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CareAdvantage, Inc.
Metropolitan Corporate Plaza
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Allied Health Group, Inc.
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Re: Administrative Service Agreement
Ladies and Gentlemen:
Reference is made to the Administrative Service Agreement dated as of
January 2, 1997 (the "Agreement") by and between Medigroup of New Jersey, Inc.,
d/b/a HMO Blue ("HMO Blue"), and Allied Health Group, Inc. ("Allied").
Capitalized terms used and not otherwise herein defined have the meanings
ascribed to such terms in the Agreement.
This will confirm our understanding that anything to the contrary
contained in the Agreement notwithstanding, each monthly Capitation Payment will
be paid as follows:
(i.) the fifteen percent (15%) of each monthly Capitation Payment
described in Section 5.2(1)(a) of the Agreement as subject to
retention by Allied (each such amount, a "Fee") will be paid as
described in clause (i) of the next following paragraph; and
(ii.) the remainder of each monthly Capitation Payment will be placed in
the Capitated Pool as contemplated by the Agreement or as otherwise
agreed by HMO Blue and Allied.
In addition, in view of the services rendered by CareAdvantage, Inc. ("CAI") in
connection with the negotiation and implementation of the Agreement and the
advisory and other services to be rendered in connection with the Agreement as
described in Appendix A hereto, this will confirm
our understanding that, subject to the penultimate paragraph of this letter,
during the term of the Agreement:
(i.) HMO Blue will pay each Fee to CAI;
(ii.) of each Fee, CAI will retain (x) prior to the first full month
during which Participants include at least 100,000 (Administrative
Services Only" members of HMO Blue (the "Step-Up Month"). an amount
equal to two-fifteenths (2/15) of the Fee, and (y) during and after
the Step-Up Month, an amount equal to three-fifteenths (3/15) of the
Fee (in each case, the "CAI Retention Amount");
(iii.) in addition to the CAI Retention Amount, CAI will retain from each
Fee an amount equal to three-thirtieths (3/10) of the Fee (the "CAI
Risk Amount"), such amount to be applied, if and to the extent
necessary, to satisfy CAI's obligations under clause (vi) of this
paragraph;
(iv.) all amounts paid to CAI under clause (i) of this paragraph, other
than the CAI Retention Amount and the CAI Risk Amount, will be paid
immediately by CAI to Allied;
(v.) anything to the contrary set forth in Section 5.2(1)(a) of the
Agreement notwithstanding. Allied will be entitled to retain as
compensation each month an amount equal to the applicable Fee less
the CAI Retention Amount and the CAI Risk Amount; and
(vi.) in the event that Allied is required to make any payment to HMO Blue
pursuant to Section 5.2(1)(b)(iii) of the agreement, CAI will
immediately pay to Allied one-half (1/2) of any amount so paid by
Allied, but not more than the CAI Risk Amount for the applicable
period.
By executing this letter, Allied agrees to accept as payment from HMO Blue
under the Agreement any and all amounts paid to Allied by CAI as described in
clause (iv) of the preceding paragraph, it being understood that, except to the
extent that Allied actually receives funds from CAI pursuant to this letter,
nothing herein contained will be deemed to affect in any way the respective
obligations of HMO Blue and Allied under the Agreement. HMO Blue fully and
unconditionally guarantees the obligations of CAI hereunder, including, without
limitation, the obligations specified in the immediately preceding paragraph.
The agreement represented by this letter is terminable:
(i.) by HMO Blue at any time, (A) in the event that CAI fails in any
material respect to perform any of its obligations hereunder, (B) in
the event that, in HMO Blue's judgement, reasonable grounds for
insecurity exist with respect to the performance by CAI of any of
its obligations hereunder or (C) pursuant to mutual agreement with
CAI, in each case, upon notice to Allied and CAI; and
(ii.) by Allied at any time, in the event that CAI fails in any material
respect to perform any of its obligations hereunder, upon notice to
CAI and HMO Blue; provided that (x) the obligations of the parties
arising prior to the effective date of termination will survive any
such termination. (y) from and after the effective date of any such
termination, this letter will be of no force or effect for purposes
of determining the respective rights and obligations of Allied and
HMO Blue arising thereafter under the Agreement and (z) in the event
that the agreement represented by this letter is terminated by
Allied, then Allied will pay to CAI (A) Immediately out of each Fee
received by Allied under the Agreement, an amount that would, if
this letter agreement were still in effect, be equal to the CAI
Retention Amount for the applicable month and (B) immediately
following any determination made pursuant to Section 5.2(1)(b)(iii)
of the Agreement (regarding payments that may be required to be made
by Allied to HMO Blue or by HMO Blue to Allied) one-half (1/2) of
the amount, if any, by which three percent (3%) of aggregate
Capitation Payments during the applicable Calculation Period exceeds
the amount, if any, then required to be paid by Allied to HMO Blue
pursuant to said Section 5.2(1)(b)(iii).
If the foregoing accurately expresses our understanding, please so
indicate by signing the enclosed copy of this letter and returning it to the
undersigned.
Very truly yours,
MEDIGROUP OF NEW JERSEY, INC.
d/b/a HMO Blue
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
Accepted and agreed:
CAREADVANTAGE, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and CEO
ALLIED HEALTH GROUP, INC.
By: /s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
Title: Principal
APPENDIX A
CAI will provide to Allied and HMO Blue, at the request of Allied and at such
reasonable times and places as shall be mutually acceptable to CAI and Allied or
to CAI and HMO Blue, as the case may be, advice and consultation with respect to
the following:
(i) methods of inpatient care management to
enhance inpatient savings and to develop care
management protocols:
(ii) the adoption of efficient inpatient care
management practices on a specialty specific basis;
(iii) the development of specialty advisory
committees and/or steering committees by Allied and
HMO Blue;
(iv) disease management in selected specialties,
including but not limited to oncology, asthma and
selected cardio vascular diseases; and
(v) case management programs to broaden the
number of members on a specialty specific basis.
MEDIGROUP OF NEW JERSEY, INC.
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June 13, 1997
CareAdvantage, Inc.
Metropolitan Corporate Plaza
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Re: Administrative Service Agreement
Ladies and Gentlemen:
Reference is made to the Administrative Service Agreement dated as of
January 2, 1997 by and between Medigroup of New Jersey, Inc., d/b/a HMO Blue
("HMO Blue"), and Allied Health Group, Inc. ("Allied"), the related letter
agreement dated as of March 1, 1997 by and among HMO Blue, Allied and
CareAdvantage, Inc. ("CAI") (the "Letter Agreement") and the related letter
agreement dated as of March 1, 1997 by and between HMO Blue and CAI (the
"HMO/CAI Letter").
The HMO/CAI Letter provides, pursuant to clause (i)(C) of the penultimate
paragraph of the Letter Agreement, that HMO Blue may, in its sole discretion,
terminate the Letter of Agreement in the event that Blue Cross and Blue Shield
of New Jersey, Inc. ("BCBSNJ"), CAI and the other parties to that certain
Services Agreement dated as of February 22, 1996 (the "Services Agreement") have
not on or prior to April 1, 1997, entered into an amended and restated Services
Agreement satisfactory to BCBSNJ in its sole discretion. The parties hereto
hereby further acknowledge that CAI, BCBSNJ and the other parties thereto are
only today entering into an amended and restated Services Agreement.
Based upon the foregoing and for other good and valuable consideration,
this letter confirms our understanding and agreement that HMO Blue may continue
to have the right, in its sole discretion, to terminate the Letter Agreement at
any time, the parties' entry today into an amended and restated Services
Agreement notwithstanding.
CareAdvantage, Inc.
June 13, 1997
Page 2
If the foregoing accurately expresses our understanding, please so
indicate by signing the enclosed copy of this letter and returning it to the
undersigned.
Very truly yours,
MEDIGROUP OF NEW JERSEY, INC.
d/b/a HMO BLUE
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
Accepted and agreed:
CAREADVANTAGE, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
MEDIGROUP OF NEW JERSEY, INC.
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As of March 1, 1997
CareAdvantage, Inc.
Metropolitan Corporate Plaza
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Re: Administrative Service Agreement
Ladies and Gentlemen:
Reference is made to the Administrative Service Agreement dated as of
January 2, 1997 by and between Medigroup of New Jersey, Inc., d/b/a HMO Blue
("HMO Blue"), and Allied Health Group, Inc. ("Allied"), and the letter agreement
dated as of March 1, 1997 by and among HMO Blue, Allied and CareAdvantage, Inc.
("CAI") relating thereto (the "Letter Agreement").
This confirms our understanding and agreement, pursuant to clause (i)(C)
of the penultimate paragraph of the Letter Agreement, that HMO Blue may, in its
sole discretion, terminate the Letter Agreement in the event that Blue Cross and
Blue Shield of New Jersey, Inc. ("BCBSNJ"), CAI and the other parties to that
certain Services Agreement dated as of February 22, 1996 (the "Services
Agreement") have not on or prior to April 1, 1997, entered into an amended and
restated Services Agreement satisfactory to BCBSNJ in its sole discretion.
If the foregoing accurately expresses our understanding, please so
indicate by signing the enclosed copy of this letter and returning it to the
undersigned.
Very truly yours,
MEDIGROUP OF NEW JERSEY, INC.
d/b/a HMO BLUE
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
Accepted and agreed:
CAREADVANTAGE, INC.
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President/Chief Executive Officer
