Seventy-five percent of the annual revenue derived from Cayman’s public hospital swipe-card payment system was paid to a St. Lucia-based company, according to a contract negotiated in 2010 between the company, the Cayman Islands Health Services Authority and the Cayman Islands National Insurance Company, the Cayman Compass has learned.
Advanced Information Systems (AIS), Jamaica chief executive Douglas Halsall confirmed the contract arrangement, which has been the subject of some controversy locally, during a telephone interview Wednesday with the Compass. The St. Lucia company, Health Adjudication Systems, is a sister company of AIS in Jamaica.
The CarePay contract was awarded on Dec. 21, 2010, to AIS Cayman Ltd., a local agent of St. Lucia-based Health Adjudication Systems, for a five-year period. According to the contract, a copy of which was obtained by the Cayman Compass, AIS Cayman Ltd. was to receive US$1.37 million for initiating and implementing the computerized card swipe system. In addition, it would receive from CINICO and the health authority 4 percent of the value of every swipe card transaction approved for payment.
The 4 percent charge on the value of each claim was split between CINICO, which was responsible for paying 1.5 percent of it, and the Health Services Authority, which would pay 2.5 percent, according to the contract.
Mr. Halsall said Wednesday that 1 percent of that 4 percent charge on each CarePay card “swipe” – effectively 25 percent of the company’s annual revenue – went to the local arm of the company, AIS Cayman Ltd.
“AIS Cayman is a vehicle that was set up to take care of all local expenses (sales, support, rental, salaries, etc.),” read a statement issued Wednesday on Mr. Halsall’s behalf. “For this, it is paid 25 percent of the transaction fees collected on behalf of Health Adjudication Systems. If there is profit afterwards, then that is split 60/40.”
Cayman Islands Finance Minister Marco Archer told the Compass earlier this year that shareholdings of the AIS Cayman Ltd. “vehicle” were split between a local shareholder, Joscelyn Morgan, who received 60 percent of the shares, and Mr. Halsall, who received 40 percent. However, Mr. Halsall said Wednesday that it was unlikely AIS Cayman Ltd. would have much cash left over after paying all of its expenses for the year.
“AIS Cayman is not a 60-40 partner in the contract with HSA/CINICO,” read the statement from Mr. Halsall.
According to his estimates, the swipe-card contract paid about US$1.5 million annually in revenue, leaving an estimated US$375,000 gross for AIS Cayman Ltd. from which all expenses for the company’s local operations would be paid. The remaining US$1.12 million would go to the St. Lucia company, which paid for items like offshore IT backup systems and intellectual property licenses. All profit left over from the 75 percent of the card-swipe revenue was kept by the St. Lucia-based company.
“Health Adjudication Systems gets the profit,” Mr. Halsall said.
That agreement was altered by CINICO on Wednesday, when the national insurer switched providers involved in the processing of about 90 percent of the healthcare services claims made via the government-issued CarePay cards.
The change led to allegations by Mr. Halsall that the government had breached its contract with Health Adjudication Systems.
CINICO chief executive Lonny Tibbetts said civil servants would experience no difference in healthcare service as the government hospital system transitions most of its insured members from the processing system operated by Advanced Information Systems Cayman Ltd. to Detroit-based ABS Automated Systems. CarePay cards are still needed for Health Services Authority customers to verify eligibility, Mr. Tibbetts said. The new ABS claim processing system would also allow CINICO members to view their claims online, he said.
Mr. Halsall said Wednesday that he was aware of the government’s decision to stop processing CarePay claims on the AIS system for civil servants. He said it was his understanding that about 10 percent of the current CarePay card holders, mostly uninsured individuals on the government’s Standard Health Insurance Contract, would still be processed using the AIS-installed system. The other four categories of insured individuals using the CarePay cards would no longer have their claims processed via AIS.
Mr. Halsall said it was his view that the Cayman Islands government was currently in breach of its five-year contract with Health Adjudication Systems, which extends through December 2015. Mr. Tibbetts said CINICO was in talks with AIS about changes in the processing format.