This Charter authorizes the ACME Health / Cumberland Valley Integration Program and grants the Program Manager authority to apply organizational resources to integration activities. It is the highest-authority document in the program; every other artifact — the Integration Management Plan, the disposition matrices, the TSA exit plan, every statement of work — derives its authority from this Charter and must be consistent with it. Approved by the Integration Steering Committee on February 27, 2023, two weeks after execution of the definitive agreement and seven months before expected closing. Amendment requires Steering Committee approval under the change control thresholds in Section 12.
This document was written before closing and knows only what was knowable then. The budget, schedule and scope recorded here reflect the deal-model estimate prepared under the constraints of the Clean Team Protocol, which barred examination of member-level data. It is an AACE Class 5 estimate and is stated as such in Section 9. It was superseded by a formal re-baseline after closing. Nothing in this Charter has been retrospectively corrected — a charter edited to match the outcome is not a charter.
Table of Contents
Part I — Authorization and Business Case
- Charter Authorization
- Transaction Summary and Strategic Rationale
- Integration Objectives and Success Criteria
- Constraint Priority Order
Part II — Scope and Approach
- Integration Thesis — Absorb, Preserve, Best-of-Both
- Scope Inclusions and Exclusions
- Milestones and the Integration Clock
Part III — Governance and Resources
1. Charter Authorization
| Attribute | Provision |
|---|---|
| Program | ACME Health / Cumberland Valley Integration Program |
| Charter date | February 27, 2023 |
| Executive Sponsor | D. Ashmore, EVP & Chief Financial Officer, ACME Health |
| Program Manager | C. Tyrrell, Arrington Advisory Group — engaged under Deliverable SOW (Artifact 8) |
| Authorizing body | Integration Steering Committee |
| Effective period | Charter date through program close, following exit of all Transition Services Agreements |
| Authorized budget | $52,500,000 |
| Estimate class | AACE Class 5 — see Section 9.3 |
2. Transaction Summary and Strategic Rationale
| Item | Detail |
|---|---|
| Acquirer | ACME Health — approximately 1,800,000 members |
| Target | Cumberland Valley Health Plan — approximately 420,000 members, a subsidiary of Cheatham Mutual Holdings |
| Combined membership | 2,220,000 |
| Transaction value | $1,200,000,000 |
| Structure | Carve-out. ACME Health acquires Cumberland Valley Health Plan from its parent, Cheatham Mutual Holdings. Cumberland Valley then merges into ACME Health, which is the surviving entity. |
| Definitive agreement | February 13, 2023 |
| Conditions to close | HSR waiting period expiration; Tennessee Department of Commerce and Insurance Form A approval |
| Expected close | End of Q3 2023 |
| Synergy commitment | $85,000,000 run-rate by end of Year 3 |
2.1 Why the board approved this transaction
- Scale in a contiguous market. Cumberland Valley operates in Middle Tennessee counties adjacent to and overlapping ACME's existing footprint. Membership grows 23% with no new state licensure.
- Administrative synergy. Two health plans do not need two core administration platforms, two clearinghouse relationships, two PBM contracts, or two actuarial functions. This is the largest and most certain component of the synergy case.
- A care management capability worth keeping. Cumberland Valley's care management program measurably outperforms ACME's on readmission and chronic-condition engagement metrics. The transaction acquires a capability, not only a book of business.
- Provider network complementarity. Overlapping but not identical contracted networks, with the opportunity to rationalize toward the better-performing arrangement in each market.
The synergy target is the number every artifact in this program ultimately answers to. $85M run-rate by Year 3 is not an aspiration recorded in a business case — it is the figure on which the board approved a $1.2B transaction. The Synergy Realization Plan decomposes it by source and owner; the Synergy Tracker reports against it monthly. A program that delivers on time and on budget while missing this number has failed.
3. Integration Objectives and Success Criteria
An integration program is not measured the way a project is. On-time and on-budget are secondary here. The two measures that determine whether this program succeeded are synergy capture and TSA exit — and both can be missed by a program that hit every date and spent exactly what it forecast. The criteria below are written accordingly.
| # | Objective | Success criterion — measurable, dated |
|---|---|---|
| O-1 | Legal and operational Day 1 | On the first business day post-close: all associates paid, claims adjudicating in both platforms, member ID cards issued, all regulatory filings current, no service interruption |
| O-2 | Exit all Transition Services Agreements | Final TSA terminated no later than September 30, 2024 (12 months post-close), against a contractual maximum of March 31, 2025 |
| O-3 | Synergy capture | $85,000,000 run-rate by end of Year 3, with Year 1 and Year 2 cumulative capture tracked against the deal model curve |
| O-4 | Member identity resolution | Single enterprise member index across the combined book, with an audited false-positive merge rate below the threshold set in the EMPI specification |
| O-5 | Platform consolidation | Core administration consolidated to the ACME platform per the Application Disposition Matrix; Cumberland Valley platform decommissioned |
| O-6 | Cloud foundation established | Azure landing zone operational before the first migration wave, with FinOps controls and a signed Business Associate Agreement in place |
| O-7 | Retention of critical knowledge | No unplanned departure of a retention-covered role before its TSA-exit dependency is discharged |
| O-8 | Regulatory and privacy integrity | No reportable privacy incident, no adverse regulatory finding, no gun-jumping allegation |
4. Constraint Priority Order
Every program encounters a moment where something must give. This Charter states in advance which constraint gives first, so that decisions made under pressure eighteen months from now can be tested against a rule set before the pressure existed.
| Rank | Constraint | Class | Basis |
|---|---|---|---|
| 1 | TSA contractual maximum — 18 months | Hard | A contractual wall, not a target. Breaching it is a governance failure that no cost saving offsets. It is never the thing that gives. |
| 2 | Day 1 regulatory and operational integrity | Hard | Members must have coverage they can use and regulators must have their filings. Not negotiable at any price. |
| 3 | Synergy run-rate target — $85M | Firm | The basis on which the board approved the transaction. May shift in timing; may not be abandoned. |
| 4 | Program cost | Flexes | The Steering Committee may authorize additional funding from contingency and management reserve where doing so protects ranks 1–3. |
| 5 | Program scope | Flexes first | Deferred scope moves to a Day 100+ or Year 2 backlog with a named owner and a date. It does not disappear. |
The order is counterintuitive and that is the point. On most programs cost and schedule are the hard constraints and scope is defended. Here the schedule constraint that matters is a contract term with a counterparty, the operational constraint is a regulatory obligation, and money is the most flexible thing available — because every month of TSA overrun costs more than the fix would have. A Program Manager who defends the budget at the expense of the TSA date has the priority order backwards.
How this section is meant to be used. Every change request raised against this program must state which constraint it protects and which it spends. A change request that spends rank 4 to protect rank 1 should ordinarily be approved. One that spends rank 1 to protect rank 4 should ordinarily be rejected, regardless of the sums involved. This Charter is therefore not merely an authorizing document — it is the standard against which the Change Control Log can be audited after the fact.
5. Integration Thesis — Absorb, Preserve, Best-of-Both
There is no single correct integration depth. An acquirer may buy a business and leave it standing, absorb it entirely, or select between the two operating models function by function. This program adopts a mixed thesis, decided per function against a single test: does combining this function create value, or destroy the value we paid for?
| Function | Disposition | Rationale |
|---|---|---|
| Claims & core administration | Absorb | Pure scale economics. Two adjudication platforms serving one membership is duplicated cost with no offsetting benefit. Largest single synergy source. |
| Care management | Preserve | The target measurably outperforms. Migrating this function to ACME's model would destroy a capability the transaction was partly undertaken to acquire. |
| Provider network | Best-of-both | Rationalize market by market toward the stronger contracted position rather than defaulting to either party's network. |
| Member services | Preserve to Day 100, then absorb | Absorbing member-facing operations at Day 1 risks a visible service collapse at the moment of maximum member and regulator attention. Sequenced deliberately. |
| Finance, HR, IT infrastructure | Absorb | Standard corporate function consolidation. No differentiated capability to protect. |
| Actuarial & underwriting | Absorb | Single rating methodology required for the combined book; regulatory filings must be made by one entity. |
Every row here is a decision an interviewer can push on, which is why the rationale column exists. The two rows worth defending hardest are care management — where the disciplined answer is that you do not integrate the thing you bought — and member services, where the phased approach accepts twelve months of duplicated cost to avoid a Day 1 service failure in front of the state regulator. Both are choices to spend rank 4 to protect rank 2.
6. Scope Inclusions and Exclusions
6.1 In scope
- Day 1 readiness and cutover across all functions, including payroll, benefits, claims adjudication continuity, member identification, and regulatory filing
- Member identity resolution and establishment of an enterprise master patient index across the combined membership
- Core administration platform consolidation and decommissioning of the target platform
- Integration architecture and the interface layer supporting coexistence during the TSA period
- Migration of in-scope workloads to Microsoft Azure, including landing zone, FinOps foundation, and migration waves
- Vendor and contract disposition, including change-of-control review, novation, consent, and Business Associate Agreement re-execution
- Transition Services Agreement establishment, management and exit
- Legal entity consolidation, license and filing transitions
- Organization design, retention, and change and communications for both employee populations
- Synergy tracking and reporting against the deal model
6.2 Explicitly out of scope
| Excluded | Reason and owner |
|---|---|
| Product and benefit plan design harmonization | Follows integration; owned by Product. Constrained by filed plan years and cannot precede them. |
| Rate convergence between the two books | Actuarial workplan, post-integration. Subject to filing cycles and regulatory approval. |
| Facility consolidation beyond lease expiry decisions | Corporate Real Estate. Program addresses only leases requiring a decision inside the integration window. |
| Brand consolidation and market re-launch | Marketing. Timing is a commercial decision independent of operational integration. |
| Any activity prior to closing that constitutes operational control of the target | Prohibited by the Clean Team Protocol, Section 8. Planning is in scope; execution is not. |
7. Milestones and the Integration Clock
An integration program does not run on phases or sprints. It runs on a clock set by the transaction, and the fixed points below are the ones the Steering Committee governs against.
| Milestone | Date | Definition |
|---|---|---|
| Definitive agreement | February 13, 2023 | Signed. Clean Team Protocol takes effect March 6. |
| Regulatory clearance | Q2–Q3 2023 | HSR waiting period expiration and Tennessee DOI Form A approval. Conditions to closing. |
| Close | End of Q3 2023 | Ownership transfers. Antitrust barrier dissolves. Integration execution may begin. |
| Day 1 | First business day post-close | The combined entity legally and operationally functions. Not integrated. |
| Day 100 | 99 days after Day 1 | Stabilization complete, integration execution at full run rate, first synergy tranche realized. |
| TSA exit — plan | September 30, 2024 | 12 months post-close. The program's committed target. |
| TSA exit — contractual maximum | March 31, 2025 | 18 months post-close. The rank 1 hard constraint. Six months of deliberately negotiated margin. |
| Program close | Following final TSA exit | IMO stands down; residual scope transfers to line ownership with named owners. |
Day 1 does not mean integrated, and conflating the two is the classic first-timer error. Day 1 means associates get paid, claims adjudicate, members can present a card and receive care, and regulators have their filings. It does not mean one platform, one network, one member index or one operating model. Everything else is Day 100 or later. A program that promises the board an integrated company on Day 1 has promised something no integration has ever delivered.
On the six-month gap between the TSA plan and the TSA maximum. The 12-month plan and the 18-month contractual limit are different numbers on purpose. The gap is negotiated margin, agreed at signing, against the possibility that post-close discovery reveals conditions the pre-close estimate could not see. Consuming that margin is a planned use of a deliberately purchased buffer. Breaching the 18-month limit is a governance failure. The Charter treats those two outcomes as categorically different, and Section 4 ranks them accordingly.
8. Governance, Authority and Delegation
8.1 Integration Steering Committee
| Member | Role | Seat rationale |
|---|---|---|
| D. Ashmore | EVP & CFO, ACME — Executive Sponsor, Chair | Owns the synergy commitment made to the board |
| R. Villanueva | Chief Operating Officer, ACME | Owns Day 1 operational integrity |
| M. Kessinger | President & CEO, Cumberland Valley | Target-side authority; required for decisions binding target operations post-close |
| T. Broadnax | SVP Corporate Development, ACME | Owns the deal model the program is measured against |
| L. Hollingsworth | General Counsel, ACME | Regulatory approvals, gun-jumping compliance, entity consolidation |
| S. Achebe | Chief Information Officer, ACME | Owns the platform and cloud decisions carrying most of the execution risk |
The Committee meets monthly and on call for gate decisions. It is the sole approver of change requests above the thresholds in Section 12, of the Application and Vendor Contract Disposition Matrices, and of Day 1 go/no-go.
8.2 The Program Manager is a consultant, and the authority is written rather than organizational
The Program Manager is engaged through Arrington Advisory Group under a deliverable statement of work. He leads the Integration Management Office and employs no one in it. Every person in the IMO and every workstream lead reports to an ACME or Cumberland Valley line manager, not to the Program Manager.
This is a real governance problem and the Charter is where it gets solved. An internal program director carries positional authority into a room. A consultant does not. If the authority is not written down and visibly conferred by the Sponsor, it does not exist — and the first workstream lead who declines a request discovers that in front of everyone. The delegations below are therefore explicit, and the escalation path is short by design.
| The Program Manager is authorized to | The Program Manager may not |
|---|---|
| Direct integration activity across all workstreams, including sequencing, dependency resolution and deliverable acceptance | Hire, terminate, or alter the compensation of any person |
| Convene the Steering Committee and set its agenda | Commit either entity to a contract or external obligation |
| Approve change requests below the Section 12 thresholds | Approve changes to the TSA term, the synergy target, or Day 1 scope |
| Draw on program contingency within the approved cost baseline | Draw on management reserve without Sponsor approval |
| Escalate any workstream matter directly to the Executive Sponsor without intermediate approval | Override a decision reserved to Legal, Compliance, or the Clean Team Protocol |
| Require workstream leads to report against the program plan and to justify variance | Direct staff augmentation personnel as employees — see 8.3 |
8.3 A limit that is easy to breach without noticing
Personnel engaged through staff augmentation are contracted resources, not employees. Placing them on organization charts, assigning them company titles, or directing their daily work in the manner of a line manager creates co-employment and worker-classification exposure. The Resource Plan records the contract vehicle for every named individual for this reason, and the distinction between a deliverable SOW — where the vendor owns the outcome — and staff augmentation — where ACME owns the outcome and rents the hours — is maintained throughout the program's contracting documents.
9. Budget Authorization and Estimate Class
| Component | Amount | Control |
|---|---|---|
| Integration base estimate | $42,000,000 | Program Manager, within baseline |
| Contingency at 15% | $6,300,000 | Program Manager, for realized in-scope risk |
| Cost baseline | $48,300,000 | Measurement baseline for earned value reporting |
| Management reserve at 10% of base | $4,200,000 | Executive Sponsor only — for unknown-unknowns outside the baseline |
| Total authorized | $52,500,000 | Steering Committee |
9.1 Contingency and management reserve are different instruments
Contingency sits inside the cost baseline and covers identified risks that materialize — it is the priced expectation that some of the risk register comes true. Management reserve sits outside the baseline, is not part of any performance measurement, and covers scope the program did not know existed. Drawing on contingency is program management. Drawing on management reserve is an admission that the program encountered something it did not foresee, which is why it requires the Sponsor.
9.2 What this budget does not include
- Transaction costs — advisory, legal and financing fees associated with the deal itself
- Transition Services Agreement fees payable to the seller, which are an operating cost carried by the receiving functions
- Retention and severance costs, which are carried by Human Resources under a separate authorization
- Run-rate cost of the Azure platform after migration, which transfers to IT operating budget on wave completion
9.3 Estimate class — and why it is stated here
This is an AACE Class 5 estimate. Expected accuracy is approximately −20% to +50%. It was prepared during the pre-close period under the Clean Team Protocol, which barred the estimators from examining member-level data or testing target records against ACME's. The 15% contingency is not conservatism — it is the arithmetically appropriate response to a legally imposed information deficit. A formal re-baseline is planned once post-close discovery and data profiling are complete, at which point the estimate is expected to move to Class 2 and contingency to reduce as uncertainty resolves. That re-baseline is a planned event, not a change request, and it is authorized by this Charter.
Recording the estimate class in the Charter serves a specific purpose: it makes the later variance interpretable. A program that states Class 5 up front and then re-baselines is behaving as expected. A program that presents a Class 5 estimate as though it were definitive, and then explains the variance afterward, is not.
10. Program Organization
The program is staffed across four labor categories — ACME employees, Cumberland Valley employees, onshore and offshore consultants from Arrington Advisory Group, and specialist vendors. Full detail sits in the Resource Plan and Org Chart; the Charter records the structure and the two structural features that distinguish it.
| Body | Composition and accountability |
|---|---|
| Integration Steering Committee | Six executives per Section 8.1. Decision authority. |
| Integration Management Office | Program Manager, PMO analyst, synergy and financial analyst, change and communications lead, TSA manager. Coordination and control. |
| Workstreams | Sixteen, each with an ACME lead and a Cumberland Valley counterpart. Execution. |
| Clean Team | Four, third-party, pre-close only. Dissolves at closing and does not join the program. |
| Specialist vendors | EDI transaction assurance; staff augmentation for data stewardship; cloud platform. |
10.1 Every workstream is paired
No workstream has a single lead. Each has an ACME lead and a Cumberland Valley counterpart, jointly accountable. This doubles the number of people in every meeting and is worth it: a workstream run only by the acquirer makes decisions without the knowledge of how the target actually operates, and a workstream run only by the target makes decisions the acquirer will not honor.
10.2 The organization changes shape at closing
The pre-close organization and the post-close organization are different populations, not the same population with more people. The Clean Team exists only before closing. Data stewards cannot exist before closing, because the member-level data they work is not lawfully available. The Resource Plan is therefore maintained in two states, and the transition between them is a planned Day 1 event.
11. Assumptions, Constraints and Principal Risks
11.1 Assumptions — if any of these fail, the plan changes
| Assumption | If it fails |
|---|---|
| Regulatory approvals are obtained without conditions materially restricting integration | Scope and schedule re-planned; conditions may bind data location or timing |
| Target data quality is broadly consistent with diligence representations | Identity resolution effort and duration increase; migration window at risk |
| Retention-covered target staff remain through their TSA-exit dependencies | Knowledge loss; TSA extension likely |
| ACME's core platform absorbs target volume without material re-architecture | Platform work becomes a critical path item |
| TSA services can be exited incrementally rather than as a single event | Exit becomes a big-bang cutover with materially higher risk |
The second assumption is the one that carries the most risk and the least evidence. It rests on diligence representations and aggregate reporting, because the Clean Team Protocol barred any test of it against ACME's own records. It is recorded here as an assumption rather than a finding for exactly that reason, and it is the assumption the post-close profiling work is designed to test first.
11.2 Constraints
- No integration execution may occur before closing — Clean Team Protocol, Section 8
- Member-level data may not be processed outside the United States, per Tennessee DOI conditions and ACME privacy policy
- The TSA contractual maximum of 18 months post-close cannot be extended without seller consent, which is not assumed
- Plan-year filing cycles constrain when product, benefit and rate changes may take effect
- ACME has no prior production cloud operating experience
11.3 Principal risks at charter
| Ref | Risk | Charter-level response |
|---|---|---|
| R-01 | Member identity resolution proves materially harder than modeled | Staffed data stewardship with an SLA; conservative match thresholds; contingency sized against it |
| R-02 | Attrition of critical target staff before TSA exit | Retention agreements on identified roles; knowledge transfer as a tracked deliverable |
| R-03 | First-time cloud adoption under a fixed deadline | Rehost-first migration strategy; landing zone before any wave; refactoring deferred out of the integration window |
| R-04 | Vendor change-of-control rights disrupt Day 1 | Pre-close contract sweep; consents and novations prepared for immediate post-close execution |
| R-05 | Business Associate Agreements not re-executed for the surviving entity | Tracked to completion as a Day 1 gate condition; a miss is a privacy exposure, not an administrative one |
| R-06 | Systems cannot integrate directly within the coexistence period | Integration layer with a canonical model, sized for a coexistence period measured in years rather than a tactical bridge |
12. Change Control Thresholds
| Change | Approver | Notes |
|---|---|---|
| Cost impact under $250,000, within baseline | Program Manager | Logged; reported to Steering monthly |
| Cost impact $250,000 to $1,000,000 | Executive Sponsor | Contingency draw; Steering notified |
| Cost impact above $1,000,000 | Integration Steering Committee | Formal change request required |
| Any draw on management reserve | Executive Sponsor | Regardless of amount |
| Any change to the TSA exit date | Integration Steering Committee | Must state impact against the 18-month contractual maximum |
| Any change to Day 1 scope | Integration Steering Committee | Rank 2 constraint; presumption against approval |
| Any change to the synergy target | Steering Committee and board notification | The board approved the transaction on this figure |
| Scope deferral to a post-integration backlog | Program Manager, with Steering ratification | Requires a named owner and a date. Scope may be deferred; it may not be deleted silently. |
The last row is the one that keeps the program honest. Deferred scope with a named owner and a date is a program decision. Deferred scope with neither is scope that vanished, and a closeout report that cannot account for what was dropped and where it went is describing a program that did not happen as written.
13. Approval
| Name | Role | Approval |
|---|---|---|
| D. Ashmore | EVP & CFO, ACME Health — Executive Sponsor | Approved February 27, 2023 |
| R. Villanueva | Chief Operating Officer, ACME Health | Approved February 27, 2023 |
| M. Kessinger | President & CEO, Cumberland Valley Health Plan | Approved February 27, 2023 |
| T. Broadnax | SVP Corporate Development, ACME Health | Approved February 27, 2023 |
| L. Hollingsworth | General Counsel, ACME Health | Approved February 27, 2023 |
| S. Achebe | Chief Information Officer, ACME Health | Approved February 27, 2023 |
| C. Tyrrell | Program Manager, Arrington Advisory Group | Acknowledged February 27, 2023 |
The Program Manager acknowledges this Charter; he does not approve it. A charter is conferred on a program manager by the sponsoring organization. One that the program manager approves is a proposal.
Related artifacts: 2 — Deal Summary & Investment Thesis · 4 — IMO Governance Model · 5 — Clean Team Protocol · 8 — Consulting SOW & Engagement Model · 20 — Application Disposition Matrix · 44 — Change Control Log