termination date of the Plan's participation
in the Program.
6. 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 Plan Program.
C. Obligations in Event of Termination.
1. Upon termination of this Agreement, the Plan shall
purchase those fixed assets acquired and used by MCS to administer the Plan at a
price equal to the book value of such assets at the termination date.
2. In the event of termination of this Agreement for
any reason, MCS shall cooperate with the person or entity selected by the Plan
to assume administration of the Plan.
3. In the event of termination of this Agreement MCS
shall provide the Plan with all copies of records in MCS's possession directly
and specifically relating to the Plan Program and which are necessary for the
continued operation of the Plan Program, or shall forward such records to a
successor administrator as directed by the Plan.
A. Confidentiality. MCS agrees to safeguard the
confidentiality of all data pertaining to this Agreement and Covered Services
rendered to Members.
B. Relationship to 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
ventures 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 greater power or authority shall be
implied by the grant or denial of power or authority specifically mentioned
C. 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.
D. 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.
E. Headings. The headings of the various sections of this
Agreement are inserted merely for purpose of convenience and do not expressly or
by implication limit, define or extend the specific terms of the section so
F. 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.
G. Applicable Law. This Agreement shall be governed in all
respects by the laws of the State of Missouri.
H. 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.
I. No Third-Party Beneficiary. This Agreement is entered into
by and between the Plan and MCS and for their benefit. There is not 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.
J. Arbitration. In the event that any dispute relating to this
Agreement arises between MCS and Plan, 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 on party first gave written notice of the
dispute to the other party. The arbitration shall be held in St. Louis, Missouri
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.
K. Review and Audit. MCS will at all times make available for
review and audit by either Plan or its designee its files, books, procedures and
records (including computer terminal access to same) pertaining to the Plan
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.
L. 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 agreements of the parties, provided that such amendment is
reduced to writing and signed by both parties.
M. Exhibits. Any exhibits attached to this Agreement are an
integral part of this Agreement and are incorporated herein by reference.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year set forth above.
By Betty Jean Kerr
Date: May 22, 1995
ADDRESS FOR NOTICES:
- - -----------------------------
St. Louis, Missouri 63112
- - -----------------------------
MANAGED CARE SOLUTIONS, INC.
By James A. Burns Its President
Date: May 18, 1995
2510 W. Dunlap Ave, Suite 100
Phoenix, Az 85021
LAIRD, SCHNECK, LINDFORS & SMYTH, P.C.
1440 EAST MISSOURI, AVE., SUITE 250
PHOENIX, ARIZONA 85014-2405
March 1, 1996
VIA FACSIMILE - 314-241-8624
David M. Harris, Esquire
Greensfelder, Hemker & Gale, P.C.
1800 Equitable Building
10 South Broadway
St. Louis, MO 63102
RE: Community Care Plus
This letter sets forth an outline of Managed Care Solutions' proposal
to turn over all management functions to CCP. This is in response to the
parties' inability to come to terms on the issue of compensation with respect to
the proposed transfer of MCS employees to CCP. I do not believe we will be able
to agree on a fair adjustment. MCS now proposes a larger turnover of management
function in connection with the employee transfer.
1. General Description.
MCS will agree to cease all management responsibility pursuant to the
Administrative Services Agreement, except for MIS, claims and finance functions.
These retained functions are more specifically described below. In other words,
CCP will assume complete responsibility for all employees, member services,
provider services, contracting, medical management, grievance and
administration, among other things, and MCS will have responsibility for only
the retained functions, with no residual responsibility for any of its former
duties. Any agreement entered into between the parties will specify that CCP
will bear the burden of properly inputting and maintaining clean provider data
so that claims can be properly processed by MCS. As we discussed in our meetings
in Phoenix, MCS will be unable to properly pay provider claims and capitation
without reliable data and clean claims.
Payment will be based not on a per-member per-month basis, but rather
on the number of eligible plan members as determined on the first day of each
month in which services are provided by MCS to CCP. In other words, payment is
due in advance. The fee will be due on the 5th day of the month. If payment is
not made on the 5th day of the month, no provider checks will be paid until the
fee is paid. The agreement will provide that upon CCP's failure to timely pay
MCS in full, MCS will notify State of Missouri Medicaid of its intention to
terminate the contract within 15 days.
The fees for the retained services are as follows on a per eligible
MIS - $3.15
Claims - $2.90
Finance - $1.00
Any consulting services beyond the retained services will be charged on
an hourly basis as follows:
Other Staff $100
MC1 system enhancements or report requests specific to CCP will be
proposed as a project fee dependent on the specific request. All other costs
will be billed at cost plus 15%. Costs include lease payments on office space,
cellular phones and pagers, insurance, telephone related costs, office supplies
and other costs paid by MCS related to CCP. Upon CCP securing a CFO and other
financial systems, many of these costs can be transitioned to CCP.
Consulting and cost bills will be payable 10 days after the invoice
date. Late payments will be subject to an 18% per annum interest and penalty
3. Retained Services. MCS will provide the following services.
- - - Maintaining the MC1 system and hardware including local and wide-area
networks in both Phoenix and St. Louis as currently exist.
- - - All data transfers to and from the State of Missouri Managed Care+
program including but not limited to member and provider file
- - - All data transfers to and from the pre-established contractors which
include People's Health Center, St. Louis Comprehensive Health Center,
Family Care Health Center, DPS, Delta Dental, UBS, VSP, and Nurseline.
- - - Excluded are data conversion costs over and above a data cut to the new
vender in the format accepted by GTE for the Missouri Medicaid MC+
b. Claims Services:
- - - Input and processing of clean claims.
- - - Encountering all claim data to the State of Missouri.
- - - Providing claim payment reports to CCP showing weekly activity.
- - - Generating remits and checks which are drawn on the CCP claims account
and sending to CCP CEO for review and mailing.
c. Finance Functions:
- - - Coordinating reinsurance recoveries from State of Missouri.
- - - Maintenance of accounts payable system.
- - - Maintenance of CCP general ledger.
- - - Compilation of monthly financial statements including IBNR
- - - Reporting package to CEO including accrual based balance sheet,
profit and loss statement and risk pool statements; profit and loss
statement based on actual paid claims data, and lag schedules.
- - - Process and issue monthly capitation payments drawn on the CCP claims
account to all capitated providers, and provide an exception/error
report and detail capitation schedules to the CEO.
Any agreement modifying the Administrative Services Agreement will have
to be very specific about what is and is not included in the retained functions.
MCS suggests that the parties terminate this modified arrangement by August 31,
1996, or sooner if CCP is able to obtain an alternative MIS provider before that
I believe the foregoing represents a reasonable basis for continuing
operation of the plan while a transition of the retained functions is being
LAIRD, SCHNECK, LINDFORS & SMYTH, P.C.
Stephen G. Smyth
Attorney at Law
GREENSFELDER, HEMKER & GALE, P.C. 2000 EQUTABLE BUILDING
ATTORNEYS AT LAW 10 SOUTH BROADWAY
ST. LOUIS, MISSOURI 63102-1774
March 6, 1996
Stephen G. Smyth, Esq.
Laird, Schneck, Lindfors & Smyth, P.C.
1440 East Missouri Avenue, Suite 250
Phoenix, Arizona 85014-2405
At your suggestion, the principals of CCP and MCS have been discussing
the proposal outlined in your letter dated March 1, 1996. These discussion have
led to an agreement which CCP has requested that I set forth below and to be
confirmed by MCS's signature this afternoon. The understanding is as follows:
1. The ASA is amended to reflect the following contract
2. MCS shall cease providing all management services,
except for MIS and Claims services effective the
close of business today.
(A) MCS agrees that it is responsible to
finalize all claims received up to and
including today's date as though it is under
the unamended ASA. In other words, there
will be no consulting charges for the
processing of those claims.
(B) All clean claims received from St. Louis
Comprehensive Center and People's Health
Center by MCS as of this date shall be fully
processed by March 15, 1996. By fully
processed it is meant that the claims will
be paid with a remittance advice. All
non-clean claims will be identified prior to
March 15, 1996 and that CCP Provider
Services will at least be contacted by March
15, 1996 to resolve such non-clean claims.
(C) For all claims received hereafter, all clean
claims shall be fully processed within
thirty calendar days. All non-clean claims
shall be returned to CCP Provider Services
within thirty days.
(D) Upon completion of the tasks specified in
paragraph 1(B), CCP shall pay MCS the
February, 1996 management fee. The amount of
payment will be $279,000, as to which all
parities reserve all rights thereto.
(E) For all Claims/MIS services from march 1,
1996 forward, CCP shall pay MCS a fee of
$6.05 pmpm calculated, billed and paid as
follows. On the fourteenth day of the month,
or the next business day, MCS shall charge
its fee based the prior month's member
months. Invoices are deemed received when
faxed to Dr. Malone at CCP. Said invoice
shall be paid by CCP writing seven days of
receipt. If not paid within seven days of
receipt, MCS shall be entitled to halt the
processing of any claims for CCP.
(F) Those MIS/Claims services to be provided
are defined at paragraphs 3(a) and 3 (b)
of your letter of March 1, 1996 and are
fully incorporated herein.
3. CCP shall be responsible effective March 1, 1996, for
the office lease, office costs, cellular phones and
pagers, insurance, telephone costs and the like. Any
prepaid expenses shall be subject of an adjustment
payment by CCP to MCS on a pro rata basis. CCP shall
pay all St. Louis based MCS employees' salaries from
March 1, 1996 to March 6, 1996.
4. All documents for functions other than MIS/Claims
shall be turned over to CCP, including any copies
5. In the event CCP requests services beyond MIS/Claims
services, such service will be charged on an hourly
basis as follows by MCS:
Executives - $200
Directors - $175
Manager - $125
Other Staff - $75
Invoices for consulting services shall be made by MCS on no
more often than a two week cycle. An invoice for consulting
services must show the date of service, amount of time spent
to the tenth of the hour, and a narrative of work performed.
CCP shall have ten days upon receipt of an invoice for
consulting services. Late payments shall be subject to an 18%
per annum interest charge.
6. All St. Louis-based MCS employees shall be
transferred to CCP effective the end of business
March 6, 1996. MCS agrees to indemnify CCP for any
claims by past or present employees based on events
prior to transfer. CCP agrees to indemnify MCS for
any claim by present or future employees based on the
event of transfer and all events subsequent to
7. The parties agree that these MIS/Claim functions will
be terminated by CCP on or before, at CCP's
discretion, August 31, 1996.
Yours very truly,
GREENSFELDER, HEMKER & GALE, P.C.
David M. Harris