rdd Doc 11 Filed 05/25/17 Entered 05/25/17 11:07:54 Main Document Pg 1 of 53

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1 Pg 1 of 53 Christopher Marcus, P.C. James H.M. Sprayregen, P.C. John T. Weber William A. Guerrieri (pro hac vice pending) KIRKLAND & ELLIS LLP Alexandra Schwarzman (pro hac vice pending) KIRKLAND & ELLIS INTERNATIONAL LLP KIRKLAND & ELLIS LLP 601 Lexington Avenue KIRKLAND & ELLIS INTERNATIONAL LLP New York, New York North LaSalle Street Telephone: (212) Chicago, Illinois Facsimile: (212) Telephone: (312) Facsimile: (312) Proposed Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) 21st CENTURY ONCOLOGY HOLDINGS, INC., et al., 1 ) Case No (RDD) ) Debtors. ) (Joint Administration Requested) ) DEBTORS MOTION FOR INTERIM AND FINAL ORDERS AUTHORIZING THE DEBTORS TO (I) PAY CERTAIN PREPETITION WAGES, SALARIES, OTHER COMPENSATION, AND REIMBURSABLE EMPLOYEE EXPENSES AND (II) CONTINUE EMPLOYEE BENEFITS 1 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: 21C East Florida, LLC (0905); 21st Century of Florida Acquisition, LLC (7449); 21st Century Oncology Holdings, Inc. (7745); 21st Century Oncology Management Services, Inc. (7211); 21st Century Oncology of Alabama, LLC (3649); 21st Century Oncology of Harford County, Maryland, LLC (6540); 21st Century Oncology of Jacksonville, LLC (4308); 21st Century Oncology of Kentucky, LLC (3667); 21st Century Oncology of New Jersey, Inc. (9875); 21st Century Oncology of Pennsylvania, Inc. (0463); 21st Century Oncology of Prince Georges County, Maryland, LLC (2750); 21st Century Oncology of South Carolina, LLC (1654); 21st Century Oncology of Washington, LLC (3274); 21st Century Oncology Services, LLC (6866); 21st Century Oncology, Inc. (8951); 21st Century Oncology, LLC (5899); AHLC, LLC (9353); American Consolidated Technologies, LLC (4024); Arizona Radiation Therapy Management Services, Inc. (3876); Asheville CC, LLC (9175); Associates in Radiation Oncology Services, LLC (0866); Atlantic Urology Clinics, LLC (0029); Aurora Technology Development, LLC (5383); Berlin Radiation Therapy Treatment Center, LLC (3712); Boynton Beach Radiation Oncology, LLC (0780); California Radiation Therapy Management Services, Inc. (7222); Carepoint Health Solutions, LLC (7130); Carolina Radiation and Cancer Treatment Center, LLC (5493); Carolina Regional Cancer Center, LLC (6164); Derm-Rad Investment Company, LLC (4111); Devoto Construction of Southwest Florida, Inc. (3949); Financial Services Of Southwest Florida, LLC (3717); Fountain Valley & Anaheim Radiation Oncology Centers, Inc. (3999); Gettysburg Radiation, LLC (8771); Goldsboro Radiation Therapy Services, LLC (2589); Jacksonville Radiation Therapy Services, LLC (6266); Maryland Radiation Therapy Management Services, LLC (0079); MD International Investments, LLC (3303); Medical Developers, LLC (1261); Michigan Radiation Therapy Management Services, Inc. (3965); Nevada Radiation Therapy Management Services, Incorporated (4204); (Continued ) KE

2 Pg 2 of 53 The above-captioned debtors and debtors in possession (collectively, the Debtors ) respectfully state as follows in support of this motion: Relief Requested 2 1. By this motion, the Debtors seek entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B (the Interim Order and Final Order, respectively), (a) authorizing, but not directing, the Debtors to (i) pay prepetition wages, salaries, other compensation, and reimbursable employee expenses, and (ii) continue the employee benefits programs in the ordinary course, (b) scheduling a final hearing to consider approval of this motion on a final basis, and (c) granting related relief. 2. The Debtors believe that all employee compensation and benefits are vital to the Debtors business, and so, pursuant to the Interim Order, the Debtors seek authority to continue making payments on account of employee compensation and benefits that are necessary to prevent immediate and irreparable harm to the Debtors business during the first 21 days of these chapter 11 cases. In addition, the Debtors seek to minimize the personal hardship Employees would suffer if prepetition Employee-related obligations are not paid or remitted when due or as 2 New England Radiation Therapy Management Services, Inc. (6448); New York Radiation Therapy Management Services, LLC (8868); North Carolina Radiation Therapy Management Services, LLC (4741); OnCure Holdings, Inc. (1697); OnCure Medical Corp. (1053); Palms West Radiation Therapy LLC (4934); Phoenix Management Company, LLC (8644); Radiation Therapy School For Radiation Therapy Technology, Inc. (7840); Radiation Therapy Services International, Inc. (7575); RVCC, LLC (3578); Sampson Accelerator, LLC (2724); Sampson Simulator, LLC (2250); SFRO Holdings, LLC (6927); South Florida Medicine, LLC (6002); South Florida Radiation Oncology, LLC (7256); Treasure Coast Medicine, LLC (0975); U.S. Cancer Care, Inc. (3730); USCC Florida Acquisition, LLC (0485); West Virginia Radiation Therapy Services, Inc. (0691). The location of 21st Century Oncology Holdings, Inc. s corporate headquarters and the Debtors service address is: 2270 Colonial Boulevard, Fort Myers, Florida A description of the Debtors businesses, the reasons for commencing these chapter 11 cases, the relief sought from the Court to allow for a smooth transition into chapter 11, and the facts and circumstances supporting this motion are set forth in the Declaration of Paul Rundell (I) in Support of First Day Motions and (II) Pursuant to Local Bankruptcy Rule (the First Day Declaration ), filed contemporaneously herewith. Capitalized terms used in this Relief Requested section of this motion but not otherwise defined therein shall have the meanings ascribed to such terms later in the motion 2

3 Pg 3 of 53 expected. As such, by this motion, the Debtors seek authority to pay certain prepetition claims and continue to honor obligations on a postpetition basis, as applicable, relating to, among other things, wages, salaries, variable compensation, temporary agency fees, federal and state withholding taxes and other amounts withheld (including garnishments, Employees share of insurance premiums, taxes, and 401(k) contributions), reimbursable expenses, health insurance benefits, health savings accounts, flexible savings accounts, life and AD&D insurance, short- and long-term disability benefits, the workers compensation program, employee assistance services, time-off benefits, retirement savings, health, and welfare benefits (including the 401(k) plans, and COBRA benefits program, and other benefits the Debtors historically have provided to Employees) (collectively, the Employee Compensation and Benefits ) on an interim and final basis as summarized in the chart below. Relief Sought Interim Amount Final Amount Employee Compensation Employee Compensation $10,000,000 $10,000,000 Covering Physicians $99,000 $99,000 Temporary Agency Fees $1,200,000 $1,200,000 Deductions, Withheld Amounts, and $63,000 $138,000 Payroll Taxes Reimbursable Obligations $703,800 $703,800 Employee Health and Welfare Benefits Insurance and Health Benefit Plans $4,107,300 $4,111,800 Flexible Spending Accounts and Health $281,500 $283,500 Savings Accounts Life and Disability Insurance Plans $65,300 $65,300 Workers Compensation $0 $785,000 Disability Insurance $125,700 $125,700 Employee Savings and Retirement Plans $225,000 $225,000 Fringe Benefits $225,500 $225,500 Other Benefits Paid Vacation $0 $0 Paid Personal Time $0 $0 Bereavement Leave $0 $0 Holidays $0 $0 Total $17,096,100 $17,962,600 3

4 Pg 4 of 53 Jurisdiction and Venue 3. The United States Bankruptcy Court for the Southern District of New York has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference from the United States District Court for the Southern District of New York, dated December 1, The Debtors confirm their consent, pursuant to Rule 7008 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), to the entry of a final order by the Court in connection with this motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 4. Venue is proper in this Court pursuant to 28 U.S.C and The statutory bases for the relief requested herein are sections 105(a), 363(b), 507, and 541(b) of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code ), Bankruptcy Rules 6003 and 6004, and rule (a) of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules ). The Debtors Workforce 3 6. As of the date of commencement of these chapter 11 cases (the Petition Date ), the Debtors employ approximately 3,631 employees (the Employees ), including approximately 3,269 full-time Employees (the Full-Time Employees ), 90 part-time Employees (the Part-Time Employees ), 137 Employees working reduced hours (the Reduced Hours Employees ), 135 Employees hired through outside temporary employment agencies 3 The summary of the Employee Compensation and Benefits is qualified entirely by the Debtors official policies or other practices, programs, or agreements, whether written or unwritten, evidencing an arrangement among the Debtors and the Employees (each, an Official Policy ). In the event of any inconsistency or ambiguity between the summary contained in this motion and an Official Policy, the terms of such Official Policy shall govern. 4

5 Pg 5 of 53 (the Temporary Employees ), and 75 independent contractor physicians (the Covering Physicians ). Approximately 2,407 Employees are paid on an hourly basis (the Hourly Employees ) and the remaining approximately 1,224 Employees are paid on a salaried basis (the Salaried Employees ). As a healthcare company, the Debtors employ or contract with numerous individuals with advanced medical training, including approximately 350 physicians. 7. The Employees perform a variety of critical functions including operating the Debtors cancer treatment centers, providing radiation oncology, medical oncology, breast, gynecological and general surgery, urology, and primary care, and recruiting and training physicians and technicians. Employees also engage in various functions to manage and support the operations of the Debtors cancer care services, including various administrative, marketing, legal, accounting, finance, and management-related tasks. A majority of Employees are highly skilled physicians, nurses, radiation therapists, and radiation physicists. The skills and experience of the Employees are essential to the Debtors ongoing operations. 8. At the same time, the vast majority of Employees rely exclusively on their compensation and benefits to pay their daily living expenses. Thus, Employees likely will be exposed to significant financial difficulties if the Debtors are not permitted to continue paying wages and salaries, providing employee benefits, and maintaining certain programs benefiting Employees in the ordinary course of business. Accordingly, the Debtors respectfully submit that the relief requested herein is necessary and appropriate under the facts and circumstances of these chapter 11 cases. 5

6 Pg 6 of 53 Employee Compensation and Benefits I. Employee Compensation. A. Wages. 9. In the ordinary course of business, Employees generally are paid on a bi-weekly basis, every other Friday for work completed through the previous Saturday. Approximately 96 percent of Employees receive their wages, salaries, and other compensation by direct deposit, with the remaining Employees receiving checks. On average, the Debtors gross payroll is approximately $12.7 million per bi-weekly pay period. 10. The Debtors pay the majority of their Employees wage and salary obligations (collectively, the Wages ) on either a salaried or hourly basis. However, the Debtors pay approximately 350 physicians a variable compensation ( Variable Compensation, together with Wages, Employee Compensation ) on either a monthly or quarterly basis pursuant to the terms of the Debtors employment agreements with such physicians. Variable Compensation is dependent upon the applicable physician achieving certain specific performance metrics, including, but not limited to, productivity, compliance, quality improvement, and practice enhancement and growth. Performance generally is measured on either a monthly or quarterly basis and payments are remitted in the month following the relevant performance period. The Debtors maximum annual liability for Variable Compensation is approximately $75 million, with average monthly payments totaling approximately $6.4 million for calendar year Because the Debtors pay the majority of Employees in arrears, the Debtors will owe certain Employees accrued but unpaid Employee Compensation as of the Petition Date. Employee Compensation also may be due and owing as of the Petition Date because of, among other things, (a) potential discrepancies between the amounts paid and the amounts that Employees believe should have been paid, which, upon resolution, may reveal that the Debtors owe additional amounts to such 6

7 Pg 7 of 53 Employees and (b) the delay between the date when some payroll checks are issued and the date when such checks are presented to Employees banks for payment. 12. As of the Petition Date, the Debtors estimate they owe approximately $10.0 million on account of accrued but unpaid Employee Compensation (excluding Payroll Taxes, Deductions, and Reimbursable Expenses (each as defined herein) (the Unpaid Employee Compensation ), all of which will become due and owing within the first 21 days of these chapter 11 cases. 13. As of the Petition Date, the Debtors estimate that they may owe certain additional amounts on account of accrued and unpaid Variable Compensation, however, such amounts cannot be calculated with certainty at this time. The Debtors believe that payment of accrued but unpaid Employee Compensation may result in payments to certain Employees in excess of the $12,850 priority cap in section 507(a)(4) of the Bankruptcy Code. However, the Debtors are seeking to pay Employee Compensation in excess of the priority cap only upon entry of the Final Order. B. Covering Physicians. 14. As discussed, the Debtors employ approximately 350 physicians on a full-time basis. To supplement this workforce and ensure continuous patient care, the Debtors from time to time contract with independent contractor physicians, the Covering Physicians, to provide on-demand services to the Debtors. The Debtors contract with approximately 75 Covering Physicians, and use the services of approximately 38 Covering Physicians on average per month. The Covering Physicians are paid hourly and are not eligible for the Employee Health and Benefit programs set forth in section II of this motion. On average, the Debtors pay approximately $6,000 per month to each Covering Physician who provides services in a given month. 7

8 Pg 8 of As of the Petition Date, the Debtors owe approximately $99,000 on account of services rendered by the Covering Physicians, all of which will come due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to pay up to $99,000 on account of the Covering Physicians on an interim basis, subject to entry of the Final Order, and to continue to pay the Covering Physicians in the ordinary course of business on a postpetition basis C. Temporary Employees. 16. The Debtors also hire Temporary Employees, as necessary, to support their workforce, providing additional accounting and collections functions, clerical support, medical support staff, and lab technicians. The Temporary Employees are procured through one of several temporary employment agencies with which the Debtors contract. The Debtors pay fees to the agencies that employ the Temporary Employees (the Temporary Agency Fees ), which fees are then used by the agencies to compensate the Temporary Employees. On average, the Debtors pay approximately $600,000 in Temporary Agency Fees per month. 17. The Debtors estimate that, as of the Petition Date, they owe approximately $1,200,000 in accrued but unpaid Temporary Agency Fees, all of which will become due in the first 21 days of these chapter 11 cases. The Debtors seek authority to pay up to $1,200,000 in Temporary Agency Fees on an interim basis, pending entry of the Final Order, and to continue to pay the Temporary Agency Fees in the ordinary course of business on a postpetition basis. D. Deductions, Withheld Amounts and Payroll Taxes. 18. For each applicable pay period, the Debtors routinely deduct certain amounts from Employee paychecks, including, without limitation, (a) garnishments, child support, and service charges and similar deductions, and (b) other pre- and after-tax deductions payable pursuant to certain of the Employee benefit plans discussed herein (such as an Employee s share 8

9 Pg 9 of 53 of health care benefits and insurance premiums, contributions under flexible spending plans, 401(k) contributions, and miscellaneous deductions) (collectively, the Deductions ). On average, the Debtors deduct a total of approximately $1.3 million from Employees paychecks per bi-weekly pay period, which the Debtors remit to the appropriate third-party recipients. 19. In addition to the Deductions, federal and state laws require the Debtors to withhold certain amounts related to federal, state, and local income taxes, Medicare taxes, and Social Security for remittance to the appropriate federal, state, or local taxing authority (collectively, the Withheld Amounts ). On average, the Debtors withhold approximately $3.2 million from Employees paychecks on a bi-weekly basis on account of taxes. Moreover, applicable statutory authority requires the Debtors to match and pay from their own funds approximately $684,000 on a bi-weekly basis for Social Security, Medicare taxes, and certain additional amounts for federal and state unemployment insurance (together with the Withheld Amounts, the Payroll Taxes ). In the aggregate, the Payroll Taxes, including both the Employee and employer portions, total approximately $3.9 million per bi-weekly pay period. 20. As of the Petition Date, the Debtors estimate that they owe approximately $75,000 on account of prepetition Payroll Taxes, none of which will become due and owing within the first 21 days of these chapter 11 cases, and are due to remit approximately $63,000 of amounts withheld from Employees for Payroll Taxes, all of which will become due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors seek authority to remit and pay any prepetition Deductions and Payroll Taxes in an aggregate amount of $63,000 on an interim basis, pending entry of the Final Order, and to continue to remit and pay Deductions and Payroll Taxes on a postpetition basis in the ordinary course of business. 9

10 Pg 10 of 53 E. Reimbursable Obligations. 1. Reimbursable Expenses. 21. The Debtors routinely reimburse Employees for the reasonable and customary expenses incurred on behalf of the Debtors in the scope of their employment including, but not limited to, expenses for air travel, meals, parking, automobile mileage, communications (i.e., use of cellular telephone for business purposes), office and medical supplies, and other qualifying expenses (collectively, Reimbursable Expenses ). Except for those Employees who are issued a Corporate Credit Card (as defined herein), Employees pay for incurred Reimbursable Expenses by using either a personal credit card or cash. Employees then submit paper receipts to request reimbursement, and if approved in accordance with internal policies and procedures, the Reimbursable Expenses are processed through the Debtors accounts payable system. On average, the Debtors pay approximately $287,500 per month in Reimbursable Expenses. 22. Although the Debtors ask that reimbursement requests be submitted promptly, sometimes submission delays occur. Accordingly, Employees may submit reimbursement requests for prepetition expenses after the Petition Date. Reimbursable Expenses are incurred with the understanding that they will be reimbursed. Without continued reimbursement of the Reimbursable Expenses, Employees relying on these benefits would be saddled with additional costs, potentially causing personal financial hardship. 23. As of the Petition Date, the Debtors estimate that they owe approximately $575,000 in outstanding prepetition Reimbursable Expenses, all of which will become due and owing within the first 21 days of these chapter 11 cases. The Debtors believe that two Employees are owed amounts on account of Reimbursable Expenses above the $12,850 priority 10

11 Pg 11 of 53 cap set forth in section 507(a)(4) of the Bankruptcy Code. 4 By this motion, the Debtors seek authority to pay all outstanding prepetition Reimbursable Expenses up to the $12,850 priority cap set forth in section 507(a)(4) of the Bankruptcy Code on an interim basis, pending entry of the Final Order, to pay any Reimbursable Expenses in excess of the $12,850 priority cap set forth in section 507(a)(4) of the Bankruptcy Code only upon entry of the Final Order, and to continue to remit and pay Reimbursable Expenses on a postpetition basis in the ordinary course of business. 2. Corporate Credit Cards. 24. The Debtors provide American Express Corporate Services cards, prepaid Citi cards, fleet cards, and certain store issued credit cards (the Corporate Credit Cards ) 5 to approximately 132 Employees (the Corporate Credit Card Holders ). The Corporate Credit Card Holders use the Corporate Credit Cards to pay for certain expenses incurred in the ordinary course of business. At the end of each billing cycle, the credit card issuers send statements directly to the Debtors and the Debtors pay any outstanding balances directly to the issuers of the Corporate Credit Cards. On average, the Debtors pay approximately $632,500 per month in the aggregate to the card issuers for amounts incurred on the Corporate Credit Cards. 25. As of the Petition Date, the Debtors estimate that there is an outstanding balance of approximately $128,800 in the aggregate on the Corporate Credit Cards, all of which will become due and owing in the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to pay up to $128,800 on account of the Corporate Credit Cards in the interim 4 5 Reimbursable Expenses in excess of the priority cap are owed on account of moving stipends negotiated with the two employees. The Corporate Credit Cards include credit cards issued by Citi, American Express, Lowes, Home Depot, and Enterprise Bank (fleet cards). The fleet cards are assigned to each vehicle and are used for gas for patient transport and courier vehicles. 11

12 Pg 12 of 53 period, pending entry of the Final Order, and to continue to pay the balances on the Corporate Credit Cards on a postpetition basis in the ordinary course of business. 26. The Corporate Credit Card Holders use the Corporate Credit Cards on a regular basis to pay for valid and legitimate business expenses, the amounts of which can often be significant, with the understanding that the Debtors will pay the balances incurred. Many of the Corporate Credit Cards are issued in the name of the Corporate Credit Card Holders. The Debtors failure to continue to pay the credit card issuers for any outstanding balances on the Corporate Credit Cards may cause financial hardship on the Corporate Credit Card Holders who have Corporate Credit Cards issued in their name. To the extent the Debtors fail to remit payments to the relevant issuers for amounts incurred on the Corporate Credit Cards, the Corporate Credit Card Holders credit may be negatively impacted, and the issuers could seek recovery of those amounts or pursue other remedies against the Corporate Credit Card Holders. Accordingly, the Debtors seek authority to pay the prepetition outstanding balance on the Corporate Credit Cards and to continue to offer the Corporate Credit Cards and pay any balances incurred thereon on a postpetition basis in the ordinary course of business. II. Employee Health and Welfare Benefits. 27. The Debtors maintain various employment benefit plans and policies, including, among other things, health care, dental and vision plans, flexible spending accounts, health savings accounts, life insurance coverage, workers compensation benefits, short- and long-term disability insurance, 401(k) savings plans, a deferred compensation program, and other fringe benefit plans (collectively, the Employee Health and Welfare Benefits ). A. Insurance and Health Benefit Plans. 28. The Debtors offer Employees who are regularly scheduled to work 30 hours or more per week the opportunity to participate in certain health benefit plans, including the 12

13 Pg 13 of 53 Medical Plans, Dental Plans, Supplemental Medical Plans, Vision Plan, COBRA Plan, and Telemedicine Plan (each as defined herein, and collectively, the Health Insurance Benefits ). The Health Insurance Benefits are customary for similarly-sized companies and participants and their dependents have come to rely on the Health Insurance Benefits. Without Health Insurance Benefits, participants would be forced either to forego health benefit coverage completely or obtain potentially expensive out-of-pocket insurance coverage, which would adversely affect Employee morale. As such, the Debtors seek authority to pay or remit all prepetition amounts due on account of the Health Insurance Benefits and pay amounts owed thereunder on a postpetition basis in the ordinary course of business. 1. Medical and Dental Plans. 29. The Debtors offer medical and prescription drug coverage to current Employees (the Medical Plans ). The Debtors employ Baldwin Krystyn Sherman Partners, LLC ( Baldwin Krystyn ), an insurance broker, to select and manage the Medical Plans. The Debtors also pay Baldwin Krystyn approximately $2400 per month for the use of their benefits enrollment software. Under the Medical Plans, participants have three benefit options a core preferred provider organization option (the Core PPO Option ), an enhanced preferred provider organization option (the Enhanced PPO Option ), and a high-deductible health plan option (the HDHP Option ). The Medical Plans provide coverage of, among other medical costs, outpatient and inpatient services, preventative care, and prescription drugs. Approximately 928 Employees participate in the Core PPO Option, approximately 231 Employees participate in the Enhanced PPO Option, and approximately 1,388 Employees participate in the HDHP Option. Participants pay bi-weekly premiums between approximately $39 and $633 depending on the level of coverage selected under their chosen Medical Plan option. The Debtors pay on average 13

14 Pg 14 of 53 $674 per participant per month to provide the Medical Plans. 30. The Debtors also offer current Employees a dental plan (the Dental Plan ). Approximately 2,232 Employees participate in the Dental Plan. The Dental Plan is fully funded by participating Employees. The Debtors withhold from participating Employees Compensation an average of approximately $123,000 per month on account of the Dental Plan, which amounts they remit to UnitedHealth, the Dental Plan administrator. 31. The Debtors self-insure the Medical Plans, but have contracted with UMR, a UnitedHealth Care Company ( UMR ), to administer the Medical Plans, for which the Debtors pay UMR monthly administration fees consisting of approximately $54,000 and an additional approximately $39,000 on account of claims management. Prior to 2017, the Debtors contracted with UnitedHealth Group, Inc. ( UnitedHealth ) to administer the Medical Plans. The Debtors continue to pay UnitedHealth for claims incurred while the prior administration contract was in place. Year to date, the Debtors have paid approximately $ on account of such claims to UnitedHealth. The Debtors pay approximately $2.76 million per month to UMR for claims submitted under the Medical Plans. 32. In addition, the Debtors provide the Employees with a Reinsurance Plan administered by Sun Life Assurance Company of Canada. The Reinsurance Plan functions as a stop loss policy for medical bills incurred by Employees and their eligible family members. The Debtors pay approximately $18 per insured individual per month, for a total of approximately $46,000 on average per month in connection with the Reinsurance Plan. As of the petition date, the Debtors estimate that they owe approximately $53,000 on account of prepetition obligations in connection the Reinsurance Plan, all of which will come due and owing within the first 21 days of these chapter 11 cases. 14

15 Pg 15 of As of the Petition Date, the Debtors estimate they have accrued approximately $4 million on account of outstanding, prepetition claims submitted pursuant to the Medical Plans, all of which will come due and owing within the first 21 days of these chapter 11 cases. The Debtors do not believe they owe any prepetition amounts to UMR or Baldwin Krystyn on account of administration fees. However, the Debtors do believe they owe approximately $5,300 to Baldwin Krystyn on account of their license for benefits enrollment software. By this motion, the Debtors seek authority to pay any prepetition amounts owed to UMR on account of claims submitted pursuant to the Medical Plans and amounts owed on account of the Reinsurance Plan, and to continue offering the Medical Plans and the Dental Plans and paying amounts related thereto on a postpetition basis in the ordinary course of business. In addition, the Debtors seek authority to remit to any funds withheld from participating Employees Compensation on account of prepetition obligations for Medical and Dental Plans, to continue deducting and withholding premiums from participating Employees Compensation for Medical Plans and Dental Plans, and to continue remitting such withheld amounts on a postpetition basis in the ordinary course of business. 34. The U.S. Government, in collaboration with private-sector employers, including the Debtors, offers a form of health insurance to veterans called TRICARE. Employers who offer TRICARE to their veteran employees are obligated to contribute certain monthly payments to TRICARE on behalf of such employees. 35. As of the Petition Date, five Employees participate in the TRICARE program at cost to the Debtors of approximately $600 per month. Payments for the TRICARE program are billed through a third-party agent, Selman Co. As of the Petition Date, the Debtors do not believe they owe any amounts on account of the TRICARE program. By this motion, the 15

16 Pg 16 of 53 Debtors request authority to continue offering the TRICARE program and paying the TRICARE premiums on a postpetition basis in the ordinary course of business. 2. Supplemental Medical Plans. 36. In addition to the Medical Plans, the Debtors offer Employees the opportunity to participate in four supplemental medical plans, including an accident plan, a specified disease benefits plan, a critical illness benefits plan, and a hospital plan (collectively, the Supplemental Medical Plans ). Approximately 719 Employees are enrolled in the Supplemental Medical Plans, all of which are fully funded by the participating Employees. The Debtors withhold from participating Employees Compensation an average of approximately $49,000 per month on account of the Supplemental Medical Plans, which amounts are remitted to American Heritage Life Insurance Company, the insurance plan broker, on behalf of Supplemental Medical Plan administrator. 37. As of the Petition Date, the Debtors are holding approximately $49,000 on account of premiums for Supplemental Medical Plans, all of which will come due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to remit any funds held on account of prepetition obligations for Supplemental Medical Plans on an interim basis, pending entry of the Final Order, to continue deducting and withholding premiums from participating Employees Compensation for Supplemental Medical Plans, and to continue remitting such withheld amounts on a postpetition basis in the ordinary course of business. 3. Vision Plan. 38. The Debtors offer Employees the option to participate in a vision plan (the Vision Plan ) administered by Ameritas Life Insurance Corporation ( Ameritas ). 16

17 Pg 17 of 53 Approximately 1,868 Employees are enrolled in the Vision Plan. The Vision Plan is fully funded by participating employees. The Debtors withhold from participating Employees Compensation approximately $29,000 per month on account of the Vision Plan, and remit such amount to Ameritas. 39. As of the Petition Date, the Debtors are not currently holding any unremitted payments on account of the Vision Plan. Out of an abundance of caution, the Debtors seek authority to continue the Vision Plan on a postpetition basis in the ordinary course of business. 4. COBRA. 40. The Debtors also continue to provide certain benefits under the Consolidated Omnibus Budget Reconciliation Action of 1985 (the COBRA Plan ) to certain former Employees after their termination or retirement. Approximately 42 former Employees currently are receiving benefits under the COBRA Plan. Additionally, the Debtors pay approximately $1,500 per month (the COBRA Fees ) to Discovery Benefits ( Discovery ), the COBRA Plan administrator. 41. As of the Petition Date, the Debtors owe approximately $4,500 in accrued but unpaid COBRA Fees, none of which is due within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to pay upon entry of the Final Order the unpaid prepetition COBRA Fees, and to continue offering the COBRA Plan and paying the COBRA Fees on a postpetition basis in the ordinary course of business. 5. Telemedicine Plan. 42. The Debtors provide their employees with the option to participate in a supplemental telephonic-based care service (the Telemedicine Plan ) administered by First Stop Health, LLC ( First Stop ). The Telemedicine Plan allows Employees to call a hotline that 17

18 Pg 18 of 53 connects them with a physician who can provide basic medical services. All Employees are enrolled in the Telemedicine Plan, which is fully paid for by the Debtors. The Debtors pay First Stop approximately $3.80 per Employee per month on account of the Telemedicine Plan. 43. As of the Petition Date, the Debtors do not believe they owe any amounts on account of accrued but unpaid prepetition Telemedicine expenses. By this motion, the Debtors request authority to pay upon entry of the Final Order the unpaid prepetition Telemedicine fees, and to continue offering the Telemedicine Plan and paying the Telemedicine Fees on a postpetition basis in the ordinary course of business. B. Flexible Spending Accounts and Health Savings Accounts. 44. The Debtors also offer certain Employees who participate in certain of the Medical Plans with access to a flexible spending account (the FSA ) administered by Discovery, which account can be used to cover certain out-of-pocket health care and dependent care expenses. Approximately 376 Employees contribute to FSAs, for which the Debtors pay Discovery a monthly administration fee of approximately $2,000 (the FSA Fees ). The Debtors do not make any contributions to any Employees FSA but withhold approximately $66,000 per month from participating Employees Compensation on account of FSA contributions. 45. As of the petition date, the Debtors are holding approximately $165,000 on account of FSA contributions that have been withheld from participating Employees Compensation but have not yet been remitted to Discover. The Debtors are required to hold these funds until such time as the Employees take certain actions requiring disbursement of the funds, which actions may occur within the first 21 days of these chapter 11 cases. As a result, the Debtors request, on an interim basis, to remit the Employee FSA contributions as and when due. In addition, as of the Petition Date, the Debtors owe approximately $6,000 in accrued but 18

19 Pg 19 of 53 unpaid FSA Fees, approximately $4,000 of which will become due and owing in the first 21 days of these chapter 11 cases. 46. Employees who enroll in the HDHP Option described above also have the option to enroll in a health services account (an HSA ), administered by Optum Bank, which account can be used to cover certain eligible medical expenses. Approximately 999 employees use HSAs for medical expenses. The Debtors withhold approximately $230,000 per month from participating Employees Compensation on account of HSA contributions. The Debtors also contribute approximately $92,000 per month to participating Employees HSA accounts, which includes between approximately $500 and $1000 for newly hired Employees who enroll in a HSA. The number of new Employees who choose to open a HSA varies from month to month. As of the Petition Date, the Debtors owe approximately $65,500 in accrued but unpaid HSA matching contributions. Moreover, certain Employees have requested that the Debtors withhold amounts from their Employee Compensation for their HSAs but have not yet opened their HSA accounts. In the event such Employees do not open their HSA accounts by the end of 2017, the Debtors will remit such withheld amounts to the applicable Employees. The Debtors currently hold approximately $47,000 on account of unopened HSAs. 47. As with FSA Employee contributions, the Debtors are required to hold HSA matching funds and funds held on account of unopened HSA accounts until such time as the Employees take certain actions requiring disbursement of the funds, which actions may occur within the first 21 days of these chapter 11 cases. As a result, the Debtors request, on an interim basis, to remit the Employee HSA matching funds and Employee HSA contributions as and when due. 19

20 Pg 20 of By this motion, the Debtors seek authority to pay on an interim basis, pending entry of the Final Order, any prepetition amounts owed on account of the FSA Fees and HSA matching contributions, remit any accrued but unpaid matching contributions on account of employee contributions to FSA and HSA accounts, and continue offering the FSAs and HSAs and honoring related obligations on a postpetition basis in the ordinary course of business. C. Life and AD&D Insurance Benefits. 49. The Debtors provide Employees who are regularly scheduled to work 30 hours or more per week with primary life insurance and accidental death and dismemberment insurance (the Life and AD&D Insurance ) through Medical Group Insurance Services, Inc. ( MGIS ). All Full-Time Employees and Reduced Hours Employees are covered by the Life and AD&D Insurance. The maximum benefit provided under the Life and AD&D Insurance policy is an amount equal to one and half times the Employee s annual base salary, which coverage is capped at $75,000. The Debtors pay approximately $22,000 per month in premiums on account of the Life and AD&D Insurance. In addition, the Debtors pay approximately $4,600 per month to MGIS on account of certain liabilities related to the Family Medical Leave Act (the FMLA ). 50. As of the Petition Date, the Debtors owe approximately $22,000 in premiums on the Life and AD&D Insurance and approximately $5,300 in FMLA fees, all of which will come due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to pay up to $27,300 on account of the Life and AD&D Insurance and FMLA fees on an interim basis, subject to entry of the Final Order. D. Variable Life Insurance Plan. 51. In addition to the Life and AD&D Insurance, certain Employees are eligible for a variable life insurance plan (the Variable Life Insurance Plan ), administered by Massachusetts Mutual Life Insurance Company ( MassMutual ). Approximately 20

21 Pg 21 of Employees participate in the Variable Life Insurance Plan, which provides up to an additional $150,000 in life insurance coverage. The Debtors pay approximately $22,000 per month in premiums on account of the Variable Life Insurance Plan. 52. As of the Petition Date, the Debtors do not owe any amounts on account of premiums on the Variable Life Insurance Plan. Out of an abundance of caution, the Debtors request authority to continue the Variable Life Insurance Plan on a postpetition basis in the ordinary course of business. E. Supplemental Life Insurance. 53. Employees have the option to purchase supplemental life insurance and supplemental accidental death and dismemberment insurance (collectively, the Supplemental Life Insurance ) through MGIS. The Supplemental Life Insurance is fully funded by participating Employees. The Debtors withhold approximately $38,000 in premiums each month from participating Employees Compensation. 54. As of the Petition Date, the Debtors are holding approximately $38,000 of unremitted payments that were withheld from participating Employees Compensation on account of the Supplemental Life Insurance, all of which will come due and owing within the first 21 days of these chapter 11 cases. The Debtors seek authority to remit prepetition amounts due and owing on account of Supplemental Life Insurance on an interim basis, pending entry of the Final Order, and to continue the Supplemental Life Insurance program on a postpetition basis in the ordinary course of business. F. Workers Compensation. 55. In the ordinary course of business, the Debtors maintain workers compensation insurance at the level required by statute for each state in which the Debtors conduct business (the Workers Compensation Program ). The Workers Compensation Program is 21

22 Pg 22 of 53 administered by the Pennsylvania Manufacturers Association Insurance Company ( PMA ). Under the Workers Compensation Program, the Debtors pay all amounts related to workers compensation claims up to a fixed per-claim deductible in the amount of $250,000, in addition to a fixed annual premium for losses that exceed the deductible. The Debtors pay approximately $457,000 annually in premiums on account of the Workers Compensation Program, which amount has been fully paid for calendar year Total current assets in the workers compensation fund equal approximately $6.91 million. 56. As of the Petition Date, the Debtors owe approximately $785,000 in prepetition amounts on account of losses incurred under the Workers Compensation Program. None of the prepetition amounts owed on account of the Workers Compensation Program will come due and owing within the first 21 days of these chapter 11 cases. To ensure that the Debtors remain in compliance with applicable state law, the Debtors seek authority to continue to maintain the Workers Compensation Program postpetition in the ordinary course of business and to pay upon entry of the Final Order, any prepetition amounts related thereto, including the broker fees. 6 G. Disability Insurance. 1. Long-Term Disability Insurance. 57. The Debtors provide Employees with basic long-term disability insurance (the Long-Term Disability Insurance ) through Professional Services Employers Trust 6 For the avoidance of doubt, the Debtors are not seeking relief with respect to such broker fees pursuant to Debtors Motion For Entry Of Interim And Final Orders Authorizing The Debtors To (I) Continue Insurance Coverage Entered Into Prepetition and Satisfy Prepetition Obligations Related Thereto, (II) Renew, Amend, Supplement, Extend, or Purchase Insurance Policies, (III) Honor the Terms of the Premium Financing Agreements and Pay Premiums Thereunder, and (IV) Enter Into New Premium Financing Agreements in the Ordinary Course of Business, filed contemporaneously herewith. 22

23 Pg 23 of 53 ( PSET ). The Debtors pay approximately $25,500 per month in premiums on account of Long-Term Disability Insurance. 58. As of the Petition Date, the Debtors estimate that they owe approximately $25,500 on account of Long-Term Disability Insurance, all of which will come due within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority to pay on an interim basis, pending entry of the Final Order, the prepetition Long-Term Disability Insurance premiums and to continue paying the Long-Term Disability Insurance premiums on a postpetition basis in the ordinary course of business. 2. Statutory Disability Insurance. 59. The Debtors also maintain disability insurance to cover statutory disability benefits in certain states in which the Debtors operate, including California, New Jersey, and New York (the Statutory Disability Insurance ). California and New Jersey statutory insurance premiums are paid through state payroll taxes and are not a separate expenditure. New York statutory insurance premiums are paid to Wesco Insurance Company. The Debtors pay approximately $400 per quarter on account of New York statutory disability insurance. 60. As of the Petition Date, the Debtors estimate that they owe approximately $200 on account of the Statutory Disability Insurance, all of which will become due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority pay on an interim basis, pending entry of the Final Order, the prepetition Statutory Disability Insurance obligations and continue paying amounts on account of the Statutory Disability Insurance on a postpetition basis in the ordinary course of business. 23

24 Pg 24 of Supplemental Disability Insurance. 61. Employees also have the option to purchase supplemental long-term disability insurance and short-term disability insurance through Sun Life (collectively, the Supplemental Disability Insurance ). The Supplemental Disability Insurance is fully funded by participating Employees. The Debtors withhold approximately $100,000 in premiums each month from participating Employees Compensation on account of the Supplemental Disability Insurance. 62. As of the Petition Date, the Debtors hold approximately $100,000 on account of premiums for Supplemental Disability Insurance, all of which will come due and owing within the first 21 days of these chapter 11 cases. By this motion, the Debtors request authority on an interim basis, pending entry of the Final Order, to remit to Sun Life any funds held on account of prepetition obligations for Supplemental Disability Insurance and to continue honoring their obligations under the Supplemental Disability Insurance plan on a postpetition basis in the ordinary course of business. 4. Executive Disability Insurance. 63. Certain Employees in executive-level positions have the option to purchase additional disability insurance through Hanleigh Management, Inc. (the Executive Disability Insurance ). The Debtors withhold approximately $9,400 in premiums each month from participating Employees Compensation to cover premium payments for Executive Disability Insurance. 64. As of the Petition Date, the Debtors do not owe any amounts on account of the Executive Disability Policy. Out of an abundance of caution, the Debtors seek authority to continue providing Executive Disability Insurance to Employees on a postpetition basis in the ordinary course of business. 24

25 Pg 25 of 53 H. Employee Savings and Retirement Plans (k) Plans. 65. The Debtors provide eligible Employees with the ability to participate in a 401(k) plan (the 401(k) Plan ). Additionally, certain Employees over the age of 50 who are employed by Debtor 21st Century Oncology, Inc. are also eligible to contribute $6,000 annually to a catchup 401(k) Plan (the 401(k) Catch-Up Plan ) administered by The Principal Financial Group ( PFG ). All eligible Employees are automatically enrolled in the 401(k) Plan. As a result, approximately 3,332 Employees participate in the 401(k) Plan. The Debtors withhold and remit to PFG approximately $1.6 million each month from participating Employees Compensation on account of 401(k) Plan contributions. Approximately 43 Employees participate in the 401(k) Catch-Up Plan and the Debtors withhold approximately $33,000 each from participating Employees Compensation on account of the 401(k) Catch-Up Plan. The Debtors pay PFG fees to administer the 401(k) plans on their behalf. Historically, these payments have been made by offsetting any fees with forfeitures collected. The Debtors also pay approximately $62,000 annually to Merrill Lynch, on account of investment management services for the 401(k) Plan (the 401(k) Investment Management Services ). In addition, the 401(k) Plan and the 401(k) Catch-Up Plan are audited annually in compliance with applicable law. The Debtors pay approximately $21,000 annually to Hill Barth & King LLC as auditor to conduct 401(k) audits (the 401(k) Audits ). 66. As of the Petition Date, the Debtors are not holding any amounts on account of 401(k) Plan and 401(k) Catch-Up Plan Contributions. Similarly, the Debtors do not believe they owe any prepetition amounts on account of the 401(k) Plan, the 401(k) Catch-Up Plan, or any fees associated therewith. Out of an abundance of caution, the Debtors seek authority to continue offering the 401(k) Plan and 401(k) Catch-Up Plan and paying the 401(k) audit fees and 25

26 Pg 26 of (k) investment management services fees on a postpetition basis in the ordinary course of business. 67. Historically, the Debtors offered a 401(k) match program (the 401(k) Match ) pursuant to which the Debtors provided a matching 401(k) contribution to each participating Employee s 401(k) account. For every dollar an employee contributed up to 4 percent of the Employee s annual salary, the Debtors provided an additional 2 percent contribution, capped at $3,000 per year, to the Employee s 401(k) account. 68. The Debtors are not currently offering the 401(k) Match. However, the Debtors anticipate reinstituting this program within the first 90 days following the Petition Date. Out of an abundance of caution, the Debtors seek authority to reinstate the 401(k) Match upon entry of the Final Order any obligations thereunder in the ordinary course of business. 2. Deferred Compensation Plan. 69. The Debtors provide access to a non-qualified deferred compensation plan (the Deferred Compensation Plan ) to certain physicians and executive Employees (a) designated as eligible to participate in the Deferred Compensation Plan and (b) who qualify as members of a select group of management or highly compensated employees under the Employee Retirement Income Security Act. The Deferred Compensation Plan is intended to provide additional retirement benefits for participants whose participation in the 401(k) Plan is limited due to of certain IRS regulations. Under the Deferred Compensation Plan, participating Employees are permitted to defer up to $150,000 annually on a pre-tax basis. Each participating Employee s deferred compensation is placed into a rabbi trust for the benefit of the Employee and disbursements from the trust are made to the participating Employee upon such Employee s election. The Deferred Compensation Plan is administered by Principal Life Insurance. 26