Letter from George Eisenstadt of CalaCare, Received 11/25/96

November 21, 1996

Dr. Charles Balis
San Francisco, CA 94104

Re: Compensation Arrangements

Dear Dr. Balis:

As you are no doubt aware, Calacare and the HMO business as a whole is driven by the desire of all parties concerned to maximize the efficiency of patient care and minimize its cost. While we assume you are doing a good job at treating your patients (although due to your tardiness in filing the requested forms we are still unable to quantify this), the high cost of your services has forced us to consider other means of achieving the same results.

We have received a very attractive offer from a local therapy group practice to outsource our current patient load at a much more favorable rate then what we are currently paying for your services. While it is true that these therapists are psychologists, not psychiatrists, this type of counseling would doubtless be sufficient for the majority of your current patients. We would appreciate it if you could identify for us those of them for whom, in your opinion, this option would be appropriate.

While we realize that we are contractually obligated to continue paying your current $90 per hour rate for the patients under your care through our contractual period, this is subject to a waiver on your part. Should you be willing to compromise somewhat on your compensation, agreeing to adjust it to, say, $60 per hour, we might be able to justify your continued treatment of a larger number of patients. Our business must reflect the realities of the marketplace if it is to continue to be viable, as I am sure you understand. Please feel free to contact me with any question or concerns you might have regarding these necessary changes in our working arrangements.

Very truly yours,

George Eisenstadt

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