Exhibit 10.36
PHYSICIAN SERVICES ORGANIZATION AGREEMENT
This Physician Services Organization Agreement ("Agreement")
is made and entered into as of the 12th day of September, 1996, by and
between DOCTORS HEALTH XXXXXXXXXX, LLC, a Maryland limited liability company
(hereinafter referred to as the "LLC") and DOCTORS HEALTH SYSTEM, INC., a
Maryland corporation (hereinafter referred to as the "Manager").
WHEREAS, the LLC is owned exclusively by and employs only
physicians licensed to practice medicine in Maryland and is organized and
dedicated solely to engage in the Practice of Medicine. The Manager is a medical
services organization organized and dedicated to hold title to various assets
related to the Practice of Medicine, to perform various management,
administrative and support services for physician groups and to develop and
administer an integrated healthcare network with an emphasis on managed care;
and
WHEREAS, the Manager wishes to contract with the LLC to
provide to the LLC certain assets, including leased office space, fixtures and
equipment, and certain management and support services, including financial,
managerial, administrative and employment services, in support of and with
respect to the LLC's Practice of Medicine, and the LLC wishes to secure such
assets and such services from the Manager and to appoint the Manager as its
exclusive agent and attorney-in-fact of and for the LLC, to enable the Manager
to act on behalf of the LLC in the provision of certain of such services, all
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
hereby covenant and agree as follows:
1. RECITALS; DEFINITIONS; ETC.
a. Recitals. The above recitals are incorporated herein.
b. Definition Appendix. When used in this Agreement with its
initial letter capitalized, a word shall have the meaning set forth in the
Definition Appendix attached as Appendix A hereto.
c. Certain Other Definitions. When used in this Agreement with
its initial letter capitalized, a word that is not defined in Appendix A shall
have the meaning assigned to it elsewhere in this Agreement.
d. Appendices, Exhibits and Schedules. Attached hereto and forming an
integral part of this Agreement are various Appendices, Exhibits and Schedules,
all of which are incorporated into this Agreement as fully as if the contents
thereof were set out in full herein at each point of reference thereto.
e. References. All references herein to any agreement,
instrument or other document shall include any and all amendments,
modifications, extensions, renewals, substitutions, supplements, Exhibits and
Schedules to, of and for such agreement, contract, instrument or document.
2. OFFICE SPACE AND EQUIPMENT.
a. Provision of Office Space and Equipment. The Manager agrees during
the term of this Agreement to supply and provide, or to engage others to supply,
the commercially reasonable needs of the LLC for office space and equipment,
including all related materials and supplies, to enable the LLC to engage in the
Practice of Medicine, including, without limitation, the provision of
laboratory, testing and other ancillary services. The Manager will assist the
LLC in developing its Budgets and Business Plans and in assessing and
determining its needs for office space and equipment. The LLC agrees to keep the
Manager and the Quality Committee currently advised concerning its needs for
office space and equipment and shall promptly advise the Manager and the Quality
Committee of any changes in such needs.
b. Sublease of Office Space. The Manager, as sublessor, and the LLC, as
sublessee, shall, simultaneously with the execution of this Agreement (or as
soon after Closing as is reasonably practicable), enter into a Sublease in form
substantially similar to Exhibit 2b attached hereto as a part hereof (each a
"Sublease") for and in respect of each location where the LLC intends to
establish an office from which to engage in the Practice of Medicine as of the
Closing Date. Specifically, the Manager and the LLC will enter into a Sublease
for those portions of each of the buildings shown on Schedule 2b attached hereto
as a part hereof (collectively, the "Units") consisting of the medical office
space designated in such Schedule (collectively, the "Office Space").
c. Provision of Equipment. The Manager shall provide to the
LLC for use in its Practice of Medicine all fixtures, furnishings and equipment
existing in the Office Space (collectively, the "Equipment"). (The Office
Space and the Equipment, as repaired, replaced or maintained, shall be
sometimes referred to collectively as the "Demised Premises".)
d. Use of Demised Premises. The LLC acknowledges and agrees that the
Demised Premises meet and fulfill its commercially reasonable needs for office
space and equipment as of the Closing Date. The LLC shall use the Demised
Premises solely for purposes related to the Practice of Medicine. The LLC shall
use and occupy the Office Space in a safe and reasonable manner, in accordance
with applicable governmental laws, regulations and/or orders. The LLC shall use
the Equipment in a safe and reasonable manner and in accordance with reasonable
operating standards.
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e. Repair, Replacement and Return of Equipment. During the term of this
Agreement, the Manager, at the LLC's request and subject to the LLC's approval,
agrees to install, repair, maintain and replace, or cause to be installed,
repaired, maintained and/or replaced, the Equipment, including securing such
improved or enhanced equipment for the LLC as the Manager deems commercially
reasonable. The LLC shall promptly notify the Manager if any item of Equipment
requires repair or replacement. The LLC shall, upon the reasonable request of
the Manager, return all Equipment to the Manager in the same condition as of the
Effective Date of this Agreement (or such later date as of which any item of
Equipment was provided to the LLC), ordinary wear and tear, and obsolescence,
excepted.
f. Maintenance and Repair of Office Space. The Manager shall provide,
or cause to be provided, maintenance, repair and replacement of the systems and
related equipment to the extent necessary for the proper operation of the Office
Space and for the Practice of Medicine, including, but not limited to,
mechanical, heat, ventilation, air conditioning, lighting, electrical and
plumbing systems. The Manager shall also provide, or cause to be provided,
appropriate janitorial services consisting of daily trash removal and light
dusting and vacuuming of the Office Space, provided that the LLC shall leave the
Office Space in a reasonably tidy and clean condition at the end of each day,
and such other more substantial janitorial services the LLC may reasonably
request. The Manager shall also provide for the removal of hazardous medical
waste generated by the LLC at the Office Space, provided that the LLC shall
comply with applicable regulatory waste handling, disposal and packaging
standards.
g. Reasonable Access. The LLC agrees to allow the Manager reasonable
access to the Demised Premises, where such entry will not unreasonably interfere
with the LLC's use or occupancy, or with the provision of medical care or the
rights of any patient, in order to provide any of the services or fulfill any of
the duties of the Manager set forth in this Agreement, and/or to take steps the
Manager deems necessary for the safety, improvement or preservation of the
Demised Premises.
h. Changes, Additions or Improvements to Office Space. The LLC may from
time to time request that the Manager make reasonable changes, additions or
improvements to the Office Space in order to permit the LLC to engage more
efficiently in the Practice of Medicine or to enhance its profitability and,
subject to the limitations upon its leasehold or fee interest, the Manager will
endeavor to comply with such of the LLC's requests as it deems commercially
reasonable, provided that such changes shall comply with the applicable local,
state or Federal laws or regulations. The LLC shall not cause or permit
materialmen's, mechanics or other liens to be filed against the Office Space or
the Units or the interest of the Manager or any mortgagee in contravention of
any lease or mortgage, by whatever name, on the Office Space or the Units.
i. Taxes. The Manager shall pay before delinquency all real estate and
property taxes imposed upon the Office Space or the Units for which it is
responsible.
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The LLC shall pay before delinquency (and hereby authorizes the Manager to
pay on its behalf) all taxes, assessments, and other charges imposed upon the
LLC's operations or business conducted upon the Demised Premises, and/or
upon any property of the LLC located in the Demised Premises.
j. Insurance. The LLC shall maintain (and hereby authorizes
the Manager to acquire and maintain on its behalf) fire insurance with extended
coverage on the Demised Premises, business interruption insurance, general
liability insurance and professional liability insurance on any incidents
occurring in connection with the LLC' s occupancy and use of the Demised
Premises, all of which policies shall be in amounts deemed reasonable by the
Manager and shall name the Manager as loss payee and as an additional insured.
k. Indemnification. The LLC shall indemnify and hold the
Manager, its employees, agents, officers, and partners or stockholders, as
the case may be, harmless from and against any and all demands, claims,
judgments, losses and damages, and any related costs or expenses (including
reasonable attorneys' fees) arising from any injury or damage to person or
property caused by the negligence or the misconduct of the LLC, its agents,
servants or employees, or of any other person entering upon or using the
Demised Premises under the express or implied invitation of the LLC, or
resulting from the violation of laws or regulations, or violation of the terms
of this Agreement by any of the foregoing to the extent such injury or
damage is not covered by insurance or does not arise as a result of the
Manager's breach of its obligations to the LLC under this Agreement.
l. Assignment/Pledge/Encumbrance. The LLC may not, without the
Manager's prior written consent, assign, sell, pledge, mortgage, encumber or in
any manner transfer any interest in nor sublet the Demised Premises or any part
or item thereof, nor permit occupancy or use of the Demised Premises or any item
thereof by any other Person other than in the ordinary course of the LLC's
business.
m. Damage/Destruction/Casualty of Demised Premises. In the event all or
any portion of the Demised Premises is damaged or destroyed by fire or other
casualty, the Manager shall use commercially reasonable efforts to restore the
damaged, or replace the destroyed, Demised Premises as soon as reasonably
possible and to make provision for temporary or interim use of such assets or
facilities in lieu of damaged or destroyed Demised Premises as may be reasonably
required to permit the LLC to continue its Practice of Medicine with minimal
disruption. The Manager shall have one hundred eighty (180) days to make
replacements, repairs and restorations, using insurance proceeds and such other
monies as the Manager may elect to contribute. In the event the Demised Premises
cannot be repaired, restored or replaced within such time period, or in the
event the Manager determines in its sole judgment that such repair, restoration
or replacement is not cost effective, the Manager shall have the right to elect
to terminate the LLC's lease or use of such portion of the
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Demised Premises and to provide, pursuant to the terms hereof, such other
facilities, assets, equipment or office space as is reasonably appropriate to
permit the LLC and its physicians to resume its Practice of Medicine.
n. Subordination. The LLC agrees that this Agreement shall be
and is subordinate to the lien of any and all conditional sale agreements,
financing arrangements, mortgages, deeds of trust, and ground leases that may
now or hereafter be placed upon the Demised Premises, and to any and all
advances to be made thereunder, and to the interests thereon and all renewals,
consolidations, modifications, replacements and extensions thereof.
o. Sublease Renewals. The Manager will provide to the LLC reasonable
notice of the expiration of the Sublease pursuant to which any Office Space is
occupied by the LLC or the termination of the LLC's right to occupy any Office
Space under any other circumstances and will confer with the LLC concerning the
renegotiation, or renewal of such lease or other occupancy right and the removal
of the LLC to other premises.
3. OPERATIONAL DUTIES OF THE MANAGER.
a. General Managerial Duties. The LLC hereby appoints the Manager,
acting directly or through one or more wholly-owned subsidiaries, as its sole
and exclusive manager, agent and administrator for, and the Manager, for the
benefit and on behalf of the LLC, agrees to use its commercially reasonable
efforts to perform, each of the following management and support functions:
i. provide all general management services of and for the LLC,
including the establishment of operating and administrative policies and
procedures, general oversight of the operation of the LLC, strategic planning,
including specifically with respect to financing, market development,
advertising and marketing (including one or more public relations programs that
seeks to enhance each physician's medical practice and extend the LLC's ability
to provide services by creating public awareness of the LLC and its Affiliates),
operation and overall management and control, financial reporting, insurance,
tax matters (other than for individual physicians) and personnel management, and
the establishment of an integrated healthcare delivery system for the benefit of
the LLC, and the negotiation and administration of managed care agreements in
which the LLC and its Physicians will participate;
ii. negotiate and implement such acquisitions, by purchase,
lease, or other contractual arrangements, of equipment, goods or services for
the LLC as the Manager shall deem commercially reasonable;
iii. provide a competent administrative staff for supervision
and performance of the business and administrative functions of the LLC. Each of
the
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administrative staff shall be employees of and responsible to the Manager, but
all salaries, benefits and other expenses related to the employment of the
administrative staff by the Manager shall be deemed Business Costs of the LLC
and paid by the Manager as such;
iv. assist the LLC in identifying and consummating the
acquisition of the medical practices of additional primary care physicians
and/or physician groups to become Members and employees of the LLC and selling
their medical practices to DHS (provided, however, that the Manager shall have
no obligation to provide funding for any such acquisition except to the extent
that the Manger, in its sole discretion, determines to do so), and recruit,
employ, train, supervise and provide to the LLC such services of non-physician
professional staff personnel as may reasonably be required to permit the LLC to
engage in the Practice of Medicine, including specifically but without
limitation allied health professionals. Except in the case of non-physician
professionals who may be required to be LLC employees for billing purposes
("Incident To Employees"), the Manager shall have the authority to hire,
discipline and terminate non-physician staff after consultation with the
Physicians. In hiring, the Manager shall comply in all material respects with
requirements of Federal, state and local law with respect to both the business
and professional obligations of the LLC and employment, generally. Each of the
non-physician professionals except Incident To Employees shall be employees of
and responsible to the Manager, but all salaries, benefits and other expenses
related to the employment of the non-physician professional staff by the Manager
shall be deemed Business Costs of the LLC and paid by the Manager as such;
v. subject to consultation with and approval by the
LLC, furnish and install operating procedures, information and other systems
and controls as the Manager deems reasonable for the purpose of providing
effective management techniques and functions for the benefit of the LLC;
vi. upon consultation with the LLC and subject to the
LLC's approval, prepare annual budgets (including operating and capital
budgets), business plans, financial forecasts and operating plans for the LLC;
vii. prepare and distribute internally prepared monthly
statements of revenue and expense (including such statements regarding the
LLC and each Medical Faclity), and such other reports as the Manager may deem
appropriate, to the Management Committee;
viii. consistent with the reasonable policies established by
the Management Committee and the Quality Committee and the general parameters
established by any LLC budget and business plan then in effect, seek to manage
the non-professional aspects of the LLC's business efficiently and economically;
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ix. keep the Demised Premises and all other assets utilized by
the LLC, including improvements, furniture, furnishings, fixtures and other
equipment therein and appurtenant thereto, in reasonably good order and repair,
subject to ordinary wear and tear, and fully insured;
x. arrange for all commercially reasonable replacements,
improvements, supplies and changes in and to the Demised Premises and all
other assets utilized by the LLC, and in the furniture, furnishings, fixtures
and other Equipment;
xi. provide for and keep accessible to the LLC proper
financial and business books of account and other records, all of which
shall be open to inspection and examination and copying at the expense of the
LLC at any reasonable time during normal business hours;
xii. subject to the provisions of Section 3.m below, pay in a
timely manner through disbursements of funds from the LLC Accounts all of the
direct and indirect costs and expenses reasonably incurred (whether directly or
indirectly) in connection with the operation and administration of the LLC's
Practice of Medicine (including in such Practice of Medicine all laboratory,
testing and other ancillary services), whether incurred directly by the LLC or
by the Manager on behalf of the LLC ("Business Costs"), including without
limitation, the following charges (or, where applicable and consistent with
Section 3.m hereof, a reasonable allocative share of such charges): (a) all
personnel costs attributable to the LLC and its Practice of Medicine, including
(1) all Base Salaries and Base Bonus (as those terms are defined in the LLC's
Professional Services Employment Agreement (the "Employment Agreement"), a copy
of which is attached hereto as Exhibit 3.a(xii)) and benefits (but not
additional bonus payments, it being the express intent of the parties that the
LLC will fund any additional bonus payments to employee physicians from Managed
Care Incentive Payments and other sources) for physicians employed by the LLC,
(2) salaries, wages, bonuses and all benefits of professional and administrative
staff employed by the Manager to provide services directly to the LLC or its
employee physicians in their Practice of Medicine, but excluding employees whose
services are provided directly to the Manager (and only indirectly to the LLC)
to enable the Manager to provide managerial and other administrative services
generally to the LLC and to any Additional Primary Care Entities or other
healthcare providers with which the Manager contracts, (3) salaries,
professional fees or other compensation, including bonuses and all benefits, of
all physicians and non-physician professionals and all other persons employed,
contracted or otherwise retained by the Manager to provide professional health
care services or other services or goods to the LLC or to the LLC's patients or
customers, and (4) all employee or personnel benefits, employee insurance costs,
payroll taxes and all premiums and charges for workmen's compensation; (b)
maintenance, replacement and repair charges and costs; (c) expenses for supplies
for the Office Space and Equipment; (d) all office and other administrative
expenses,
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including office and medical supplies, of the LLC; (e) dues and license
fees and other professional expenses for LLC employees and Manager
employees providing services to the LLC; (f) water and sewer, gas, electricity,
telephone and other utility charges; (g) premiums for insurance or bonds
reasonably related to the LLC and amounts deducted from insurance proceeds
pursuant to policy terms; (h) all taxes, assessments, fees, charges and similar
expenses relating to the LLC or the operation thereof; (i) charges for other
equipment, goods, services (including professional and consulting services) and
utilities supplied to or for the benefit of the LLC; (j) all acquisition, lease
and financing expenses and payments, including all leasehold expenses relating
to Office Space, for the benefit of or relating to the LLC; and (k) such other
expenses and charges as would normally be considered as capital, operating or
other expenses of the LLC under recognized and customary accounting principles
and practices, including expenses incurred by the Manager on behalf of the LLC.
The order of disbursement is as set forth in Section 3.m below.
Notwithstanding the foregoing, the LLC's Business Costs shall not
include, and the Manager shall have no obligation either to pay from the LLC
Collected Cash or otherwise, any costs, expenses or other charges incurred by
the LLC or presented to the Manager as a result of: (a) any action taken by the
LLC with respect to the employment terms and conditions, including termination
of employment, of any of its employee physicians to which the Manager has not
consented in writing; (b) any breach or deficiency in performance by the LLC or
any of its employee physicians of or under any contract to which the LLC is a
party or which was negotiated by the Manager on behalf of the LLC unless such
breach or deficiency occurs or arises as a result of the Manager's breach of its
obligations to the LLC; (c) violation of or failure to comply with any statute,
law, regulation, ordinance, interpretation, decision or other similar
requirement of any federal, state, or local political jurisdiction, or of any
agency, commission, board or other similar entity of any of the foregoing
jurisdictions or any professional organization with jurisdiction or authority
over the ability of the LLC or any of its employee physicians to engage in the
Practice of Medicine unless such violation or failure to comply arises as a
result of actions or conduct on the part of DHS; (d) any willful or negligent
act or omission of the LLC or any of its employee physicians that results or may
result in an award of damages against the LLC or such employee physician whether
in tort, contract or otherwise; or (e) any act or omission on the part of the
LLC or any of its employee physicians constituting fraud, willful
misrepresentation or other similar conduct.
xiii. pay in a timely manner any Managed Care Incentive
Payment to which the LLC is entitled pursuant to the provisions of Section 5
hereof with respect to any MCIP Year to permit the LLC to reward and provide
appropriate incentives to its physician employees, all pursuant to the terms of
Section 5 hereof; and
xiv. perform all other acts reasonably necessary or desirable
in the operation and maintenance of the LLC in accordance with the terms and
conditions of
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this Agreement, except that the Manager shall not provide medical or related
professional services or engage in the Practice of Medicine.
b. Billing and Collection.
(i) During the term of this Agreement, the LLC hereby assigns,
transfers and conveys to the Manager all of the LLC's currently existing and
future accounts receivable with respect to all medical services previously
provided or in the future to be provided by the LLC (but not including any
Medicare or Medicaid payments currently owing, or which in the future become
owing, to the LLC) (collectively, the "Non-Medicare Receivables"). The Manager
shall xxxx for and endeavor to collect all such Non-Medicare Receivables
(reserving the right to send, with simultaneous notice to the LLC, selected
past-due accounts to a collection agency) and issue receipts therefor, if
required. Furthermore, subject to the Manager's obligations under Section 3.c
hereof with respect to the establishment of the bank accounts described therein,
the Manager shall be entitled to take any such action consistent with the
provisions of this Agreement with respect to the Non-Medicare Receivables as it
deems appropriate in the exercise of its discretion in order to fulfill its
obligations to the LLC under this Agreement. The LLC shall execute such other
documents and agreements as may be necessary to more fully and effectively
transfer the Non-Medicare Receivables to the Manager. The Manager shall serve as
billing and collection agent for the LLC with respect to any Medicare and/or
Medicaid payments currently owing, or which in the future become owing, to the
LLC (the "Medicare Receivables") and shall xxxx for and endeavor to collect all
such Medicare Receivables owed to the LLC (reserving the right to send, with
simultaneous notice to the LLC, selected past-due accounts to a collection
agency) and issue receipts therefor, if required. The LLC hereby appoints the
Manager as its agent and attorney-in-fact for the collection of the Medicare
Receivables. The Manager shall deposit all the Medicare Receivables and all of
the other monies collected by it as the LLC's billing agent and attorney-in-fact
in the bank accounts described in Section 3.c hereof.
(ii) As part of its billing responsibility, the Manager
will use its commercially reasonable efforts to:
(A) provide to the LLC, monthly, such reasonably
detailed reports with respect to the LLC's accounts receivable, billing and
collection status, including charges, receipts, and insurance classifications
of patients as the LLC may from time to time reasonably request;
(B) should this Agreement be terminated, upon
request therefor, provide the LLC with a complete listing and print out of
all active patient accounts, all Medicare and third party insurer active
billing records, all demographic and charge data, and a final report
detailing all data and information pertinent to the LLC's accounts, in
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accordance with the normal reporting capability of the billing system or
contractor, if any, utilized for the LLC's billing by the Manager; and
(C) use reasonable care in processing and storing the
LLC's data and records.
(iii) The parties recognize that the Manager cannot xxxx or
collect for services provided by and through the LLC unless and to the extent
that the LLC Physicians perform in a timely manner certain administrative duties
related to billing, including but not limited to the completion of medical
records and the submission of billing information in the form and format
reasonably requested by the Manager.
(A) The LLC warrants that it will require
that each LLC Physician will be required, as part of his or her Employment
Agreement, to agree to grant to the LLC the right to withhold payment of any
amount due Physician under his or her Employment Agreement during any period
when such Physician has failed to comply with commercially reasonable written
standards communicated to the Physicians ("Standards") for timeliness and
diligence to be adopted by the LLC with respect to each of the following: (i)
Completion of appropriate medical records for patients of the Physician;
(ii) Maintaining the office hours agreed upon by Physician and the LLC; (iii)
Completion of all information reasonably requested by the LLC or its billing
agent in connection with billing and collecting for services provided by or
ordered by the Physician; or (iv) Compliance with the requirements of managed
care programs with respect to utilization review, prior approval or review, or
referral protocols.
(B) The LLC agrees that it shall adopt and set
such Standards in consultation with the Manager. The Manager has proposed
interim Standards set forth in Exhibit 3.b(iii)(B) which shall be applicable
during the Initial Base Salary Period until the Standards described in
Section 3.b(iii)(A) have been established by the LLC. The LLC expressly
grants to the Manager the right to require enforcement by the LLC of each
of the covenants and rights to adjust or withhold payments to LLC Physicians,
including the right to withhold for failure to comply with the Standards
contained in Section 6.4(c) of the Employment Agreement. In the event that
the LLC fails to enforce such Standards at the Manager's request, the
Manager's obligations to advance any Physician Compensation Deficiency (as
defined in Section 3.m(iv)) shall be suspended during the period of any such
non-compliance.
c. Bank Accounts.
i. The Manager has opened the bank accounts described in this
Section 3.c.i for the purpose of depositing, disbursing and otherwise
administering the Collected LLC Cash (as defined in Section 3.m). The Manager
shall establish policies and procedures reasonably satisfactory for managing and
administering such accounts, including designation and authorization of persons
authorized to sign checks. The
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Manager may, upon reasonable notice to the LLC, open in the Manager's name
such other bank accounts, including without limitation interest bearing
accounts and reserve accounts, as it may deem appropriate. The Manager may
also transfer Collected LLC Cash between any or all such accounts as it may
establish hereunder. Until disbursed by the Manager in payment of the LLC's
Business Costs or the Manager's Compensation from such accounts, the
Collected LLC Cash (other than such portion attributable to the Non-Medicare
Receivables) shall be and remain the property of the LLC. The Manager
shall deposit, disburse and administer the Collected LLC Cash as follows:
A. The Manager, as the agent of the LLC, will from time to time
maintain accounts with one or more financially secure banking
institutions, into which it shall deposit promptly upon receipt
all Collected LLC Cash which it receives as the agent of the LLC
and on the LLC's behalf from Medicare and Medicaid and in respect
of goods and services provided pursuant to the Medicare and
Medicaid programs (collectively, the "LLC Medicare Account").
B. The Manager will from time to time maintain accounts with one
or more financially secure banking institutions, into which it
shall deposit promptly upon receipt all of the Collected LLC Cash
it receives from any sources other than those described in Section
3.c.i.A above (collectively, the "LLC Cash Account") (the LLC
Medicare Account, the LLC Cash Account and any other bank accounts
established by the Manager hereunder are hereinafter collectively
referred to as the "LLC Accounts").
ii. The Manager shall utilize the cash deposited in the LLC
Accounts for the purposes of paying the LLC Business Costs and the Manager's
Compensation according to the terms and conditions set forth in Section 3.m.
Subject to the requirements of applicable law, the Manager may transfer funds
from the LLC Medicare Account to the LLC Cash Account in its discretion.
d. Consultants. Subject to the approval of the LLC, the Manager
may engage on behalf of the LLC consultants to provide specialized services
outside the normal scope of management services, including, but not limited
to, legal representation, public accounting and labor relations. All
reasonable charges for outside consultants will be LLC Business Costs.
e. Personnel. The Manager shall maintain supervisory control over its
personnel involved in providing to the LLC the assets, facilities and services
contemplated hereunder. The Manager will consult with the Quality Committee if
the LLC informs the Manager of any dissatisfaction with the performance or
staffing level of the Manager personnel without, however, surrendering any of
the Manager's discretion over the employment, discipline and other conditions of
employment related to the Manager employees.
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f. Consent. In any instance in which the Manager is required under the
terms of this Agreement to obtain the LLC's or the Management Committee's
consent or approval in connection with any proposed action, expenditure or
decision of any type, if the Manager's recommendations are not approved and
consent or approval is not received, the Manager shall have no responsibility to
the LLC with respect to the subject matter of the proposed action, expenditure,
or decision other than to act as directed by the Management Committee or to
maintain the status quo if no direction is received. The Manager shall not be
considered to be in violation of this Agreement or any part thereof as a result
of, or in connection with, any matter in which the LLC or the Management
Committee did not consent to or approve any action proposed by the Manager;
unless and to the extent the Manager shall fail to act as directed by the LLC or
the Management Committee or to maintain the status quo.
g. Contracting. The LLC hereby authorizes the Manager as its sole and
exclusive agent to negotiate and enter into, administer and terminate all
contractual arrangements between the LLC and Persons to whom the LLC provides
goods or services or from whom the LLC receives goods or services or with whom
the LLC contracts to provide medical professional or other services to the LLC's
patients or customers. The LLC hereby constitutes the Manager as the LLC's sole
and exclusive agent and attorney-in-fact for the purpose of executing the
authority granted the Manager pursuant to this Paragraph 3.g. The contracting
authority afforded the Manager hereunder includes, without limitation, the
authority to contract with hospitals, other physicians (including specialists),
hospices, nursing homes, pharmacies, laboratories, providers of transportation,
home health care providers, nurses, and other non-physician health care
providers, medical equipment providers and other providers of medical
professional services and other health care services, patients, customers,
insurance companies, health maintenance organizations and other managed care
entities, employers, administrators and other third-party payors of patient care
services or goods provided by the LLC. The Manager shall secure the LLC's prior
consent to enter into any contract on behalf of the LLC for goods or services
for which the LLC will be responsible, but which will not be directly provided
by the LLC through its employees.
h. Patient Records. The Manager shall provide to the LLC all patient
records of the LLC's physician employees and shall maintain and retain records
of all professional services provided by the LLC to its patients directly or
through contracts with other providers of medical professional services or other
health care services. The Manager shall maintain a complete file within the
LLC's offices of all such medical records and supporting documents.
i. Marketing. The Manager shall provide to the LLC, directly
or through consultants, practice development assistance, including but not
limited to advertising, promotional and media materials and one or more public
relations programs designed
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to enhance each physician's medical practice and extend the LLC's ability to
provide services through increased public awareness of the LLC and its
Affiliates.
j. Utilization Management; Quality Assessment and Improvement.
The Manager shall provide ongoing reviews of the LLC's utilization management,
and shall conduct quality assessment and improvement activities for the LLC,
including monitoring of patient satisfaction.
k. Regulatory Compliance. The Manager shall advise the LLC regarding
compliance with all applicable state and Federal laws and regulations, including
Medicare regulations and policies concerning primary care physician services.
Notwithstanding the above, it shall be the LLC's sole responsibility to comply
with all such applicable state and Federal laws and regulations, including
Medicare regulations and policies concerning primary care physician services.
l. Commercial Reasonableness. Notwithstanding any other provision of
this Agreement, all obligations of the Manager hereunder, including, without
limitation, the obligations of the Manager to provide assets, facilities, and
services to the LLC in connection with the LLC's Practice of Medicine, shall be
limited, and shall be interpreted according to, a standard of commercial
reasonableness appropriate for application to primary care Medical Practices in
the Xxxxxxxxxx County, Maryland, as determined by the Manager. The Manager, in
the performance of its obligations hereunder, including without limitation the
provision of assets, facilities and services to the LLC, shall in no event be
required to do anything or to make available to the LLC any asset, facility or
service, that the Manager in good faith believes is not commercially reasonable
and, subject to review under the provisions of Sections 7.b and 7.c hereof, the
Manager shall have no duty to do, or omit to do, anything that is, in the
discretion of the Manager, commercially unreasonable.
m. Disbursement of LLC Collected Cash. The Manager shall be obligated
to, and shall, pay the LLC's Business Costs only out of and from the cash that
the Manager actually collects in respect of and from the LLC's Non-Medicare
Receivables, with respect to which the Manager is appointed as the LLC's agent
as provided in Section 3.b hereof, and with respect to the LLC's Non-Medicare
Receivables assigned, transferred and conveyed to the Manager pursuant to such
provision, and with respect to any other amounts which the Manager collects or
receives on behalf of the LLC (collectively, the "Collected LLC Cash"). The
order of priority for the use of the Collected LLC Cash is as set forth in this
Section.
(i) If the Collected LLC Cash is or will be insufficient to
permit the Manager to pay all of the LLC's Business Costs in the ordinary course
of business as such Business Costs accrue, the Manager shall pay or provide for
such LLC Business Costs in the following order of priority: first, the Manager
will pay or provide for the payment of all LLC Business Costs ("Base Business
Costs") other than the Base
13
Salaries, Base Bonuses and Additional Bonuses of all physicians employed by
the LLC who are also members of the LLC ("Member Physicians"); Second,
the Manager will pay or provide for the payment of all the Base Salary and
benefits of all Member Physicians ("Base Salaries"); and third, the Manager
will pay or provide for the payment of all the Base Bonuses and Additional
Bonuses ("Bonuses"), as those terms are defined in each Member Physician's
Employment Agreement. The provisions of subsections (ii) and (iii) shall
govern in the event that the Manger determines that there is or will be
insufficient Collected LLC Cash to pay Base Salaries or Bonuses.
(ii) During the term of this Agreement, to the extent there is
insufficient Collected LLC Cash to pay to or for the benefit of the Member
Physicians the aggregate of all Base Salaries (each such deficiency a "Base
Salary Deficiency") with respect to any time period, available funds shall be
applied by the Manager on behalf of the LLC to reduce the Base Salary Deficiency
in the following order, with each funding source being depleted before
proceeding to the next funding source: (1) All available Net Ancillary Service
Collections received by the LLC; (2) The LLC's portion of the aggregate of the
Practice Growth Amounts, as defined in each Employment Agreement; (3) Any or all
of the MCIP payment undistributed to the LLC; (4) Any management fees earned by
the Manager with respect to Ancillary Services under Section 4.b of this
Agreement; and (5) the Manager's portion of the aggregate of the Practice Growth
Amount, discussed in Section 4.c of this Agreement. If a Base Salary Deficiency
exists after the exhaustion of all of the above listed funding sources, the
Manager shall nonetheless fund the amount of the Base Salary Deficiency to the
LLC to enable the LLC to make such payments.
(iii) To the extent there is insufficient Collected LLC Cash
to pay to or for the benefit of the Member Physicians the aggregate of all
Bonuses when due them with respect to any year (each such deficiency a "Bonus
Deficiency"), funding shall be applied to reduce the Bonus Deficiency in the
following order, and only to the extent that Base Business Costs and Base
Salaries have been funded, with each funding source being depleted before
proceeding to the next funding source: (1) All available Net Ancillary Service
Collections received by the LLC; (2) The LLC's portion of the aggregate of the
Practice Growth Amounts, as defined in each Employment Agreement; (3) Any or all
of the MCIP payment undistributed to the LLC; (4) Any management fees earned by
the Manager with respect to Ancillary Services under Section 4.b of this
Agreement; and (5) the Manager `s portion of the aggregate of the Practice
Growth Amount, discussed in Section 4.c of this Agreement. If a Bonus Deficiency
remains after the application of the funding sources as specified above, then
the Manager may, but shall not be required to, elect to advance funding to the
LLC to pay all or a portion of the remainder of the Bonus Deficiency, in which
case the Manager shall have the right to offset the amount of the advance, plus
the carrying cost of the funds, against the amounts then or thereafter owing or
accruing to the LLC. The amount of any Bonus Deficiency shall, for purposes of
the calculation of the Compensation pursuant to Section 4 hereof, be deemed a
"Base Business Cost" until
14
any funds advanced to cover any Bonus Deficiency have been paid in full. In the
event the Manger does not elect to advance all or any portion of the Bonus
Deficiency to the LLC, then, unless the Manager consents in writing, the LLC
shall accrue and defer any unpaid Bonus Deficiency otherwise due to Physicians
as contemplated by Section 6.3 of each Employment Agreement.
(iv) "Base Salary Deficiency" and "Bonus Deficiency" shall
be referred to collectively as "Physician Compensation Deficiency."
4. COMPENSATION OF THE MANAGER; OBLIGATIONS OF THE LLC.
a. Compensation. In consideration of the assets, facilities
and services provided by the Manger to the LLC pursuant to this Agreement,
the LLC hereby authorizes the Manager to pay to itself on behalf of the LLC
from the LLC Accounts, and the Manager shall be entitled to receive from
the LLC, Compensation (the "Compensation") calculated and paid according to
the terms of this Section 4.
b. Net Ancillary Services Collections. All amounts collected, billed or
derived from, or otherwise with respect to, the provision of ancillary services
in the LLC, including but not limited to, laboratory services, radiology
services, or any other service classified as a designated health service for the
purpose of the prohibition on physician self-referral contained in the Social
Security Act ("Ancillary Services") shall be considered Ancillary Services
Revenue. The Manager shall calculate all direct expense of providing Ancillary
Services (excluding any physician expense), and subtract the direct expense from
all revenue collected with respect to Ancillary Services to identify "Net
Ancillary Services Cash Collections". The Manager shall retain, and pay to
itself on a monthly basis, an amount equal to forty percent (40%) of the Net
Ancillary Services Cash Collections as part of its Compensation, with the
remaining sixty percent (60%) being the "Net Ancillary Services Collections"
which shall be credited to the account of the LLC and made available to pay LLC
Business Costs. To the extent that the Net Ancillary Services Collections are
not required to pay LLC Business Costs due or accrued with respect to any year,
or used to pay all or a portion of any Physician Compensation Deficiency under
Section 3.m, the Manager shall pay over to the LLC the remainder of the Net
Ancillary Services Collections to the LLC for distribution to the physicians
following the end of any applicable year as part of the Additional Bonus Pool.
The LLC warrants that it shall distribute Net Ancillary Services Collections
among the physician members of the LLC in accordance with a plan of distribution
that has been previously adopted by the LLC and approved by the Manager and
which does not, directly or indirectly, take into account the volume or value of
any referrals for such services by any physician in the LLC.
c. Practice Growth Bonus. "Practice Growth Amount" has the meaning
attributed to it in Section 6.3 of each Employment Agreement. At the end of
every year, the Manager shall calculate the Practice Growth Amount for each
Member
15
Physician in the LLC, and shall retain and pay to itself thirty-eight percent
(38%) of each Member Physician's Practice Growth Amount, as part of its
Compensation (the "Practice Growth Bonus Amount").
d. Base Compensation. The amount of the Manager's Base Compensation in
each year shall be the amount determined by (i) subtracting the total amount of
(A) all LLC Business Costs (which, with respect to any month in which there are
Physician Deficiencies outstanding, shall include the aggregate of all such
deficiency amounts) that the Manager pays or is obligated to pay through
disbursements from the LLC Accounts or provides for by transfers to reasonable
reserves established by the Manager, and (B) all bank fees, charges and other
deductions from the LLC Accounts made by the depository bank, during a calendar
month from (ii) the amount of (A) all Collected LLC Cash deposited by the
Manager in the LLC Accounts, and (B) all interest earned on or other amounts
credited to the LLC Accounts by the depository bank, during such calendar month;
and (iii) subtracting from the resulting number any amounts paid to or retained
by the Manager under the provisions of Section 4.b and 4.c above for the year in
question. The Manager's Compensation shall be calculated and paid on or before
the tenth day of the month following the month for which payment is being made.
The Manager's Compensation shall be paid only out of Collected LLC Cash
remaining in the LLC Accounts after all LLC Business Costs (which, with respect
to any month in which there are Base Salary Deficiencies outstanding, shall
include the aggregate of all such deficiency amounts) have been paid or provided
for, including the accruing of any reserves for the Net Ancillary Services
Collections and the Practice Growth Bonus Amounts as the Manager shall consider
appropriate. Adjustments in the amount of the Compensation for any year, if any,
may be made after review of settled bank statements by the independent certified
public accountants retained by the Manager to review the financial records of
LLC (which may be the Manager's accountants). The Manager shall permit the LLC's
accountants to review the Manager's calculation of its Compensation annually and
any disagreement or dispute between the LLC and the Manager relating to the
amount of the Compensation resulting from such review shall be subject to the
dispute resolution procedures of Section 7.b and 7.c hereof. The Manager shall,
if necessary, increase or decrease, as the case may be, the Compensation next
payable after its receipt of the results of such review (including dispute
resolution, if any) to reflect such results.
e. General Covenants of the LLC. The LLC acknowledges that the Manager
has undertaken to provide significant assets, facilities and services to the LLC
pursuant to this Agreement in reliance upon the LLC's undertaking diligently to
engage, and to use its best efforts to cause its physician employees diligently
to engage, in the Practice of Medicine. The LLC therefore covenants and agrees
that it will diligently engage in the Practice of Medicine in Xxxxxxxxxx County
and will use its best efforts to cause its physician employees diligently to
engage in, and to devote their full-time professional efforts to, the Practice
of Medicine in Xxxxxxxxxx County. The LLC further covenants and agrees that it
will use its best efforts to meet or exceed the
16
financial, professional service and other standards established for the LLC
in the business plans and budgets prepared for the LLC by the Manager and
approved by the Management Committee and, in furtherance thereof, will
engage, and use its best efforts to cause its physician employees to engage, in
the Practice of Medicine in the most efficient and economical manner possible,
consistent with all applicable professional and ethical standards and a
standard of commercial reasonableness appropriate for application to Medical
Practices in Xxxxxxxxxx County and any other areas in which the LLC may have
physician practices, including, specifically, those matters set forth in
Section 4.g below.
f. Authorization of Payments. The LLC acknowledges and agrees that its
intent in entering into this Agreement with the Manager is to secure from the
Manager all of the assets, facilities and non-physician services required by the
LLC to permit it to engage in the Practice of Medicine and, in furtherance
thereof, to enable and permit the Manager to pay, from the Collected LLC Cash in
the LLC Accounts, all of the reasonable costs and expenses of providing such
assets, facilities, and services, however and by whomever incurred, by making
disbursements of such Collected LLC Cash directly to providers of assets,
facilities or services or to the LLC or to the Manager itself in reimbursement
of costs or expenses incurred by either of them. The LLC thus covenants and
agrees that the Manager shall be entitled, and is hereby authorized, to disburse
from the Collected LLC Cash in the LLC Accounts such funds as are required to
pay all of the reasonable costs and expenses of providing assets, facilities and
services directly to the LLC pursuant to this Agreement, it being the express
understanding of the LLC that the Manager may provide assets, facilities and
services directly to Additional Primary Care Entities and other medical service
providers, and that such allocations of costs incurred for the direct benefit of
both the LLC and one or more Additional Primary Care Entities or other medical
service providers will be necessary. The Manager shall, in its discretion,
establish the basis for allocating each category of direct cost and the Manager
agrees to exercise such discretion in a manner that results in the establishment
of a basis for allocation of direct costs that is reasonable and fair to the LLC
and to each Additional Primary Care Entity and any other provider entity to
which such costs are allocated. Disputes, if any, regarding such allocations
shall be resolved first through the Quality Committee and thereafter through the
other procedures established in Sections 7.b and 7.c hereof. The Manager may, in
its discretion, involve or join as parties to such procedures any other medical
service provider involved directly or indirectly in a dispute between the
Manager and the LLC or join the LLC as a party in any dispute between the
Manager and any other service provider that relates to the LLC.
g. Covenants of the LLC and each Physician. Without limiting the
foregoing provisions of Section 4.e above, or the duties of any physician set
forth in any Employment Agreement with the LLC, the LLC agrees to provide, and
to use its best efforts to ensure that each of its physician employees and
contractors provides, at
17
least the following services to DHS and to DHS/LLC patients and otherwise
complies with the following provisions:
(i) Medical Services. With respect to any managed care
contract, provide health care services, as an independent contractor to the
Manager, including Medicare services, and charity care in accordance with the
policies, procedures, guidelines, and requirements of the Manager and the
Quality Committee as are now in place or may hereafter be established. Emergency
and immediate health care services shall be provided by the LLC without regard
to ability to pay.
(ii) On-Call Coverage. Provide such night and weekend
on-call coverage as from time to time is determined by the Manager and the
Quality Committee to be necessary to make services as readily accessible
to the community as possible.
(iii) Supervision. Monitor and review the clinical performance
of all staff, allied health professionals, and the LLC's physicians, in
cooperation with the Manager and the Quality Committee.
(iv) Quality Assurance and Peer Review. Establish, with the
cooperation and involvement of the Manager and the Quality Committee, policies,
procedures and committees for quality assurance and peer review of all
physicians providing services to the Manager, cooperate fully with the policies,
procedures and activities of such committees, and conduct peer review
disciplinary activities in accordance with Maryland law.
(v) Recommendations. Conduct periodic reviews of medical and
related staffing to consider the needs of the LLC and/or the Manager for
additional primary care physicians, staff, allied health professionals and other
non-primary care physicians, and report the results of such reviews to the
management of the Manager and the Quality Committee; and provide such other
review and reports to the Manager and the Quality Committee as reasonably
requested by the Manager's management.
(vi) Surveys. Assist the management of the Manager with
all preparation for any inspections and on-site surveys of the Manager conducted
by governmental agencies and accrediting organizations.
(vii) Managed Care Contracts. Assist and cooperate with the
Manager in negotiating and developing managed care contracts, participate in any
preferred provider network established by or through the Manager or its
Affiliates, and provide services to all Managed Care Members covered by a
managed care plan that is entered into by the Manager, comply with the terms of
managed care contracts that are negotiated by the Manager for the benefit of the
LLC, and comply with all applicable Federal and state laws and managed care plan
terms affecting the Manager and the LLC.
18
(viii) Records. Maintain all necessary and appropriate medical
records reflecting health care service provided to patients seen by LLC
physicians in a manner that is consistent with applicable law and that ensures
that the Manager has satisfied all applicable requirements for Payor contracts
and participation in public and private payment programs.
(ix) Administrative Duties and Marketing. Cooperate with the
Manager's policies, procedures and activities pertinent to marketing, patient
relations, scheduling, billing, collections and other administrative matters,
and cooperate with the Manager`s efforts to xxxx and collect fees for services
rendered to patients.
(x) Litigation. Cooperate in all litigation matters affecting
the LLC and/or the Manager.
(xi) Education. Cooperate with the Manager and the Quality
Committee in the development and provision of all educational programs offered
by the Manager, and devote reasonable time and effort to such programs.
(xii) Utilization Review. Cooperate fully with the utilization
review policies, procedures and activities of the Manager, the Quality Committee
and third party payors. The LLC shall assist the Manager and the Quality
Committee in conducting utilization reviews all of the LLC's physicians.
(xiii) License. Ensure that the LLC's physicians at all
times are licensed to practice medicine in the State of Maryland or other
jurisdictions approved by the Manager;
(xiv) Policies. Ensure that the LLC's physicians comply
with all applicable laws, rules and regulations of any and all governmental
authorities and the policies and procedures of the Manager and third party
payors;
(xv) Hospital Privileges. Ensure that each of the LLC's
physicians possesses and maintains staff privileges on the medical staff of
those hospitals and institutions set forth on Exhibit 4.3(a)(ii) of each such
physician's Employment Agreement, and such other hospitals and institutions as
the Manager and the LLC shall agree upon.
(xvi) Patient Care. Ensure that the LLC's physicians providing
professional services to the LLC and the Manager shall at all times provide only
those medical services that he or she is qualified to deliver, and shall provide
such services in a manner that is consistent with the patient's best interests.
(xvii) Credentialling. Cooperate with the Manager and the
Quality Committee in establishing, criteria, policies and procedures for
purposes of credentialling all of the LLC's physicians. Such credentialling
criteria, policies and
19
procedures shall be established in accordance with all community medical
practice standards, all applicable laws, and the minimum participation
criteria developed by the Manager and the Quality Committee. All of the LLC's
physicians shall be required to comply with such credentialling criteria. All
decisions with respect to credentialling shall be reached as follows:
(A) LLC Member Physicians. The Manager and the LLC
shall consult with each other regarding the selection of, and negotiations
with, LLC Member Physicians, and
(B) Other Physicians. The Manager and the LLC
shall consult with each other regarding the selection of and negotiations with
non-Member Physicians, but the LLC may, subject to minimum participation
criteria approved by the Manager, make decisions regarding the selection of
non-Member Physicians.
(xviii) Physician Agreements. The LLC shall enter into and
maintain Professional Services Employment Agreements or other employment
agreements reasonably acceptable to the Manager with all the physicians employed
by the LLC. The LLC shall consult with the Manager and the Quality Committee
regarding the final terms of all such employment agreements prior to the
execution thereof and any amendments, or terminations, of such agreements. It is
understood and agreed that the Manager is not and shall not become a party to
any Professional Services Employment Agreements or other employment agreements
between the LLC and its physicians.
(xix) Physician Obligations. The LLC shall be responsible for
ensuring that each of its physicians comply with the following requirements, all
of which have been incorporated by reference into the Professional Services
Employment Agreements with each physician. The LLC shall confer with the Manager
concerning the performance of its employee physicians of and under their
employment contracts generally and prior to taking any action to terminate any
such employment agreement. The LLC, at the Manager's request agrees to take any
reasonable action requested to enforce compliance, including, but not limited to
terminating such Physician's employment with the LLC and/or seeking sanctions
against such Physician:
(A) Each LLC physician shall abide by the terms and
conditions of the applicable provisions of this Agreement.
(B) Each LLC physician shall be bound to all
components of all agreements executed between the Manager and third party
payors. Furthermore, each physician shall abide by all operating rules and
regulations of any managed care plan for elements pertaining, but not limited
to the maintenance of medical records, the confidentiality of records, the
filing of claims, and the non-discrimination in treatment of its members.
20
(C) Each LLC physician shall be free to exercise
absolute discretion in the conduct of any and all activities which may
reasonably be considered as constituting the practice of medicine. The
professional responsibility to patients for the delivery of health care
services under this Agreement shall at all times remain with each LLC physician.
The Manager shall not interfere with the professional judgment of any of the
LLC's physicians in the provision of professional health care services.
(D) Each LLC physician shall be required to
participate in and cooperate with the utilization review programs of third
party payors and of the Manager. Any determination under a utilization
review program that services provided or proposed to be provided are not
medically necessary or not otherwise appropriate shall in no case be construed
as a substitute for the professional judgment of each LLC physician; rather,
such findings are intended to be and shall be limited to the determination
of reimbursement for services only, it being understood that all decisions
regarding the nature and extent of services to be provided, as well as the
choice of provider, are and will be made exclusively by each LLC physician and
his or her patient.
(E) Each LLC physician agrees that his or her
practice patterns will be profiled and will be reviewed by his or her peers,
and that participation in any of the Manager`s preferred provider networks
will be dependent upon maintaining satisfactory profiles which are within
the Manager's and the Quality Committee's standards of acceptable medical
practice.
(F) Each LLC physician shall refer patients to
other physicians only when it is deemed to be medically necessary and in the
best interest of such patients. When referrals are required, each LLC physician
shall use his or her best efforts to refer to other physicians who are
participating in any of the Manager's preferred provider networks then in
effect, and to utilize hospitals and other health care providers that are
participating in any such preferred provider network; provided, however,
that no LLC physician shall be required to refer a particular patient to any
specific physician or to admit such patient requiring hospitalization to any
specific hospital if such LLC Physician, in the good faith exercise of his or
her professional judgment, believes that the medical needs of such patient
would be better served elsewhere.
(G) Each LLC physician shall accept Managed Care
Members as new patients and treat current patients should they become Managed
Care Members, provided that no LLC physician shall be required to accept
additional patients if he is already working at full capacity, as determined
by such physician and the LLC jointly in the reasonable exercise of their
discretion.
(H) Each LLC physician shall abide by decisions
resulting from utilization review programs of the Manager, the Quality Committee
and/or third party payors, subject to any applicable rights of reconsideration
or review. Each LLC
21
physician shall pursue all appropriate opportunities for reconsideration and
appeal of denials of payment by third party payors.
(I) Each LLC physician shall provide to any
designated utilization review programs(s) any medical or other information
necessary to conduct preadmission certification and continued stay review for
all covered services to be rendered to Managed Care Members.
(J) Each LLC physician shall allow each third party
payor or its designee to review and duplicate any data or other records
maintained regarding services provided under this Agreement as may be
necessary to conduct the utilization review program. Such review and
duplication shall be allowed upon reasonable notice during regular business
hours and shall be subject to all applicable laws, regulations and the
Manager's policies concerning the confidentiality of such data or records.
(K) Each LLC physician shall use his or her best
efforts to obtain precertification for those services designated by any
utilization review program(s) as requiring precertification, and shall use his
or her best efforts to notify the designated utilization review program of
emergency or urgent inpatient admissions within forty-eight (48) hours after
admission.
(L) Each LLC physician shall cooperate as reasonably
required to verify that Managed Care Members are eligible for covered services.
(M) Each LLC physician shall prepare and maintain
appropriate records concerning health care services provided under this
Agreement. All such records shall be maintained in accordance with prudent
record keeping procedures, and as otherwise required by law.
(N) Notwithstanding anything provided herein to the
contrary, ownership of and access to all patient records shall be controlled
by the applicable state and federal law. All medical, financial, and personal
information about patients reviewed and collected in connection with this
Agreement shall be held in confidence and shall not be released, disclosed, or
published by the parties, their agents or employees without the written consent
of the patient, unless otherwise permitted by law. Each LLC physician shall
be responsible for supplying any consent necessary to the release of
medical records of patients for purposes of claims management, including
specific consent to the release of any records pertaining to any patient's
alcohol or drug addiction or treatment, or mental health commitment or
treatment.
(xx) Full Time. Except in cases of emergency, or as otherwise
expressly waived by the Manager or by the LLC, the LLC shall ensure that each
LLC physician devotes his or her full-time practice of medicine to the LLC's
group practice, and shall not provide professional services to persons other
than the Manager and the
22
patients treated by LLC Physicians. Except as otherwise waived, all patients
treated by an LLC physician shall be deemed to be the Manager's patients and
the Manager shall be the owner of the medical records for all of the Manager's
patients.
(xxi) Non-Contract Specialists. When referrals to a specialist
or other physician is required, each LLC physician shall use his or her best
efforts to refer to physicians who are employees of the LLC or with whom the LLC
and/or the Manager has a provider contract in effect, and, where applicable, to
other physicians who are participating in any of the Manager's preferred
provider networks then in effect. In all other cases, each LLC physician may
select non-contract specialists to whom patients are referred, based upon the
such physician's best professional judgment of patient needs.
5. MANAGED CARE INCENTIVE PAYMENT.
a. Creation of Managed Care Incentive Payment. The parties acknowledge
that both the Manager's Business Plan and the business plan developed by the
Manager for the LLC contemplate that the LLC and its physician employees will
shift the emphasis of their Practice of Medicine from a traditional
fee-for-service model to a managed care model, and that the Manager must
successfully manage the migration of the LLC's practice to a capitated model if
it is to meet its business goals and objectives. To provide an incentive for the
LLC and the physician employees of the LLC to engage in a managed care
environment in the most efficient and profitable manner possible, beginning with
the calendar year 1996, the Manager shall pay to the LLC, an amount, if any,
calculated as described herein (the "Managed Care Incentive Payment" or "MCIP")
with respect to each calendar year, or portion thereof, that occurs during the
term of this Agreement (each an "MCIP Year"). The Manager and the LLC shall
consult with each other as to the amount of the MCIP for each MCIP Year, subject
to the limitations established in Section 5.b hereof, and the Manager will
negotiate in good faith with the LLC in order to assure that all physician
employees are adequately compensated in light of the market in existence from
time to time.
b. Calculation of Managed Care Incentive Payment. The Manager and the
LLC shall by December 15th of each year agree upon an MCIP payment to be made
out of the Manager's income before provision for income taxes or bonus (as
reflected on the Manager's financial statements) for the following year. There
shall be no MCIP payment in any year in which the Manager does not have income
before provision for income taxes or bonus reflected on its financial
statements. The Manager and the LLC shall agree upon an MCIP payment for each
year that is fair to the Manager and the LLC. If the Manager and the LLC are
unable to agree upon an MCIP, then the MCIP, if any, with respect to such MCIP
Year shall be equal to the lesser of either (i) twenty-five percent (25%) of the
amount of the excess, if any, of (A) those operating revenues of the Manager for
the MCIP Year that are properly attributable to the provision of medical care to
patients of the LLC, over (B) expenses of the Manager
23
and the LLC for the MCIP Year that are properly attributable or otherwise
allocable to the LLC for the MCIP year, or (ii) twenty-five percent (25%) of
the Aggregate Base Salaries of all primary care physicians employed by the
LLC during such MCIP year. The Manager shall have no obligation to negotiate
for an MCIP in excess of either of such amounts. The Manager shall have the
right in its discretion to make appropriate year to year and period adjustments
to accurately reflect income and expenses, and to allocate expenses among the
LLC and any other Additional Primary Care Entities, independent practice
association or other person or entity for which it serves as manager, and to
set off against the amount of any MCIP payment all or any portion of the
amount of its costs and expenses resulting from a breach by any Physician
or any Physician's PC of any representation, warranty or covenant made by
such Physician or PC in the Practice Participation Agreement."
c. Payment of Managed Care Incentive Payment. The Manager shall pay the
MCIP, if any, with respect to each MCIP Year to the LLC on or before February 15
of the calendar year following each such MCIP Year, beginning on February 15,
1997. If, pursuant to Section 4.d hereof, an adjustment is made in a succeeding
calendar year with respect to any Management Fee paid to the Manager in a prior
MCIP Year, no adjustment shall be made in the MCIP for the MCIP Year in which
the Management Fee which was subsequently adjusted was actually paid and such
adjustments shall be given effect in the MCIP for the MCIP Year in which they
were actually made.
6. TERM AND TERMINATION.
a. Term. This Agreement shall commence as of the date first above
written, and shall continue in force until December 31, 2025, unless sooner
modified or terminated as provided herein. This Agreement shall automatically be
renewed thereafter for additional terms (each an "Additional Term") for ten
years each in the sole discretion of the Manager, so long as there is no event
of default with respect to the Manager's performance of its duties hereunder as
set forth in Section 6.b of this Agreement.
b. Termination. This Agreement may be terminated by the
non-defaulting party upon the occurrence of any of the following events of
default:
i. The commencement of any voluntary or involuntary case under
the Federal bankruptcy laws or any state insolvency or similar laws seeking the
liquidation or reorganization of either party hereto, or the appointment of a
receiver, liquidator, assignee, custodian, trustee or similar official for
either party or the property of either party or the making by either party of an
assignment for the benefit of its creditors (except that in the case of any
involuntary action against either party, such party shall have sixty (60) days
to have such case dismissed), or the failure by either party generally to pay
its debts as they mature.
24
ii. Either party hereto is indicted upon a charge of
committing any felony or committing a misdemeanor which involves allegations of
fraud, embezzlement, conversion or other similar act or admits engaging in, or
is found in a duly convened arbitral proceeding or a court of competent
jurisdiction to have engaged in, illegal or other wrongful conduct substantially
detrimental to the business or reputation of the other party.
iii. The continued refusal by, or manifest inability of,
either party to perform any of the material duties, or to discharge any of the
material obligations, of such party pursuant to this Agreement in a professional
and reasonably competent manner (consistent with applicable professional or
business standards) for a period of at least ninety (90) days after receipt of
written notice from the other party to such party providing reasonable detail as
to the specific material duties or obligations that are not being, or have not
been, performed or discharged by such party in a professional and reasonably
competent manner and providing a reasonable opportunity to such party to address
such failures or omissions and in good faith to attempt to cure or otherwise
begin to effect a remedy of such failures or omissions within such ninety (90)
day period; provided, however, that the LLC may not terminate this Agreement so
long as the Manager is in good faith attempting to address any such failure or
omission and it appears reasonably possible that such failure or omission may
(or will) be cured before irreparable material harm or other significant injury
occurs to the LLC and, provided further, that the LLC may not terminate this
Agreement if any lender to, or holder of a senior security of, the Manager
arranges, or is arranging for, an assignment or transfer of such of the
Manager's duties hereunder as to which the Manager is in actual or potential
default to another management entity with experience in managing health care
providers that is reasonably acceptable to the LLC.
c. Effect of Termination.
i. Upon the occurrence of an event of default by the LLC, the
Manager shall have the right without further notice to reenter and take
possession of the Demised Premises, or any part thereof, and to repossess the
same as the Manager's former estate, and expel the LLC and those claiming
through or under the LLC, and remove the effects of either or both without being
deemed guilty of any manner of trespass and without prejudice to any remedies
for arrears of fees due or preceding breaches of this Agreement.
ii. Upon the occurrence of an event of default by the Manager,
the LLC shall have the right to continue in full possession and use of all of
the assets, facilities and goods provided to it by the Manager, including
without limitation the Office Space and the Equipment, and to purchase from the
Manager for their appraised fair market value all of the assets of the Manager
constituting the Demised Premises and any other of the Manager's assets which
the LLC, in its sole discretion, deems necessary or desirable to permit the LLC
to continue its Practice of Medicine without
25
interruption, it being the intent of the parties to permit the LLC in such
event to continue its Practice of Medicine with as little disruption as
possible. The LLC shall be entitled to set off against the purchase price it
pays for the Manager's assets the amount of any damages incurred by the LLC
as a result of the Manager's breach of this Agreement.
7. MODIFICATIONS; QUALITY COMMITTEE; ARBITRATION.
a. Modification for Prospective Legal Events. If, in the good faith
opinion of either party, as supported by the written opinion of counsel to such
party, any Federal or state laws or regulations now existing or hereafter
promulgated or enacted, including specifically without limitation Medicare, are
interpreted by judicial decision, a regulatory agency or legal counsel in any
manner as to indicate that the structure of this Agreement, or any portion
thereof, may be in violation of such laws or regulations, such party may require
the parties hereto to use their respective best efforts to amend this Agreement,
or such portions hereof, to the extent necessary to avoid further violation. To
the maximum extent possible, any such amendment shall preserve the underlying
economic and financial risks, rewards and other arrangements set forth herein. A
party requesting such an amendment shall give written notice thereof to the
other party which shall set out in sufficient detail the basis for the amendment
request and specifically identify the specific provisions of this Agreement for
which renegotiation is sought. Within thirty (30) days of its receipt of the
requesting party's notice, the other party shall give notice to the requesting
party of any additional provisions of this Agreement as to which the other party
requests renegotiation and the reasons therefor. No provisions of this Agreement
other than those specifically designated by the parties for renegotiation shall
be affected by the renegotiations. Should the parties be unable to agree upon
mutually acceptable revisions to this Agreement within ninety (90) days after
receipt by the other party of the initial request for renegotiation, then the
matters that remain unresolved through renegotiation pursuant to this Section
7.a shall be submitted to binding arbitration pursuant to the provisions of
Section 7.c hereof. Each of the foregoing time periods shall be shortened if and
to the extent necessary to avoid a violation of applicable law in a timely
manner.
b. Quality Committee. The Manager and the LLC hereby create the Quality
Committee referred to in this Section 7.b for the purpose of (i) developing
cooperative developmental, management and administrative policies to guide each
of the LLC and the Manager in fulfilling its obligations hereunder, (ii)
providing to the Manager and the LLC a forum in which policy and implementation
matters affecting the LLC and its physicians may be discussed on a regular
basis, and (iii) establishing an expedited process through which any
disagreement or dispute between the parties to this Agreement relating to or
concerning (A) the quality, adequacy or appropriateness of the assets,
facilities or services provided by the Manager to the LLC, (B) the quality and
timeliness of the services provided by the LLC and its physicians to patients
pursuant to this Agreement, (C) the appropriateness of any expense which the
Manager treats as a Business Cost of the LLC, may be submitted for review and
resolution prior to any
26
informal or formal adjudication. The Quality Committee shall consist of six
members, three appointed by the LLC and three appointed by the Manager. The
three members appointed by the Manager shall be the Chief Executive Officer
of the Manager, the Executive Vice President and Director of Medical Services
of the Manager and the Executive Vice President and Director of Legal Services
of the Manager. Of the three members appointed by the LLC, one shall be the
President of the LLC or his designee. Either party may change the designation
of any of its Quality Committee members who is not serving ex-officio
by written notice delivered to the other party pursuant to the provisions
of Section 10.p of this Agreement.
The Manager and the LLC agree to cause the Quality Committee
to meet regularly, but not less often than monthly. Where possible, such
meetings shall be scheduled to coincide with the dates of the regularly
scheduled meetings of the Manager's Board of Directors. The Quality Committee
shall adopt such rules and regulations regarding the conduct of its business as
it deems appropriate.
If the LLC believes that any asset, facility or service
provided by the Manager to the LLC pursuant to this Agreement, including any
item of Equipment, any aspect of the Office Space, any goods, materials or
supplies or any administrative or other service, including any aspect of any
budget, business plan, policy or procedure, or any of the professional or
non-professional personnel provided to the LLC, is inadequate, inappropriate or
otherwise insufficient, then the LLC shall give written notice thereof to the
Manager, setting out in sufficient detail the basis for the LLC's position. If
the Manager believes that the quality or timeliness of the care provided to any
patient does not meet the standards established herein and in each physician's
Professional Services Employment Agreement, or that the LLC is not cooperating
in such reasonable efforts of the Manager to create a fully integrated efficient
health care delivery system as herein contemplated, then the Manager shall give
written notice thereof to the LLC which shall set forth in sufficient detail the
basis for the Manager's position. The Quality Committee shall, within ten (10)
days of the date of any such notice, convene a special meeting and shall, in
good faith endeavor to resolve the issues raised in such notice by agreeing upon
a unanimous recommendation with respect to such issues, which shall be reported
back to the Manager and the LLC. If within thirty (30) days of the date of such
notice there has been no joint recommendation, or both parties have not accepted
in writing a joint recommendation of the Quality Committee as a basis for
resolving all such issues, the unresolved issues may be referred by either party
to arbitration pursuant to the provisions of Section 7.c hereof. Any joint
recommendation of the Quality Committee members which is accepted by both the
LLC and the Manager shall be promptly implemented.
c. Arbitration. Any dispute between the parties of this Agreement
arising under or with respect to this Agreement, or any matters referred to
arbitration pursuant to the terms of Sections 7.a or 7.b hereof, shall be
submitted to binding arbitration according to the procedures set out on Schedule
13.1 of the Practice Participation
27
Agreement of even date herewith, among the LLC, the Manager and other Parties,
the provisions of the said Schedule 13.1 being hereby incorporated into
and as a part of this Agreement by express reference. Each Party agrees to
abide by the time periods and other rules said forth in the said Schedule 13.1.
The resolution of any disputes through such procedures, including without
limitation through arbitral award, shall be binding upon the Parties for
all purposes and may be enforced in any court of competent jurisdiction.
8. CONFIDENTIALITY AND EXCLUSIVITY.
a. The Manager's Obligations.
i. The Manager shall, and shall use its best efforts to cause
its employees and Affiliates to, maintain all patient records and financial
information concerning the LLC in confidence, and shall not disclose such
information to any third party without the LLC's prior written consent or as it
may be required by law.
ii. The Manager may contract with other providers of medical
services to provide, and may provide, to such other providers of medical
services the kinds of assets, facilities and services the Manager provides to
the LLC hereunder, provided, however, that the Manager shall not, without the
prior written consent of the Management Committee, contract for the provision of
such services or provide such services to any provider of medical services that
is a competitor of or with the LLC in the provision of such medical services in
the LLC's service area as determined by the Manager from time to time in
consultation with the LLC and, provided further, that the Manager shall at all
times preserve the confidentiality of the LLC's financial, professional and
other information.
b. The LLC's Obligations.
i. The LLC shall, and shall use its best efforts to cause its
employees and Affiliates to, maintain all management memoranda, handbooks,
manuals, trade secrets, know-how, techniques and procedures used by the Manager
in the provision of assets, facilities and services to the LLC hereunder in
confidence, and shall not disclose such information to any third party without
the Manager's prior written consent or as it may be required by law.
ii. The LLC agrees that the Manager shall be its sole and
exclusive contractor, provider, agent and attorney-in-fact for the provision of
the assets, facilities and services contemplated in this Agreement to the LLC
and that during the term of this Agreement the LLC will not, directly or
indirectly, seek or enter into any agreement with another Person for the
provision of, or receive from another Person, assets, facilities or services
that are the same as or substantially similar to any of those provided by the
Manager to the LLC hereunder, or perform any managed care contracting or similar
act
28
directly on its own behalf. In addition, the LLC will keep in full force and
effect the non-competition (and other) provisions of each Professional Services
Employment Agreement, will not, without the prior written consent of the
Manager, enter into employment agreements or other contracts with primary care
physicians that do not contain substantially similar provisions, and will take
any and all steps requested or required by the Manager to enforce any and all
such provisions as drafted. To this end. the LLC hereby appoints the Manager as
its attorney-in-fact for purposes of enforcing, on behalf of the LLC, all such
provisions as drafted.
c. Effect of Termination. Upon expiration or termination of this
Agreement for any reason whatsoever, each party shall immediately turn over all
confidential information of the other party in its possession and control to the
other party, and shall refrain from thereafter using, appropriating or
reproducing such information in any form whatsoever.
d. Enforcement. Each party agrees that the other party shall be
entitled to seek equitable relief to enjoin the actual or threatened breach
of the confidentiality and exclusivity obligations of this Article 8
including, without limitation, temporary or preliminary injunctive relief
either from or pursuant to the arbitration provisions of Section 7.c hereof or
pre-arbitral injunctive relief from a court of competent jurisdiction prior
to the selection of an arbitral panel.
9. SOLICITATION OF PERSONNEL. The LLC agrees that during the term of this
Agreement, and for a period of three (3) years following its expiration or
termination, the LLC shall neither interfere with, solicit the services or
employment of, nor hire any of the Manager's then current employees, either on
behalf of the LLC or in connection with any partnership, corporation, joint
venture or other Person, without the prior written consent of the Manager.
10. MISCELLANEOUS.
a. Authorizing Actions. Each party agrees promptly to do all things and
take all actions necessary to authorize and facilitate the performance of this
Agreement and the other Practice Closing Documents, and all obligations
hereunder and thereunder, including, but not limited to, the execution of any
necessary documents, and the filing of any forms, deeds or memoranda of leases
with applicable governmental agencies or offices.
b. No Performance Guarantees. The LLC acknowledges that the
Manager has made no warranties or representations other than those contained
herein and that no financial projection shall be construed as a guarantee
of the profitability or success of the LLC's operations.
c. Records.
29
i. The LLC shall keep all records relating to this Agreement
and its Medical Practice open and available for inspection by the Manager or
other authorized Person in connection with any audit related to patient
services, and shall maintain all books, records, documents and other evidence
necessary to certify the nature and extent of the services provided under this
Agreement and pursuant to its Medical Practice in accordance with accepted
business practice, appropriate accounting procedures and applicable Federal,
State or local law and regulations.
ii. The LLC agrees to maintain books, records, documents, and
other evidence as necessary to certify the nature and extent of the services
provided under this Agreement and as part of the LLC's Medical Practice in
accordance with accepted business and professional practices, appropriate
accounting procedures and practices, and Federal, State and local laws and
regulations. The LLC agrees to maintain the data described above during the term
of this Agreement and for a period of four (4) years after its expiration or
termination. The Manager or any other duly authorized Person shall have
reasonable access during normal business hours to such books, records,
documents, and other evidence for the purpose of inspection, audit, and copying.
If the LLC carries out any of the duties required under this Agreement through a
subcontract with a value or cost of Ten Thousand Dollars ($10,000) or more, over
a twelve (12) month period, the LLC shall incorporate in any such subcontract
the provisions regarding access to books and records as set forth herein.
iii. Each party hereto agrees to cooperate with the other
party in the event it is the subject of a tax audit or inquiry and to make
available to such other party or other authorized Person in connection with any
such inquiry or audit all of the business, financial and other records
reasonably relating thereto on reasonable terms during normal business hours for
the purpose of inspection, audit and, subject to payment of reasonable fees,
copying.
d. Governing Law. The validity of this Agreement, its interpretation
and construction shall be governed by the laws of the State of Maryland, without
regard to principles of conflict of laws.
e. Equal Employment Opportunity. Each party expressly agrees to abide
by any and all applicable Federal and/or state equal employment opportunity
statutes, rules and regulations including, without limitation, Title VII of the
Civil Rights Act of 1964, the Equal Employment Opportunity Act of 1972, the Age
Discrimination in Employment Act of 1967, the Equal Pay Act of 1963, the
National Labor Relations Act, the Fair Labor Standards Act, the Rehabilitation
Act of 1973, the Occupational Safety and Health Act of 1970, and the Americans
with Disabilities Act of 1990, as all may be from time to time modified or
amended.
30
f. Force Majeure. Neither party shall be liable nor deemed to be in
default for any delay or failure in performance under this Agreement or other
interruption of service resulting, directly or indirectly, from Acts of God,
civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's service providers, employees or agents, or
any similar or dissimilar cause beyond the reasonable control of either party.
g. Waiver. A waiver by either party of a breach or failure to
perform any provision of this Agreement shall not constitute a waiver of any
subsequent breach of the same or a different provision hereof.
h. Severability. If any provision of this Agreement is found to be
void or unenforceable, then such provision shall be treated as severable,
leaving valid and enforceable the remainder of this Agreement.
i. Binding Effect and Assignment. This Agreement may not be assigned
by the LLC without the prior written consent of the Manager.
j. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one Agreement.
k. Tax Liabilities. The LLC shall have the sole responsibility for
paying any and all applicable Federal, state and local income taxes, gross
receipt taxes, FICA taxes, and all other withholding taxes, unemployment and
disability benefits, and, although the Manager will act as payment agents,
workers' compensation obligations, and any and all license and permit fees of
whatever nature which may be applicable to it and for filing all information and
other tax returns and other returns or reports as may be required of it. The
Manager shall act as payment agent for all of these taxes, and shall have
responsibility for making such payments when due on behalf of the LLC from
Collected LLC Cash. The LLC shall indemnify and hold the Manager harmless
against any and all claims against the LLC, any physician employed by the LLC or
the Manager, and related attorneys' fees, for the failure to pay or file any of
the foregoing payments, withholding, contributions, taxes, fees, and documents,
reports and returns, including but not limited to, Federal, state, and local
taxes, FICA taxes, gross receipt taxes, unemployment and disability benefits,
and workers' compensation obligations, and any and all license and permit fees.
l. Independent Relationship. The LLC and The Manager intend to act and
perform as independent contractors. Only the LLC shall practice medicine and
shall do so utilizing licensed physicians with no employment relationship to the
Manager. Notwithstanding the authority granted to the Manager herein, the
Manager and the LLC agree that the LLC shall retain the authority to direct the
medical, professional, and ethical aspects of its medical practice. Each party
shall be solely responsible for and
31
shall comply with all state and federal laws pertaining to employment taxes,
income withholding, unemployment compensation contributions and other
employment related statutes applicable to that party. As more specifically set
forth herein, the Manager shall provide the LLC with offices and facilities,
equipment, supplies, support personnel, and management and financial advisory
services. As more specifically set forth in, and subject to the provisions of,
this Agreement and the LLC Operating Agreement, the LLC shall be responsible
for the recruitment and hiring of physicians and all issues related to medical
practice patterns and documentation thereof. The Manager shall neither
exercise control over nor interfere with the physician-patient relationship,
which shall be maintained strictly between the physicians of the LLC and their
patients. Matters involving the internal agreements and finances of the LLC,
including the distribution of professional fee income or distributions
of Managed Care Incentive Payments, if any, among the individual Members and
other physicians of the LLC, tax planning, and pension and investment
planning (and expenses relating solely to these internal business matters)
shall remain the sole responsibility of the LLC and/or the individual
physicians. The parties agree that the benefits to the LLC hereunder do not
require, are not payment for, and are not in any way contingent upon the
admission, referral or any other arrangement for the provision of any item or
service offered by the Manager or any of its Affiliates to any of the LLC's
patients in any facility or laboratory controlled, managed or operated by the
Manager.
m. Exchange of Information. Each party shall cooperate in sharing
with and providing to the other party all information reasonably required or
desirable pursuant to the terms of this Agreement.
n. Further Cooperation. The LLC shall cooperate and execute such
agreements and cause such of its physician employees as may be necessary to
become participating providers in such third-party reimbursement programs as the
Manager may from time to time direct. As used in this Agreement, the term
"third-party reimbursement program" shall include, but not be limited to, health
maintenance organizations, preferred provider organizations, private health
insurance companies, Blue Cross/Blue Shield, the Federal and State Medicare
and/or Medicaid programs, and any other managed care plan. The LLC shall also
cooperate with the Manager in promotional programs developed or selected by the
Manager.
o. Entire Agreement. This Agreement and the other Practice Purchase
Closing Documents constitute the complete understanding of the parties and
supersede any and all other agreements, written or oral, between the parties
with respect to the subject matter hereof and thereon. No other agreement,
statement or promise not contained herein or therein shall be valid or binding.
p. Notices. All notices required hereunder shall be in writing,
delivered personally, by overnight delivery service or by registered or
certified mail, postage prepaid and return receipt requested, and shall be
deemed made when delivered and
32
shall be properly addressed to the parties as follows or as otherwise
designated from time to time:
To the Manager:
Xxxxxxxxxx Newco, Inc.
00000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
with a required copy to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Corporate Counsel
To the LLC:
Doctors Health Xxxxxxxxxx, LLC
00000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
With a required copy to:
Ober, Kaler, Xxxxxx & Xxxxxxx
A Professional Corporation
Attn: Xxxxxxx X. Xxxxxxx, Esquire
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
q. Amendment. This Agreement may be modified or amended at any
time by a written amendment, signed by both parties hereto.
r. Appointments. By its execution of this Agreement, the LLC hereby
constitutes and appoints the Manager, acting in its corporate capacity or
through any of its duly authorized officers or employees, the LLC's true and
lawful attorney-in-fact and also constitutes and appoints the Manager as the
LLC's agent, and hereby empowers and authorizes the Manager, as its attorney and
agent, for the LLC and in its name, place and stead, and on its behalf, from
time to time, to do and to execute any and all acts, deeds, instruments and
things, which are necessary or desirable to enable the Manager to do any and all
things relating to the organization, management, business, or non-professional
activities of the LLC, as fully and completely as the LLC might or could do if
it, itself, undertook to do or execute any or all of such acts, deeds,
33
instruments or things. The appointment of the Manager as the LLC's agent and
attorney-in-fact hereunder is and shall be irrevocable during the term of this
Agreement and is expressly agreed and acknowledged by both parties to be coupled
with an interest.
IN WITNESS WHEREOF, the parties hereto have caused their
authorized representatives to execute this Agreement effective as of the day and
date first above written.
WITNESS/ATTEST: DOCTORS HEALTH XXXXXXXXXX, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------- _______________________(SEAL)
Xxxxxxx X. Xxxxxxxxx, Chairman
WITNESS/ATTEST: DOCTORS HEALTH SYSTEM, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------- ________________________(SEAL)
Xxxx X. Xxxxxx,
Executive Vice President
34
EXHIBIT 2b
SUBLEASE
THIS SUBLEASE ("this Sublease"), ____day of___________, 199_, by and
between Doctors Health System, Inc., a Maryland Corporation, ("Tenant") DOCTORS
HEALTH XXXXXXXXXX, LLC, a Maryland limited liability company ("Subtenant").
EXPLANATORY STATEMENT
A. By Lease Agreement dated_______________, 19___, a copy of which is
attached hereto as Exhibit A (the "Lease"), [Add appropriate recitals regarding
leases from Physicians and/or PCs, to the LP, to DHS] ___________, Maryland
known as ___________________ (the "Premises").
B. Subtenant desires to sublease the Premises from Tenant and
Tenant desires to sublease the Premises to Subtenant, on the terms and subject
to the conditions which are hereinafter set forth.
[C. Landlord joins in the execution of this Sublease to evidence
its consent to the within Sublease, as required by Section ______ of the Lease.
Where appropriate.]
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual entry into this
Sublease by the parties hereto and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by each party
hereto, Tenant hereby subleases to Subtenant and Subtenant hereby subleases from
Tenant all of the Premises in its "as is" physical condition (Subtenant having
heretofore examined and being familiar in all respects with the Premises), on
the terms and subject to the conditions which are hereinafter set forth:
1. Term; Extension and Expiration of Term. The term of this Sublease
(the "Initial Term") shall be for a period of ______ (___) months [which period
shall be equal to the term of the Lease less one (1) day], beginning on
________, 19___ and expiring on ___________, 19____ (the "Expiration Date"). If
the term of the Lease is renewed, Subtenant may extend the Initial Term for a
period coterminous with the extended period less one (1) day on the same terms
and conditions as set forth in this Sublease by providing Tenant with at least
_________ (___) days' notice in advance of the Expiration Date. If Subtenant
provides such notice, this Sublease shall continue and extend until the
expiration date of the renewal term less one (1) day (the "Extended Term") (both
the Initial Term and the Extended Term shall be collectively
35
referred to as the "Term"). Tenant shall use reasonable efforts to notify
Subtenant of the Expiration Date of this Sublease at least thirty (30) days
before the Expiration Date.
2. Rental. Subtenant shall pay to Tenant, without prior notice or
demand and without set-off or reduction, as rental for the Premises (the
"Rent"), the amount of ________ Dollars ($__________) per month during the
Term.. Rent shall be prorated on a daily basis for any partial calendar month
during the Term. This Sublease is on an absolute gross lease basis and Landlord
shall maintain the Premises (including repair or replacement of any part
thereof, unless such replacement is due to Subtenant's negligence or willful
misconduct), pay taxes, insurance, and operating expenses, and any and all other
charges due and payable in connection with the occupancy and use of the
Premises, including, but not limited to, those payable to Landlord under the
Lease. Tenant and subtenant agree (A) that no actual payments are required to be
made by Subtenant to Tenant of Rent hereunder, all such Rent due herewith being
part of the Tenants Management Fee charged to Subtenant under that Certain
Professional Services Organization Agreement between Tenant and Subtenant dated
________ __, 1996 (the "PSO Agreement"); (B) Tenants' payment of rent to the
landlord from time to time shall be deemed the payment of an "LLC Business Cost"
under the PSO Agreement, and a "Direct Medical Facilities Cost" under the
Professional Services Employment Agreement for each of the Subtenant's physician
employees.
3. Obligations of Tenant and Subtenant Under the Lease.
3.1. In addition to any other obligations that are imposed
upon Subtenant under the provisions of this Sublease, Subtenant shall abide by
any restriction placed on Tenant pursuant to the terms of the Lease.
3.2. In addition to any other rights that are held by
Subtenant under the provisions of this Sublease, Subtenant shall have all of the
same rights hereunder against Tenant as Tenant has against Landlord under the
provisions of the Lease, and, except for the services to be provided by Landlord
to Tenant under the Lease, Tenant shall have all of the same obligations
hereunder to Subtenant as Landlord to Tenant under the Lease, all as if
provisions identical to such provisions were set forth at length in this
Sublease.
3.3. Without limiting the generality of the foregoing
provisions of this Section, 3.3.1. Subtenant covenants and agrees not to commit
any act that shall cause Tenant to be in breach of any term, covenant, or
condition under the Lease or interfere with Tenant's performance of its
obligations or duties under the Lease;
3.3.2. in any instance in which Tenant has any right under the
provisions of the Lease to give or withhold its approval of any action,
omission, or other matter, or has any other discretionary right under the
provisions of the Lease, Tenant shall
36
exercise such right in each instance in a manner that is consistent with
Subtenant's rights and Tenant's obligations hereunder, and
3.3.3. in any such instance in which Tenant may exercise any
such right in two (2) or more ways, neither or none of which would be
inconsistent with Subtenant's rights and Tenant's obligations, Tenant shall
notify Subtenant thereof in writing, and shall exercise any right in accordance
with Subtenant's written instructions to Tenant; provided, however, that Tenant
must receive such instructions within such period, if any, during which Tenant
may be required by the provisions of the Lease to exercise or waive such right.
4. Amendment and Termination of Lease.
4.1. Tenant shall not amend, or consent to any amendment of,
the Lease in any respect that materially and adversely affects Subtenant's right
to use and enjoy the Premises on the terms and subject to the conditions that
are contained in this Sublease. No amendment of the Lease shall operate to alter
or impair Subtenant's rights hereunder.
4.2. If the Lease terminates for any reason this Sublease
shall thereupon automatically terminate simultaneously with such termination of
the Lease, and no party hereto shall have any right hereunder against any other
party hereto on account thereof; provided, however, that nothing in the
foregoing provisions of this sentence shall be deemed in any way to alter or
impair any liability that any party hereto may have to any other accruing before
such termination.
4.3. If the Lease terminates as a result of a default by
Tenant in performing its obligations thereunder, the parties hereto shall have
such rights and liabilities to each other hereunder on account of such default
as exist under applicable law.
4.4. On the expiration or earlier termination of this
Sublease, the rights and obligations of Landlord and Tenant shall be governed by
the Termination of Lease Agreement by and between Landlord and Tenant of even
date herewith.
5. Notices. Any notice, demand, consent, approval, request, or other
communication or document to be provided hereunder to a party hereto shall be
(a) in writing, and (b) deemed to have been provided (i) twenty-four (24) hours
after being sent as certified or registered mail in the United States mails,
postage prepaid, return receipt requested, to the address of such party set
forth below or to such other address in the United States of America as such
party may designate from time to time by notice to each other party hereto, or
(ii) (if such party's receipt thereof is acknowledged in writing) upon being
given by hand or other actual delivery to such party. The addresses for the
parties are as follows:
37
If to Tenant: Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx Xxxxx, XX 00000
38
If to Subtenant: Doctors Health Xxxxxxxxxx, LLC
00000 Xxxx Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx Xxxxx, XX 00000
6. General.
6.1. Effectiveness. This Sublease shall become effective
on and only on its execution and delivery by the parties hereto.
6.2. Complete Understanding. This Sublease, together with the
Physician Services Organization Agreement and other documents executed between
Tenant and Subtenant in connection therewith, represent the complete
understanding among the parties hereto as to the subject matter hereof, and
supersedes all prior negotiations, representations, guaranties, warranties,
promises, statements, or agreements, either written or oral, among the parties
hereto as to the same.
6.3. Amendment. This Sublease may be amended by and only
by an instrument executed and delivered by the parties hereto.
6.4. Waiver. No party hereto shall be deemed to have waived
the exercise of any right which it holds hereunder unless such waiver is made
expressly and in writing (and, without limiting the generality of the foregoing,
no delay or omission by any party hereto in exercising any such right shall be
deemed a waiver of its future exercise). No such waiver made in any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance or right.
6.5. Applicable Law. This Sublease shall be given effect and
construed by application of the law of Maryland, and any action or proceeding
arising hereunder shall be brought in the courts of Maryland.
6.6. Time of Essence. Time shall be of the essence of this
Sublease.
6.7. Headings. The headings of the Sections, subsections,
paragraphs, and subparagraphs hereof are provided herein for and only for
convenience of reference, and shall not be considered in construing their
contents.
6.8. Construction. As used herein, all references made (a) in
the neuter, masculine, or feminine gender shall be deemed to have been made in
all such genders, (b) in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well, and (c) to
any Section, subsection, paragraph, or subparagraph shall, unless therein
expressly indicated to the contrary, be deemed to have been made to such
Section, subsection, paragraph, or subparagraph of this Sublease.
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6.9. Exhibits. Each writing or plat referred to herein as
being attached hereto as an exhibit or otherwise designated herein as an exhibit
hereto is hereby made a part hereof.
6.10. Assignment. This Sublease shall be binding on and shall
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors, and assigns hereunder.
6.11. Severability. No determination by any court,
governmental body, or otherwise that any provision of this Sublease or any
amendment hereof is invalid or unenforceable in any instance shall affect the
validity or enforceability of (a) any other provision thereof, or (b) such
provision in any circumstance not controlled by such determination. Each such
provision shall be valid and enforceable to the fullest extent allowed by, and
shall be construed wherever possible as being consistent with, applicable law.
6.12. Disclaimer of Partnership Status. Nothing in the
provisions of this Sublease shall be deemed in any way to create among the
parties hereto any relationship of partnership, joint venture, or association,
and the parties hereto hereby disclaim the existence of any such relationship.
IN WITNESS WHEREOF, the parties hereto have executed and ensealed this
Sublease or caused it to be executed and ensealed on its behalf by their duly
authorized representatives, the day and year first above written.
WITNESS or ATTEST: [TENANT]
By: _________________________(SEAL)
Name: _________________________
Title: _________________________
DOCTORS HEALTH XXXXXXXXXX, LLC:
By: _________________________(SEAL)
Name: _________________________
Title: _________________________
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[JOINDER (where applicable)
In accordance with Section ____ of the Lease, Landlord joins in the execution of
this Sublease for the purpose of evidencing its consent to the sublease herein.
WITNESS OR ATTEST: LANDLORD:
By: __________________________(SEAL)
Name: __________________________
Title: __________________________]
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EXHIBIT A
True Copy of Lease
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SCHEDULE 2b
Building Office Space
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EQUIPMENT ADDENDUM
TO
SCHEDULE 2b
Building:
Equipment:
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