Exhibit 10.3
FIRST AMENDMENT TO HEALTH SERVICES AGREEMENT BETWEEN
HIP OF NEW JERSEY, INC. AND PINNACLE HEALTH ENTERPRISES, L.L.C.
(DATED AS OF JULY 24, 1997)
HIP of New Jersey, Inc. and Pinnacle Health Enterprises, L.L.C. hereby
agree that the Health Services Agreement by and between HIP of New Jersey, Inc.
and Pinnacle Health Enterprises, L.L.C. dated as of July 24, 1997 is hereby
amended as follows:
1. A new Section 2A is hereby added as follows:
Plan's Obligations. Nothing contained in this Agreement, is intended to,
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nor shall be construed to (a) limit or otherwise constrain the Plan's
obligations under the Coverage Plans or applicable law including common
law, rules or regulations, including without limitation the Health
Maintenance Organization Act, N.J.S.A. 26:2J-1 and the rules and
regulations promulgated thereunder (collectively, the "Act") to provide or
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arrange for Covered Services to Covered Persons; (b) limit or diminish in
any respect the Plan's liability to third parties, including without
limitation Covered Persons, for the breach of its obligations under the
Coverage Plans or its violation of applicable laws including common law,
rules or regulations, including without limitation the Act; (c) modify or
expand the obligations of the Plan to provide or arrange for Covered
Services to Covered Persons or under applicable law including common law,
rules or regulations, including without limitation the Act; or (d) modify
or expand the Plan's liability to other persons or entities, including
without limitation Covered Persons, for the breach of its obligations under
the Coverage Plans or its violation of applicable laws including common
law, rules or regulations, including without limitation the Act.
2. Section 2.1 is hereby deleted and replaced with the following:
Independent Contractors. The Plan and PHE are independent contractors and
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separate legal entities. The relationship between the Plan and PHE is
reflected in this Agreement, and neither the Plan, PHE, nor the employees,
servants or representatives of either, shall be considered the employee,
servant or representative of the other. None of the provisions of this
Agreement are intended to create or to be construed as creating any
partnership, joint venture or employer-employee relationship between or
among the Plan, PHE or any of their respective employees, servants or
representatives.
3. Section 2.4 is hereby deleted and replaced with the following:
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Subcontracts. PHE has the right to delegate by subcontract certain
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Delegated Functions to the Medical Group and the PHE Providers, under the
Medical Services Agreement and the Provider Agreements, respectively, or to
another subcontractor, subject to the Plan's prior consent, which consent
shall not be unreasonably withheld, and provided that no subcontract shall
be entered by PHE unless it complies with the requirements of N.J.A.C.
8:38-1.1 et seq. and in particular N.J.A.C. 8:38-15.1(a) and (b). PHE may
enter into other subcontracts for the performance of its administrative
obligations hereunder; provided, however, that to the extent any such
subcontract for administrative services has an adverse effect on the Plan's
relationship with Covered Persons, such subcontract shall be subject to the
Plan's prior consent upon ten (10) days' notice. In the event that PHE
enters into contracts and/or subcontracts for the performance of its
obligations hereunder, PHE shall be responsible for assuring performance by
its contractors and/or subcontractors.
The parties agree that PHE shall not enter any agreement with any third-
party for the delivery of health care services to HIP covered persons which
is subject to N.J.A.C. 8:38-15.1(a) and (b), without first meeting the
requirements of N.J.A.C. 8:38-15.2 including required approvals from the
State of New Jersey.
4. Section 3.6(a) is hereby deleted and replaced with the following:
(a) PHE has two basic models of PHE Provider Agreements; one for
Medical Group, which is the Medical Services Agreement, and one for
other PHE Providers, which is the Provider Agreement. The form of the
Medical Services Agreement is annexed as Exhibit A, and the model form
of Provider Agreement is annexed as Exhibit B. These forms are
approved by all applicable governmental authorities and Accreditation
Agencies (to the extent required). PHE shall have the right to modify
these agreements, provided that such modifications shall not cause PHE
to be in violation of this Agreement, and subject to approval of
governmental agencies with jurisdiction, PHE shall provide the Plan
with prior notice of any material changes to the model forms described
herein and any changes required by law or regulation. PHE and the Plan
shall have the opportunity to discuss, and the Plan may provide, input
regarding such material changes prior to their implementation. PHE
hereby represents and warrants, and has secured from Medical Group in
the Medical Services Agreement and will secure from other Providers in
the Provider Agreement, their representation and warranty, that it has
the authority to bind the Medical Group and Providers, and that it
will require the Medical Group and Providers to comply with the
applicable provisions of this Agreement, including but not limited to
the obligations to submit appropriate documentation to the Plan,
uphold the exclusivity provisions, comply with medical management and
quality programs, hold harmless Covered Persons from any billing for
Covered Services, maintain appropriate medical
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records, secure such professional liability coverage as required by
the Plan, use best efforts to develop a satisfactory relationship with
Covered Persons, and provide encounter and claims data electronically
in accordance with the standards agreed to by the parties which take
into account as needed the Plan's need to respond to any regulatory
agency, Accreditation Agency or employer inquiry.
1. Section 3.9(a) is deleted and replaced with the following:
(a) PHE hereby agrees that in no event, including, but not limited to
non-payment by the Plan, insolvency or breach of this Agreement, shall
PHE, nor shall PHE permit Medical Group, or any other PHE Providers to
▇▇▇▇, charge, collect a deposit from, seek compensation, remuneration
or reimbursement from, or have any recourse against any Covered
Person, or persons other than the Plan or PHE acting on their behalf,
for Covered Services provided pursuant to this Agreement. This
provision shall not prohibit collection of fees for Non-Covered
Services, Coinsurance, Copayments, or Deductibles in accordance with
the terms of the Covered Person's Coverage Plan. PHE further agrees
that (I) this Section 3.9 shall survive the termination of this
Agreement regardless of the cause giving rise to termination and shall
be construed to be for the benefit of Covered Persons and (ii)
supersedes any oral or written contrary agreement now existing or
hereafter entered into between PHE and Medical Group, or between
medical Group or PHE and a PHE Provider and a Covered Person, or
Persons acting on their behalf. Any modification, addition, or
deletion to the provisions of this Section 3.9 shall become effective
on a date no earlier than thirty (30) days after the Commissioner of
Banking and Insurance has received written notice of such proposed
changes and the change has been deemed approved, or else the
Commissioner of Banking and Insurance has approved the proposed
changes.
1. Section 3.19(a) is deleted and replaced with the following:
(a) Subject to the Plan's financial responsibility for Covered
Services rendered to Network Covered Persons as provided in Attachment
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1.1 during the Financial Risk Period, the cost of any Covered Services
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rendered on behalf of PHE Providers by a Covering Physician shall be
the financial responsibility of PHE. Notwithstanding this, HIP
recognizes its responsibilities under N.J.A.C. 8:38-15.2(f).
1. Section 3.20 is deleted and replaced with the following:
Coordination of Benefits. The parties shall cooperate, and PHE shall cause
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PHE Providers to cooperate, in the performance of coordination of benefits.
The Plan has the
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right to all coordination of benefit recoveries for services performed for
Network Covered Persons only during the Financial Risk Period. PHE shall
have the right to all coordination of benefit recoveries for Covered
Services performed for Center Covered Persons from and after the Effective
Date and for Network Covered Persons, after the Financial Risk Period. If a
Covered Person who is treated by a PHE Provider is covered by health care
coverage provided by any Person other than the Plan, and if such other
Person is the primary carrier, PHE shall, and shall cause PHE Providers to,
cooperate with the Plan in all ▇▇▇▇▇▇▇▇ of such primary carrier on behalf
of the Covered Person for the Covered Services rendered by PHE or PHE
Providers, such ▇▇▇▇▇▇▇▇ to be at PHE Providers full customary fee.
Furthermore, PHE shall, or shall cause PHE Providers to execute any
necessary document in connection with the submission of such bills and
claims by the Plan or the Covered Person. The parties agree to abide by any
applicable state or federal law concerning coordination of benefits.
2. Section 3.26 is deleted and replaced with the following:
Claims Processing. Subject to the Transition Plan, which shall set forth a
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specific period of time after the Effective Date during which the Plan
shall remain responsible for claims processing, PHE shall adjudicate all
Provider claims for all Covered Services in accordance with its policies
and procedures, subject to approval by the Plan, which shall not be
unreasonably withheld. PHE shall provide to the Plan claims payment
reports reasonably satisfactory to the Plan including those claims paid for
ASO and POS products. PHE shall perform claims processing in accordance
with the applicable standards set forth in Attachment 5.5 and shall comply
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with all applicable laws, rules and regulations regarding claims
processing. Without limiting the foregoing, the parties agree to abide by
the requirements of N.J.S.A. 26:25-5.1, including with respect to Network
provider claims. Should PHE fail to pay in accordance with applicable
laws, rules and regulations regarding claims processing, then PHE shall pay
sums covering such claims to the Plan at such time and the Plan shall pay
such Provider claims in accordance with Attachment 5.5 and all applicable
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laws, rules and regulations.
3. Section 3.27 is deleted and replaced with the following:
Financial Net Worth. PHE shall be responsible at all times to have
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sufficient funds to perform its financial responsibilities under this
Agreement related to payment of all incurred claims. PHE shall report to
the Plan on its fiscal soundness and fiscal solvency and shall cause PHP to
provide the Plan with audited annual financial statements and quarterly
unaudited financial statements. PHE shall cause PHP to provide, promptly
after the sending or filing thereof, to the Plan, copies of all reports
which PHP sends to its stockholders generally and copies of all reports and
registration statements (promptly after becoming effective) which PHP files
with the Securities and Exchange Commission, any national securities
exchange, or the National Association of Securities Dealers, Inc.
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If at any time the Plan reasonably believes that additional financial
mechanisms may be appropriate based upon the financial performance of PHE
for Covered Persons, it shall contact PHE. PHE will take whatever
reasonable action is necessary to assure that its financial obligations
under this Agreement will be satisfied including payment of all incurred
claims. In the event that PHP is no longer a publicly held corporation, PHE
shall cause PHP to provide financial information substantially similar to
the information provided in its current filings with the Securities and
Exchange Commission.
4. Section 3.28(a) is hereby deleted and replaced with the following:
(a) The Plan and the State shall have the right to audit the accuracy
of claims paid by PHE. Such audit shall be conducted in accordance
with the standards established by the Plan and as otherwise required
by federal and State regulators and/or Accreditation Agencies and
shall consist of a review of a statistically valid sample of such
claims, and shall further be governed by the provisions of the
Provider Guide and applicable regulations. Such audit shall be during
normal business hours of PHE. The audit shall consist of a review of
those records whose review PHE and the Plan agree is necessary to
determine the accuracy of said claim adjudication. The Plan, at its
own cost, may engage a third party to conduct such audit on its
behalf, provided that such third party agrees in writing to the
limitations on right to audit set forth in Subsection (b) below.
1. A new Section 6.1(a) is hereby added as follows:
(a) Reserves at Termination. Within 90 days of the date that notice
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of renewal is due under this section for the initial or any extended
or renewal term of this Agreement, and if the term of this Agreement
shall not have been extended or renewed, then the parties shall agree
upon a procedure for funding reserves of the incurred but unpaid
claims that are due to be paid by PHE following termination of this
Agreement. PHE agrees to fund any deposit requirement associated with
the Plan's Covered Persons by either: (i) leaving claims unpaid at
termination and providing the Plan with funds that the Plan determines
are sufficient to fund reserves for incurred but unpaid claims,
provided that the Plan and PHE mutually agree on the amount of funds
necessary to cover PHE's liability for incurred and unpaid claims at
termination, or (ii) establishing a joint escrow fund under joint
administration with the Plan to be funded by a portion of the
Percentage of Premium (POP) paid to PHE to pay the incurred but unpaid
claims due from PHE following termination of this Agreement. It is
agreed that any escrow funds shall be used to pay such incurred but
unpaid claims. The amounts to be included in such escrow fund shall be
mutually agreeable, or, if HIP and PHE cannot so agree, then an
initial amount determined by PHE; provided, however, that if such
amount shall not be sufficient to pay such incurred claims, PHE shall
remain
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liable to deposit the amount of such deficiency in the escrow fund.
Except as otherwise provided in this Agreement, nothing in this
Section 6.1(a) shall require PHE to pay any amounts prior to the final
year of the initial or any extended or renewal term to fund reserves
or deposit requirements by HIP for any reason including any guarantee
of PHE's performance under this Agreement.
1. Attachment 1.1B first paragraph is deleted and replaced with the following:
Center Covered Persons. From the Effective Date through December 31, 1997
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(except if PHE assumes responsibility for claims processing at an earlier
date that is mutually agreed to by the Parties), Plan or its designated CP
Administrator shall be responsible for paying "Eligible Claims" for Covered
Services rendered to Center Covered Persons. For purposes of this
Attachment 1.1, Eligible Claims are those incurred claims that are for
services rendered during the Financial Risk Period and that meet the
standards for Claims as set forth in Section 5.5 and Attachment 5.5 of this
Agreement and have been verified to represent a Covered Service to a
Covered Person offset by any applicable third party recoveries and repriced
to meet the criteria set forth herein. For each Plan Provider, Eligible
Claims shall be paid on the basis of the Plan's applicable fee schedule
until such time as the Plan Provider has entered a Provider Agreement with
PHE and is listed by PHE as a PHE Provider; thereafter, each such PHE
Provider shall be paid on the basis of the PHE Fee Schedule. (No claims
shall be paid to the Medical Group for primary care services covered for
Center Covered Persons). In processing claims on behalf of PHE, the Plan
shall meet mutually agreeable and appropriate standards for timeliness,
accuracy, reliability, reporting, and compliance with PHE's utilization
management and cost control policies and procedures. PHE shall reimburse
the Plan by wire transfer or other means as is mutually agreeable for each
Eligible Claim within two days of receiving an Electronic Claims Payable
Report (which shall mean a report, in computer compatible format, which
contains reasonably sufficient detail from which eligibility, and amounts
charged, covered and payable with respect to the claims for Covered Persons
may be determined).
2. Except as amended as expressly provided herein, all other terms and
conditions of the Health Services Agreement by and between HIP of New
Jersey, Inc. and Pinnacle Health Enterprises, L.L.C., dated as of July 24,
1997, shall remain in full force and effect.
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3. This First Amendment to the Health Services Agreement by and between HIP of
New Jersey, Inc. and Pinnacle Health Enterprises, L.L.C., dated as of July
24, 1997, shall be effective on the date signed by the last party to sign
this Amendment.
HIP OF NEW JERSEY, INC. PINNACLE HEALTH ENTERPRISES, L.L.C.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.D.
Date: October 31, 1997 Date: October 31, 1997
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