Exhibit 10.53

 

MANAGEMENT SERVICES AGREEMENT

 

BETWEEN

 

PRO MED HEALTH CARE ADMINISTRATORS

 

AND

 

POMONA VALLEY MEDICAL GROUP, INC.,
D.B.A. PRO MED HEALTH NETWORK

 

EFFECTIVE:  OCTOBER 1, 1998

 

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MANAGEMENT SERVICES AGREEMENT

 

TABLE OF CONTENTS

 

 

 

 

 

PAGE

 

 

 

 

 

1.

 

Services to be Performed and Manner of Performance

 

1

 

 

 

 

 

2.

 

Facilities and Personnel

 

1

 

 

 

 

 

3.

 

Fees

 

1

 

 

 

 

 

4.

 

Payor

 

2

 

 

 

 

 

5.

 

IPA’s Plan Account and Payment of Revenues

 

2

 

 

 

 

 

6.

 

Term

 

2

 

 

 

 

 

7.

 

Termination

 

2

 

 

 

 

 

8.

 

Liabilities and Obligations

 

3

 

 

 

 

 

9.

 

Indemnification

 

4

 

 

 

 

 

10.

 

Accounting Records

 

4

 

 

 

 

 

11.

 

Professional Services

 

4

 

 

 

 

 

12.

 

Additional Services

 

4

 

 

 

 

 

13.

 

Books and Records

 

4

 

 

 

 

 

14.

 

Independent Contractor

 

5

 

 

 

 

 

15.

 

Assignments

 

5

 

 

 

 

 

16.

 

Entire Agreement: Amendments

 

5

 

 

 

 

 

17.

 

Compliance with State and Federal Law

 

5

 

 

 

 

 

18.

 

Force Majeure

 

5

 

 

 

 

 

19.

 

Enforcement Overpayment

 

5

 

 

 

 

 

20.

 

Expenses

 

5

 

 

 

 

 

21.

 

Arbitration

 

6

 

 

 

 

 

22.

 

Confidentiality

 

6

 

 

 

 

 

23.

 

Notices

 

6

 

 

 

 

 

SIGNATURES

 

6

FEES AND SERVICES EXHIBITS

 

 

 

 

EXHIBIT I

Fees

 

8

 

 

EXHIBIT II

Services

 

9

 

 

EXHIBITIII

Compensation

 

11

 

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MANAGEMENT SERVICES AGREEMENT

 

THIS MANAGEMENT SERVICES AGREEMENT (hereinafter referred to as “Agreement”) is
made and entered into as of the FIRST day of October, 1998, by and between PRO
MED HEALTH CARE ADMINISTRATORS, INC. a California corporation (hereinafter
referred to as “ProMed HCA”) and POMONA VALLEY MEDICAL GROUP, INC., D.B.A. PRO
MED HEALTH NETWORK, a California professional corporation (hereinafter referred
to as “IPA”).

 

RECITALS

 

WHEREAS, ProMed HCA is a company that provides management services to
Independent Practice Associations (IPAs) and other medical organizations, and

 

WHEREAS, IPA is a physician organization organized as a California professional
medical corporation, which has entered into written service agreements with
managed care or health maintenance organizations (HMOs), licensed pursuant to
the California Knox-Keene Act of 1975, and has as its primary objective to
deliver or arrange for the delivery of health care services to the HMO’s
Enrollees, through the IPA’s arrangements or contracts with health
professionals, all of whom are licensed, certified, or otherwise lawfully
qualified to practice their professions in the State of California, and

 

WHEREAS, IPA desires to have ProMed HCA provide management services and ProMed
HCA is willing to provide such services, under the terms and conditions set
forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and in exchange for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.             Services to be Performed and Manner of Performance.  ProMed HCA
shall perform the services set forth in the “Fees and Services Exhibits,”
Exhibit II, which is an essential part of this Agreement.  The services required
to be performed by ProMed HCA shall be limited to the services set forth in the
“Fees and Services Exhibits”, Exhibit II.  ProMed HCA shall perform said
services consistently with the terms and conditions of the contracts between IPA
and its contracting Payors and within the framework of the policies,
interpretations, rules, practices and procedures made or established by IPA,
provided that such terms and conditions are made known to ProMed HCA and are
consistent and compatible with the description of services set forth in the
“Fees and Services Exhibits”, Exhibit II, and with all applicable state and
federal laws and regulations.

 

2.             Facilities and Personnel.  ProMed HCA shall maintain the
facilities and personnel necessary to provide the services to be performed by it
under this Agreement.

 

3.             Fees.  IPA agrees to pay to ProMed HCA for the services provided
under this Agreement the fees set forth on the “Fees and Services Exhibits”,
Exhibit I, which is an essential part of this Agreement.

 

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4.             Payor.  Payor shall be defined as the managed care or health
maintenance organization (HMO), government agency, employer or other
organization which has entered into an agreement with IPA under which IPA
provides medical services to employees, members or Enrollees (“Enrollees”) based
on payments made by the Payor, subject to the benefits, copayments, limitations
and exclusions set forth in the agreement between the Payor and Enrollees. 
Payor may also mean any other payment source including but not limited to,
Enrollees, coordination of benefits carriers, reinsurance and stop loss
carriers, institutional providers, ancillary providers and third party liability
payors.

 

5.             IPA’s Plan Account and Payment of Revenues.  The contract between
IPA and its contracting Payor shall establish a set of benefits and other
provisions which, for the purposes of this Agreement will be referred to as a
“Plan”.  ProMed HCA shall establish a Plan Account to be used to pay all
Expenses arising under the Plan as defined in Exhibit III, attached hereto. 
Payments made from Plan Account will be in the amount of Cost of Services and
Other Liabilities as defined in Section 20, currently paid by ProMed HCA, any
Additional Services provided per Section 12, plus fees agreed upon in the “Fees
and Services Exhibits”, Exhibit I.  To assure the adequacy of funds to pay all
Expenses under such accounts, IPA agrees to pay to ProMed HCA all of IPA’s
revenues under all Payor agreements and all revenue paid to IPA by any other
Payor as defined in Section 4 above.  Such payment of revenue is intended to
comply fully with relevant state and federal law.  ProMed HCA shall accept
perpetual and unilateral control over the assets of IPA and will assume risk for
IPA revenue control.  ProMed HCA will administer all revenues paid by IPA
according to the provisions of Section 20.  Expenses and Exhibit III,
Compensation, an essential part of this Agreement.

 

6.             Term.  The term of this Agreement shall be for a period of twenty
(20) years, commencing October I, 1998 and ending September 30, 2018, and shall
be automatically renewed for successive five (5) year periods, unless terminated
as hereinafter provided.

 

7.             Termination.

 

A.          Without Cause:  After the first anniversary date of this Agreement,
either party shall have the right to terminate this Agreement without cause,
effective on any subsequent anniversary date, by giving the other party advance
written notice at least one hundred twenty (120) days prior to the anniversary
date.

 

B.           With Cause:  ProMed HCA may terminate this Agreement immediately
upon delivery of written notice if:

 

1.            IPA is unable to lawfully operate under its articles of
incorporation and bylaws, or

 

2.            IPA or a substantial number of its member physicians are unable to
secure and maintain the required professional liability insurance, or

 

3.            In the event of a commission of a material fraudulent act by IPA.

 

2

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C.          Either patty may terminate this Agreement for cause by providing
thirty (30) days written notice to the other party specifying material breach of
the provisions of this Agreement.  The remedy of such breach will result in the
uninterrupted continuance of the Agreement within the remaining term, provided
that such remedy occurs within twenty (20) days of the receipt of such notice,
or if the breach is failure by IPA to make payments required under this
Agreement, then within ten (10) days of the receipt of such notice. 
Circumstances beyond the control of either party, such as acts of God, shall not
be construed as constituting material breach of this Agreement.

 

D.          The Parties agree that significant time and effort has been spent by
ProMed HCA in the development of managed care agreements and in the maintenance
of said managed care agreements.  IPA also understands and agrees this is an
on-going, time consuming process, and that in the event of termination of this
Agreement:

 

1.            By IPA without cause, IPA shall pay to ProMed HCA, or;

 

2.            By ProMed HCA for cause, IPA agrees to pay to ProMed HCA:

 

An amount equal to one hundred (100%) percent of the IPA’s Total Gross Revenue
collected in the twelve (12) months prior to the termination date

 

“Total Gross Revenue” is defined as the total amounts actually received from all
Payors on a capitated per member per month basis prior to any deductions, plus
the total amounts actually received from all other payment sources for any
payments, reimbursements, compensation and incentive payments due IPA.  For the
purposes of this Agreement, risk sharing funds are included in the definition of
Total Gross Revenue.

 

E.           If IPA terminates this Agreement without cause or if ProMed HCA
terminates this Agreement with cause, IPA shall be responsible to continue
payment of ProMed HCA Management Fee in effect at the time of termination, for a
period of one (1) year following termination of Agreement.  The above-referenced
payments in case of termination of this Agreement, stated in section D above,
shall not apply if IPA terminates this Agreement due to the sale of all or
substantially all of the stock or assets of IPA to another entity which also
holds a Management Services Agreement with ProMed HCA.

 

F.           Upon termination of this Agreement, ProMed HCA shall not be
responsible for claims adjudication or issuing of claims payments for any claims
received on and/or after the date of termination.  In the event the parties
desire to have ProMed HCA continue processing claims, such services will be
engaged in and rendered only pursuant to a separate written agreement.

 

8.             Liabilities and Obligations.  ProMed HCA shall have no
responsibility, risk, liability or obligation for the funding of the Plan or for
any extended liabilities for the Plan whether resulting from the termination of
the Plan or from a change to fully or partially insured funding methods.  Such
responsibility, risk, liability or obligation shall reside solely with IPA,
IPA’s contracting Payor and such other entities as are designated in the Plan.

 

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9.            Indemnification.  ProMed HCA shall indemnify and hold harmless IPA
against any loss, claim or judgment, including reasonable attorneys’ fees,
resulting from the negligent acts or omissions or willful misconduct of ProMed
HCA.

 

IPA agrees to indemnify and hold harmless ProMed HCA against any expenses, loss,
claim or judgment, including reasonable attorneys’ fees, arising out of or
resulting from negligent acts or omissions or willful misconduct of IPA.

 

In addition, IPA shall indemnify and hold harmless ProMed HCA for losses, claims
or judgments arising out of ProMed HCA’s performance of its services hereunder
where ProMed HCA has substantially adhered to the framework of policies and
procedures made or established by IPA and made known to ProMed HCA and has
otherwise performed its services without gross negligence or willful misconduct
and in accordance with industry practices.

 

10.          Accounting Records.  If requested by IPA, ProMed HCA shall prepare
and maintain records of the accounting of the Plan funds based upon information
provided to ProMed HCA for this purpose by IPA.  ProMed HCA shall make such
records available within forty-five (45) days of the end of the calendar month
in question.  Said records are defined in the “Fees and Services Exhibit”,
Exhibit II, Sections 2 and 5.

 

11.          Professional Services.  Except as otherwise specifically provided
in any services exhibit attached hereto, ProMed HCA shall not be required to
provide any legal or other professional services to IPA nor shall ProMed HCA be
responsible for providing the services of an independent accountant, actuary or
auditor.

 

12.          Additional Services.  Without the prior written approval from
ProMed I-ICA, IPA shall make changes in the Plan effective only on the
anniversary dates of the documents governing the Plan, unless otherwise required
by applicable law or regulation.  In the event such changes require additional
services to be performed by ProMed HCA, the cost of such services shall be borne
by IPA and upon approval by IPA, such costs will be deducted by ProMed HCA from
Plan Account.

 

13.          Books and Records.  ProMed HCA shall maintain all records
pertaining to the services to be performed by it hereunder.  ProMed HCA shall
disclose the information of such records only to IPA or as designated in writing
by IPA to IPA’s designee or to a person who has obtained an order of a court of
competent jurisdiction requiring such disclosure.

 

Upon termination of this Agreement, ProMed HCA shall deliver to IPA, upon
written request within a time period mutually agreeable, but in no event greater
than six (6) months from the date of termination, information on all claim
histories for the two (2) years immediately preceding the termination of this
Agreement if ProMed HCA has provided administrative services under this
Agreement and/or all files and documents pertaining to consulting services if
ProMed HCA has provided consulting services under this Agreement.

 

If such information or claim histories is so requested, the IPA agrees to pay
all costs incurred by ProMed HCA in providing such information and records,
including but not limited to, the costs of programming computer changes and
mailing.  If additional

 

4

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information is requested by IPA subsequent to the termination of this Agreement,
ProMed HCA shall take reasonable steps to provide such information and IPA
agrees to pay all costs incurred by ProMed H CA in providing such information,
including but not limited to, the costs of programming computer changes and
mailing.  ProMed HCA shall be entitled to retain copies of all such records at
its own expense.

 

14.          Independent Contractor.  It is understood and agreed by the parties
hereto that ProMed HCA is engaged to perform under this Agreement as an
independent contractor and there is no employee-employer relationship between
the parties, nor is there any intent to form any attachment or affiliation
between the parties as a result of this Agreement not specified in this
Agreement.

 

15.          Assignments.  Neither party shall assign nor delegate to any other
person or entity the duties, obligations or responsibilities imposed upon it by
this Agreement without the prior written approval of the other party, except
that ProMed HCA may assign such duties, obligations and responsibilities to a
parent or subsidiary or successor of ProMed HCA upon thirty (30) days written
notice to IPA.

 

16.          Entire Agreement:  Amendments.  This Agreement including the
exhibits hereto and any amendment hereto, contains the entire agreement between
the parties, and all prior proposals, discussions and writings by and between
the parties and related to the subject matter hereof are superseded hereby. 
This Agreement may be modified or amended only  pursuant to a written instrument
executed by both parties hereto, except that the parties agree to be bound by
applicable provisions mandated by state and federal law that are proposed in
good faith by either party as amendments to this Agreement.

 

17.          Compliance with State and Federal Law.  If any provision of this
Agreement or any portion thereof is declared invalid or unenforceable, the
remaining provisions shall nevertheless remain in full force and effect.  This
Agreement shall be interpreted under the laws of the State of California.  IPA
shall cooperate in all audits, applications, licensure, and compliance matters
necessary for ProMed HCA to comply with State and federal law, and with the
requirements of industry accreditation bodies.

 

18.          Force Majeure.  Notwithstanding any provision of this Agreement to
the contrary, neither ProMed HCA nor IPA shall have any liability to the other
for a failure of performance resulting from any cause beyond its control.

 

19.          Enforcement Overpayment.  ProMed HCA shall have neither the
responsibility nor the obligation to take any action, legal or otherwise,
against IPA or any participant in the Plan or other person to enforce the
provisions of the Plan.  In the event that IPA desires to engage the services of
ProMed HCA for such purposes, such services may be engaged in and rendered only
pursuant to a separate written agreement between the patties.

 

20.          Expenses.  Following the calculation of the “Management Fees” in
accordance with the Fees and Services Exhibits for any month, but prior to the
payment thereof, ProMed HCA shall be entitled to pay all other costs, expenses
and liabilities of IPA (including, without limitation, all other costs, expenses
and liabilities incurred in defending

 

5

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or settling any actions or procedures, indemnification obligations to any party
including ProMed HCA, and all other liabilities under contracts or otherwise)
but excluding all costs, expenses and liabilities that are the responsibility of
ProMed HCA under this Agreement (collectively, “Other Liabilities”) by reducing
the amount actually paid by ProMed HCA for costs of provider services or health
care services (“Cost of Health Care Services”); provided however that in no
event shall any such reduction in the actual amount of Cost of Health Care
Services paid by ProMed RCA in any month because of the payment of any Other
Liabilities result in a recalculation of the Management Fee for that month.

 

21.          Arbitration.  Any dispute arising under this Agreement that cannot
be settled by the parties may be referred by either party for binding
Arbitration under the commercial rules of the American Arbitration Association,
in Los Angeles County, California, and the judgment of such arbitration may be
entered in any court of competent jurisdiction.

 

22.          Confidentiality.  The parties agree that the information processes
and the work performed under this Agreement is of a confidential nature.  ProMed
RCA shall provide and IPA shall acknowledge receipt and acceptance of ProMed
HCA’s policies and procedures regarding maintenance of Confidentiality of
information.  ProMed RCA shall receive ninety (90) days notice from IPA prior to
implementation of any request by IPA for the revision or addition of systems
and/or procedures under this paragraph.

 

23.          Notices.  Any notice required to be given pursuant to the terms of
this Agreement shall be in writing and shall be hand delivered or sent, postage
prepaid, by certified or registered mail, return receipt requested, to ProMed
HCA or IPA at the addresses set forth below in the signature section.  The
notice shall be effective on the date delivered by hand or the date of delivery
indicated on the return receipt.

 

IN WITNESS WHEREOF, the parties have signed this Agreement effective the date
first written above.

 

FOR:

PRO MED HCA

 

FOR:

IPA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

Yvonne K. Sonnenberg, M.H.A.
Executive Director

 

 

Jeereddi A. Prasad, M.D.
President

 

 

 

 

 

 

Dated:

 

 

Dated:

 

 

 

ProMed Health Care Administrators
160 E. Artesia St., Suite 350
Pomona, CA 91767
909.620.5252

 

 

Pomona Valley Medical Group, Inc.,
d.b.a. ProMed Health Network
160 E. Artesia St., Suite 350
Pomona, CA 91767
909.620.5252
Tax ID# 95-4142044

 

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THIS AGREEMENT IS SUBJECT TO THE FEES AND SERVICES EXHIBITS
ATTACHED HERETO AND MADE A PART HEREOF.

 

7

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FEES AND SERVICES EXHIBITS

 

EXHIBIT I - FEES

 

Fees

 

1.

 

Management Fees: ProMed HCA shall calculate IPA Management Fees on a monthly
basis, for services provided under this Agreement Management Fees shall be an
amount equal to the actual cost of administrative and management services, plus
five (5%) percent of Total Gross Revenue, as defined in Section 7.D.2., and
shall be calculated prior to the payment of Other Liabilities and Cost of
Services of IPA. ProMed HCA’s costs shall be defined as the amount of all actual
costs incurred by ProMed HCA for administration and management services provided
to IPA during the specific period of this Agreement, Plus;

 

 

 

2.

 

Consulting Fees: When performed by an employee or affiliate of ProMed HCA, IPA
shall pay ProMed HCA for consultation services (including travel expenses) not
included in the services described in Exhibit II, on a “Per Project” or hourly
rate of $150.00 per hour. Charges will be due and payable by IPA upon receipt of
an itemized statement from ProMed HCA, Plus;

 

 

 

3.

 

Other Fees: Additional fees for provision of hardware and software, not included
in initial installation, will be quoted on a “Per Project” bases and agreed upon
in writing between the parties prior to provision of said services. Charges will
be due and payable by IPA upon receipt of an itemized statement from ProMed HCA.

 

 

 

4.

 

Timing and Manner of Payment: ProMed HCA shall deduct the Fees from IPA’s Plan
Account on or before the twentieth (20th) day of each month with respect to
services provided in the prior month.

 

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FEES AND SERVICES EXHIBITS

 

EXHIBIT II - SERVICES

 

Services to be performed by ProMed HCA

 

1.

Claims

 

 

 

 

a.

Adjudication of claims for IPA’s services.

 

b.

Upon written request by IPA, nonclinical assistance to reconcile problems
between provider and patients,

 

c.

Match claims to authorizations.

 

d.

Print, sign and transmit medical service payment checks to Participating
Providers.

 

e.

Microfilm original claims.

 

 

 

2.

Claims Reports

 

 

 

 

a.

Prepare encounter data reports.

 

b.

Prepare accounts receivable reports,

 

c.

Prepare accounts payable reports (if applicable).

 

d.

Prepare month-end claims financial report as appropriate (i.e., lags and IBNR).

 

e.

Provide claims utilization/encounter data reports to meet Payor requirements.

 

 

 

3.

Claims Support Activities

 

 

 

 

a.

Maintain vendor file (provider contract terms and IRS Form 1099 tax
information).

 

b.

Coordinate claims payment policy with IPA.

 

e.

Manage cash balances for claims demand deposit account.

 

d.

Order and implement customized software applications requested by IPA, at IPA’s
expense.

 

 

 

4.

Eligibility

 

 

 

 

a.

Maintain and update eligibility records on a monthly basis.

 

b.

Provide physician assignment and eligibility and retroactive detail reports,
which coincide with payments to IPA physicians, on a monthly basis.

 

c.

Prepare capitation payments per IPA guidelines to correspond with Payor
eligibility and physician assignment.

 

d.

Provide necessary eligibility verification consistent with that received from
Payor.

 

 

 

5.

Accounting

 

 

 

 

a.

Provide information necessary for IPA’s accountant, to close medical expense
journals and ledgers each month.

 

b.

Bind and store computerized accounting reports, or microfiche reports.

 

c.

Provide incentive distribution payments to IPA Physicians, at IPA’s direction.

 

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6.

Authorizations

 

 

 

 

a.

Provide on-line authorization services.

 

b.

Provide authorization tracking and verification per IPA policy.

 

c.

Assist in development of guidelines for authorization (i.e. second opinion,
ancillary services, etc.).

 

d.

Provide trending comparison based on utilization of Primary and Specialty
Physicians.

 

e.

Generation and distribution of authorization logs to provide notification to
providers of authorization status, including Initial Determination for Medicare
line of business.

 

f.

Provide telephone authorization services during working hours and nurses by
telephone for authorization services after working hours.

 

 

 

7.

Quality Assurance and Utilization Review

 

 

 

 

a.

Provide supplemental nursing support services and triage services relative to
Utilization Review and Quality Assurance.

 

b.

Provide Monthly/Quarterly/Annual Quality Management reports.

 

c.

Provide Daily/Weekly/Monthly Utilization Review reports for IPA’s
Director/Board.

 

d.

Assist Physicians and make Quality Assurance recommendations in Quality
Assurance Review.

 

e.

Administer grievance procedures, per Plan requirements.

 

 

 

8.

Credentials/Contracts

 

 

 

 

a.

Assist IPA in development and implementation of credential guidelines.

 

b.

Maintain credential and contract files for IPA Physicians.

 

c.

Provide appropriate credential information to contract entities.

 

d.

Assist in marketing IPA to Payors, negotiate and manage contracts.

 

e.

Assist IPA in arranging and negotiating IPA contracts which include, but are not
limited to: hospitals, home care, radiology, laboratory and other ancillary
services.

 

 

 

9.

Administer all revenues paid by IPA to ProMed HCA according to the provisions of
Section 20, Expenses and Exhibit and Exhibit III, Compensation

 

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COMPENSATION

 

EXHIBIT III

 

ProMed HCA shall receive one hundred (100%) percent of all IPA Collections(1)’
for and on behalf of IPA.  ProMed HCA shall thereafter remit to IPA or its
designee(s), a) the full cost of reimbursing IPA and IPA participating health
care providers for those health care services provided to Payor’s Enrollees by
IPA and IPA participating health care providers using compensation guidelines
developed by IPA in consultation with and approved by ProMed HCA, and b) the
full cost of any other goods, services or benefits provided by IPA to Payor’s
Enrollees or participating health care providers (e.g., malpractice insurance)
using compensation guidelines developed by IPA in consultation with and approved
by ProMed I-ICA.

 

ProMed HCA’s payment hereunder shall be commensurate with the percentage of IPA
Collections which reflects the fair market value of those administrative
services provided by ProMed HCA hereunder.  The percentage as set forth in the
“Fees and Services Exhibits”, Exhibit I may be adjusted by ProMed HCA in
response to fluctuations in market value.  Notwithstanding anything to the
contrary in this Agreement, IPA shall be under no obligation to pay ProMed HCA
any monies in the event those remittances made to IPA as set forth above are in
excess of IPA Collections.

 

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(1) IPA Collections shall mean, for purposes of this Agreement, any and all
revenue paid to ProMed HCA, for and on behalf of IPA, by Payors, Enrollees,
coordination of benefit carriers, reinsurance carriers, institutional providers,
ancillary providers and any other payment source.

 

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