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HomeMy WebLinkAbout02/16/1990 Kevin McDermott, Chair Patricia DeMond Ken Peterson Staff: John Stinson AGENDA BUDGET AND FINANCE COMMITTEE Friday, February 16, 1990 12:00 Noon City Manager's Conference Room 1. Selection of City Physician 2. 'Health Care Consultant. 3. Downtown Improvement District MEMORANDUM MAY 3, 1990 TO: BUDGET & FINANC~ COMMITTEE FROM: SUE WHITFIELD SUBJECT: HEALTH CARE CONSULTANT On December 13, 1989, the Council approved the City Manager's Report No. 3-89, directing staff'to retain a professional advisor to assist the City in the implementation of'a multi-year approach to the health care cost problem, including a review of the separation of retirees from the active employee contribution formulas. A request for proposals was sent to the Sher Group, Advanced Risk Management Techniques (ARMTECH), Wright Insurance Agents, Gil Howell, and Sedgwick James Company. Proposals were received from: - Sher Group - Wright Insurance Agents - Advanced Risk Management Techniques (ARMTECH) - Sedgwick James Company All the above'groups were interviewed with the exception of Sedgwick James Company, who cancelled their appointment. The interview panel was made up of: - Bill Avery - Labor Negotiator - Gil Rojas - Assistant Finance Director - John Stinson - Assistant to the City Manager - Sue Whitfield - Personnel Manager Based upon a review of the proposals and an extensive interview with each of the consultants, the interview panel recommends the Sher Group. With the Council's approval, Mr. Sher will perform the services under "Scope of Work" in the attached Agreement. The compensation for these services will consist of monthly payments upon the submission of an invoice, for a total payment not to exceed $20,000 for a period not exceed 6 months. klc 4:BFC1 JAN ~, 0 1999 PERSONNEL OFFICE I CITY OF BAKERSFIELD PROPOSAL FOR PROFESSIONAL -SERVICES SHER GROUP 100 First .Street, Suite 1035 San 'Francisco, CA. 94105 January 26, 1990 SHER GROUP. City of Bal~ersfieid Proposal for Professional Services I Proposal Outline Itl 1. What Sher Group Believes Must Be Done. 2. The Approach Sher Group Will Use to Working with the City of Bakersfield. I I 3. References. 4. Proposed Timing of Work and Fee Schedule. SHER GROUP City of Bakersfield Proposal for. Professional Services 1. What Sher Group Believes· Must .Be Done. The City Of Bakersfield needs to take a fresh look at the assumptions upon which are based its group health and dental benefit plans. There is a strong case to be made for returning to the basic principles of group health insurance underwriting. This approach would place all active and retired employees in one plan which, ideally, would be able to offer both HMO and some sort of Fee-for-Service benefits.' This is a simple, elegant way of addressing the vexing problems now facing the City. Covering all City health plan beneficiaries under one contract would permit broad spread of risk and more equitably distribute the expense of retiree health care coverage. Retired and .active employee coverage' should incorporate some cost-sharing at point of service. This would re-allocate the cost of covering small claims from premium, which everyone pays, to small per-visit Co-payments by those who use the most physician services. Such change would dramatically reduce the rate of increase in premiums thereby freeing money for other forms of compensation. Finally, both management and labor need to recognize that the healthcare cost problem is not going to go away. Any proposed solution must be examined for its range of possible outcomes over the next three years. Procedures, reports, management practices and personnel must be put in place to assure consistent year-to-year direction of the City of Bakersfield's group benefit plans. ;. .. ~.. SH'ER GROUP City of Bakersfield Proposal for Professional 'Services 2. The APproach Sher Group Will Use to Working with the City of Bakersfield. Sher Group works to assist the process of decision-making which leads to effective benefit plan governance and management. We are as much interested in the process of decision-making as the result of deliberations. We believe that a properly structured decision-making process leads to a well-thought-out consensus which generates gOod results. Sher Group will, in conjunction with your Committee, work on a two phase project: PHASE ONE ..A. Analyze data. Analysis of enrollment, claims, income, administrative procedures, and plan management practices are all Part of understanchng the status quo. Establishment of regular, standardized reporting formats is vital to month- to-month review of operating results and for strategic planning. B. ·Educate decision-makers about the status quo and the results of ,maintaining the status quo. The ·basis of effective decision-making is a clear understanding of the status quo and where things are going if nothing changes. We will describe for the City of Bakersfield, based on our experience and the Citv's recent plan history., the consequences over the next two to three years o~ continuin ~ with plans and policies in-force today. ' ~  C. Present alternatives to the·status qUO. ' ' Rapid change in the group health environment requires flexibility and creativity, in adrn/nistrative practice and plan design. 'If the City does. not adapt to'change, plans offered by the City will no longer meet the needs of ~ts retzrees and employees. Regular, thorough revie~of alternatives to the status quo must be performed. Administrative assumptions such as stability of enrollment,-rates of utilization, inflation, and so forth must' be questioned '! or subjected to analysis. While benefit plans are complex, there are only four variables that may be modified. Sher Group is expert at malting clear the trade-offs involved in :' l changing these variables: Benefits- what are the levels of coverage and types of ser~4ces covered? Access- from whom may beneficiaries receive care? Price- hoTM much of the' cost does the employee or·the employer pay? Eligibility- who Will be offered coverage? 4 City of Bakersfield · Proposal for Professional Services 2. The Approach Sher Group Will Use (continued). i D. F0cilitate discus,sion of al~¢rnafives presented. Pros and cons of alternatives must be discussed openly. As a professional advisor,' Sher Group will recommend solutions, but the ultimate I responsibility for decision-making rests with the Committee and the City Council. We are very good at guiding our clients from discussion of alternatives to develoPment of consensus for action while addressing 1 positive and negative consequences of alternatives. · E. Develop a three-year business plan. I The City must operate its health plans like a business. The City provides coverage to employees and retirees who dePend on City decision makers to develop and maintain competitive and cost-effective benefit plans. In California's rapidly changing heal.th care environment, short-term decision- making which fails to consider lonaer-term consequences - such as occurred in 1989 - will lead inexorably to di'~aster. Sher Group will help City develop a three-year business plan which should be reviewed annually. .PHASE TWO iF. Negotiate'with insurance c,"-a-riers or Other vendors as.retmired to implement changes proposed. · Sher Group and sher Company Insurance Services provide prOfessional advice to nearly one hundred California employers whose employees are enrolled in plans offered by forty different careers. We have a long and successful record of pragmatic negotiations and effective results with the City's' carriers: Blue Cross and HealthNet. We will negotiate with carriers 'in a manner acceptable to City decision makers with consideration that long- run stability is generally Preferable to short-term winner-take_all outcomes. _G. Perform other services as required. -.. Unlike larger fu'rns we are very flexible and provide personal service. It is irnpossible in two Pages to sUmmariZe all the tasks we have performed in the past or may be asked to Undertake in the future. We haVe assisted in. design of communications materials, held seminars for employees, developed requests for proposal :for'various products and services, analvzed . those proposals, and accomplished many other tasks. If We.can 'perform a task competently, within the budget allocation, we Will do ir X~,ell. If.X',,e · can't do it, we'll find someone who will. City of Bakersfield Proposal for Professional Services 3..References Mr. Wesley L. Apker, Ed.D. Executive Director ASsociation of California School' Administrators 1517 L Street Sacramento, CA 95814 1-(916)-444-3216 Mr. John P. Fraser and General Counsel Executive Director Association of California Water Agencies 910 K Street, Suite 250 Sacramento, CA 95814-3577 1-(916)-441-4545 Mr. Earl G. Eckert Personnel Director Butte County County Administration Building 25 County Center Oroville, CA 95965-3387 1-(916)-538-7651 Mr. John Worcester Personnel Services Manager City of Sacramento Street, 2nd Floor 921'Tenth Sacramento, CA 95814-2693 1-('916)-449-5726 · City of Bakersfield I Proposal for Professional Services 4. Proposed Timing of Work and Fee Schedule. Timing Phase One This should take four to five months depending on the frequency of Committee 'meetings and the Committee's ability to digest information. The most important part of the process in Phase One is consensus building in support of long-term strategy. If divisions between members of the Committee are great or if solutions are controversial Phase One may take more than 4-5-months. We recommend one meeting per month in this phase. This is the hard' part. Phase Two This will include implementation and maintenance of th.e plans developed Phase One and will be of indeterminate duration. .... Fee Schedule Sh.e.r Group's proposed fee schedule is based on a combination of a mrna'hum monthly fee and actual hours worked. Phase One: 1. A Minimum Monthly Fee will be billed at $3000 per month and will be the least amount payable to Sher Group for any month. 2. A Maximum Monthly Fee of $4000 will be set. 3. Sher Group will track actual hours worked on City business at a rate of $190/hour for principals, $90/hour for account executives and $60/hour for support staff. If_,L_char=~es based on actual hours .worked exceed the Minimum Monthly Fee. S~her Group will bill the C~ntre between the Minimum Monthly Fee and the Maximtim Monthlyl:'~-~7-". 4. Sher Group will pay all of its own expenses for travel, lodging, and~ routine office support- services. Phase Two: We propose to negotiate with the City an arrangement similar to that of Phase One, possibly at different rates. We believe the proposed fee schedule is extremely reasonable. It is based. on Sher group's intimate understanding of how complicated cities can be. If Phase One is carried out over'five months, will cost the City at most $20,000~ This figure represents about onezhalf of one percent of the City's lff89-b-'~nefit expenditures of $3.8 million. ' NO. CONSULTANT' S AGREEMENT THIS AGREI~II~IT, is made and entered into on by and1 between the CITY OF BAKERSFIELD, a municipal corporation, referred to herein as "CITY" and ~ S~ GROU~, referred to herein as "CONSULTANT". RECITA-LS WHEREAS, the CITY OF BAKERSFIELD issued a Request for Proposals and CONSULTANT has submitted a proposal concerning health care analysis; and WHEREAS,· CONSULTANT is experienced and well qualified in analysis of.health care services; and WHEREAS, the CITY does not have expertise currently on staff to perform analysis, recommend, and implement a multi-year · approach to controlling health care costs for active employees and retirees; and · WHEREAS, CONSULTANT is aware that information may come· into CONSULTANT's possession which may impact .the CITY's legal position in the event such information was released to outside parties; .and WHEREAS, CITY now desires to emPloy.CONSULTANT to: ~ a) analyze data, present alternatives to our status quo health system; ~') facilitate discuSsion of alternatiVes presented; and .c) .develop a three-year business plan. as set'.forth herein. NOW, T}r~.REFORE, 'CITY and CONSULTANTmutually agree as follows: 1. SCOPE OF WORK.· The scope of work is generally described as a·review and analysis of CITY medical and dental benefit plans · ~ for active and retired employees;. ConsUltative '?·meetings approximately once each month with CITY'staff~ CITY's negotiator, the joint CITY/employee insurance committee, employees and retirees of CITY; preparation of meeting materials and research necessary .to·facilitate such consultative meetings; recommendation of changes · · .to Current benefit plans;.if.necessary, preparationof requests for · .proposal from alternate health and dental benefit vendors; analysis of proposals received and presentation of comparisons between in- force and proposed programs to various City groups. Written reports in support of the tasks listed shall be aS mutually agreed Upon betWeen the consultant and the CITY and shall include a summary report to the CITY by NoVember 30 or by such date as shall be agreed upon between the City and the consUltant. CONSULTANT's engagement shall begin 'on May 21, 1990, and shall terminate on November 30, 1990, unless extended at the sole discretion of the CITY at terms to be mutually agreed~upon. The scope of work shall include all items contained in CONSULTANT'S Proposal and CITY's Request for Proposals. CONSULTANT'S Proposal and CITY's Request for Proposals are set forth in Exhibit "A", and~incorporated herein by reference as though fully set forth. CONSULTANT's services will include all the procedures necessary to properly complete the task CONSULTANT has been hired to perform whether specifically included in the scope of work or not. 2. COOPERATION. Upon request CITY and its officers and employees shall provide necessary information not available to CONSULTANT from other sources to CONSULTANT as required to perform the services described herein and in accordance with the scope of work set .forth above. 3. COMPENSATION. Compensation for services under paragraph 1 shall be computed as set forth'in the fee schedule for Phase One described in paragraph 4 of the CONSULTANT's proposal and shall consist of monthly payments upon invoice for a total payment not to exceed TWENTY. THOUSAND DOLLARS ($20,000). The compensation set forth in this paragraph shall be the total compensation for the services provided by CONSULTANT including all out-of-pocketcost incurred by the CONSULTANT. CITY shall pay no fee other than the compensation listed in this paragraph unless otherwise agreed to in writing by the .CITY and CONSULTANT. 4. PAYMENT PROCEDURE. CONSULTANT shall be paid for services rendered after receipt of an ~itemized invoice for the work completed and approved by CITY in accordance with the terms of this agreement. Payment by CITY to ~CONSULTANT. shall be ,made,within forty-five'~(45) days after receipt and approval by CITY of CONSULTANT's itemized invoice. 5. TITLE TODOCUMENTS. All documents, plans, and drawings~ · maps, photographs, and other papers, or copies thereof prepared by CONSULTANT pUrsuant to the terms of this agreement, shall, upon preparation, become the property of the CITY. 6. CONFIDENTIALITY. During the term of' this agreement, cONSULTANT will be~ dealing ~with information of a tegal,~ and .~.~onfidential nature, and such information could severely~damage CITY in the event any of said information was disclosed to outside parties. CONSULTANT will not diSclose to anyone, directly or indirectly, either during the term of this agreement or at any time thereafter, any such information or use such information other than as necessary in the course of services provided to the CITY under this agreement. All documents that CONSULTANT prepares and confidential information that might be given to CONSULTANT in the course of. providing services under this agreement are the exclusive property of the CITY and shall remain in the CITY's possession. Under no circumstances shall any such information.or documents be removed from the CITY without the CITY's written consent first being.obtained. · 7. BEST EFFORTS. CONSULTANT is preparing a work product at the request of the CITY. All work done under .this Agreement will be on a best efforts basis. CONSULTANT agrees to dedicate the necessary personnel and time to carry out the work as proposed. In the event that litigation is commenced involving the work prodUct of CONSULTANT, CONSULTANT will, at the request of the CITY, assist the CITY in that litigation.. Should such litigation demonstrate that. CONSULTANT was negligent or committed misfeasance or malfeasance'in preparation of the Study, or used patented, copyrighted or proprietary informatiOn without full legal authority to do so, no added compensation shall be due for providing such assistance. 8. NEWS RELEASES/INTERVIEWS. All consultant and subconsultant/subcontractor news releases, media interviews, .testimony at hearings and public comment shall be prohibited unless expressly authorized by'the Contract Administrator. '9. WAIVER OF DEFAULT. The failure of any party to enforce against another a provision of this Agreement shall not constitute a waiver of that party's right to enforce such a provision at a later time, 'and shall not serve to vary the terms, of this Agreement. 10. FORUM. Any lawsuit pertaining to any matter arising .Under, or growing out of, this contract shall be instituted'in Kern County, California, - 3 - 11. ' NOTICES. Alt no~ices relative to this Agreement shall be given in Writing and shall be sent by certified or registered mail and be effective upon depositing in the United States mail. The parties shall be addressed as follows, or at any other address .designated by notice: ' ~ CITY: CITY OF BAKERSFIELD CITY HALL 1501Truxtun Avenue Bakersfield, California 93301 CONSULTANT: THOMAS S. Sw~R S~r~.R GROUP 100 First Street Suite 1035 San Francisco, California 94105 12. ASSIGNMENT. This contract shall not be assigned by any party, or any party'substituted, without prior written consent of all the parties. 13. 'BINDING EFFECT. The rights and obligations of this Agreement shall inure to the benefit of, and be binding upon, the parties to the contract and their heirs, administrators, executors, personal representatives, successors and.assigns. 14. ATTORNEY'S FEES. In any action to enforce the terms of this Agreement, the prevailing party shall be entitled to recover its attorney's fees and coUrt costs and- other nonreimbursable litigation expenses, such as expert witness fees and investigation expenses, whether or not such action proceeds to judgment. 15. MERGER AND MODIFICATION. This contract sets forth the entire Agreement between the parties and supersedes all other oral or written representations. This contract may be modified only in a writing approved by the City Council and signed by all the parties. In the event of a conflict between the terms, conditions or speCifications set forth herein and those in Exhibits attached hereto, 'the terms, conditions or speCifications set'forth in this agreement (and not the exhibits) shall prevail. ~ 16. CORPORATE AUTHORITY. Each individual executing this Agreement represents and warrants that they are duly authorized to exeCute and deliver this Agreement on behalf of the corporation or organization named herein and that this Agreement is binding upon said Corporation or organization in accordance with its terms. -- 4 .-- 17. TERMINATION. This agreement may be terminated by any party upon thirty (30) days written notice to all other parties. In the event of termination, CONSULTANT shall be paid for the work completed to the satisfaction of CITY up to the date of notice of termination. Upon termination, CONSULTANT shall deliver all materials relative to the Study to the CITY. 18. COMPLIANCE WITH AT,L LAWS. CONSULTANT shall, at CONSULTANT's sole cost, comply with all of the requirements of · Municipal,' State, and Federal authorities now in force, or which may hereafter be in force, pertaining to this Agreement, and shall faithfully observe in all activities relating to or growing out of this Agreement all Municipal ordinances and State and Federal statutes, rules or regulations now in force or which may hereafter be in force. 19. INDEPENDENT CONTRAcTOR. This Agreement calls for the performance of the services of CONSULTANT as an independent contractor, and CONSULTANT will not be considered an employee of the CITY for any purpose and is not entitled to any of the benefits provided by CITY to its employees. This Agreement shall not be construed as forming a partnership or any other association with · CONSULTANT other than that of an independent contractor. 20. INSURANCE.. In addition to any other form of insurance or bond required under the terms of this Agreement, the CONSULTANT shall procure and maintain for the duration of this Agreement the following types and limits of insurance: a~ Professional. liability insurance, providing coverage on an occurrence basis for errors and omissions with limits of not less than one million ($1,000,000) per occurrence; and b. Automobile liability insurance, providing coverage on an occurrence basis for bodily injury, including death, 'of one or more persons, property damage and personal injury, with limits of not less than one million ($1,000,000) per occurrence; and c. Broad form commercial general liability insurance, providing coverage on an occurrence basis for bodily injurY, including death, of one or more persons, property damage and personal injury, with limits of not less than one million ($1,000,000) per occurrence. ~ '.~ " d. Workers' compensation with statutory limits and employer's liability insurance with limits of not less than one million ($1,000,000) per accident. Except for professional liability, all policies required of the CONSULTANT hereunder shall be primary insurance as respects the CITY, its mayor, council, officers, agents, employees and volunteers and any insurance or self-insurance maintained by the CITY, its mayor, council, officers, agents, employees and volunteers shall be excess of the CONSULTANT's insurance and shall not. contribute with it. The automobile liability policies shall provide coverage for owned, non-owned and hired autos. The liability policies shall provide contractual liability coverage for the terms of this Agreement. Exceptfor professional liability, the liability policies shall contain an additional insured endorsement in favor of the CITY, its mayor, council, officers, agents, employees and volunteers. · The workers' compensation policy shall contain a waiver of subrogation endorsement in favor of the CITY, its..~mayor, council, officers, agents, employees and volunteers. '~ Ail policies shall contain the following endorsement: An endorsement providing the CITY with ten (10) days written notice of cancellation or material change in policy language or terms. If any part of the work under this'Agreement is sublet, similar insurance shall be provided by or on behalf of the subcontractors to cover their operations. The insurance required under this Agreement shall be maintained until all work required to be performed under the terms of this Agreement is satisfactorily completed as evidenced by formal'~acceptance by the 'CITY. The CONSULTANT shall furnish the City Risk Manager with a certificate'of insurance eVidencing the insurance required under this Agreement. .. '21. INDEMNITY. CONSULTANT shall indemnify, defend, and hold harmless CITY, its officers, agents and employees againSt any and all liability, claims, actions, causes of' action' or demands whatsoever against them, or any of them, for injury to or death of pers0nS or damage to property arising Out of, connected with, or caused by CONSULTANT, CONSULTANT,semployees' agents or/independent contractors or companies in the performance of (Or in any .way arising from) the term: and provisions of. this Agreement. i -- 6 -- 22. EXECUTION. This Agreement is effective upon execution. It is the product of .negotiation and therefore shall not be construed against any party.. 23. CONTRACT ADMINISTRATOR. The Contract Administrator for the CITY is: Ms. Sue Whitfield ~.:'~ Personnel Manager City of Bakersfield 1501 Truxtun Avenue Bakersfield, California 93301 (805) 326-3789 CONSULTANT's project manager shall be: Mr. Thomas S. Sher Sher Group 100 First Street Suite 1035 San Francisco, California 94105 The Contract Administrator .and the Project Manager shall be the primary contact persons for CITY and CONSULTANT. It is expressly understood that only the CITY may approve modifications to the contract, which modifications must be in writing. 24. ACCOUNTING RECORDS. CONSULTANT shall maintain accurate accounting records and other written documentation pertaining to the costs incurred in performance of this Agreement. Such records and documentation shall be kept at CONSULTANT's office during the period of this Agreement, and after the term of'this agreement for a period of three years from the date of the final Payment under this Agreement, and shall be made available to CITY representatives upon request at any time during regular business hours. 25. CONFLICT OF INTEREST. CONSULTANT stipulates that corporately or individually, the firm, its employees and subconsultants have no financial interest in either the .success or failure of any project which is dependent on the results of the studies prepared under this agreement. 26. TAX NUMBERs. CONSULTANT's Federal Tax ID Number CONSULTANT is a corporation? Yes X No (Please check One ) o0o -- 7 -- IN WITNESS WN~.REOF, theparties hereto have caused this Agreement to be executed, 'the day and year first-above written. "CITY" CITY OF BAKERSFIELD By CLARENCEE. MEDDERs Mayor APPROVED AS TO FORM: ARTHUR J. SAALFIELD City Attorney By COUNTERSIGNED: By GREGORY KLIMKO Finance Director "CONSULTANT" THE SHER GROUP Title L~.~M/~D/meg/lg SHER.K 04/26/90 Attachment ~xhibit "A" - 8 - SHER GROUP~ $20,000 6 Months They pay all of their travel expenses, logding and routine office supplies. Wright Insurance $20,000 - $24,000 12 Months Agents On Site and Travel Time - $100 Hour ARMTECH $16,000 - $20,000 6 Months Fees to increase in 1990, but not more than 10%. Travel, Telephone, etc. (expenses) - 15 - 20% Sedgwick James $30,000 - $42,000 Based on 200- Company 300 Hours