EMCare and Team Health SEC Reports

[CAL/AAEM News Service]

EMCare and Team Health SEC Reports 

Source: AAEM (http://www.aaem.org)
Date: November 17, 2005


EMCare SEC Report (Team Health SEC Report Below)

To EM physicians, 

The following is compiled from a document submitted in October 2005, to the Securities
and Exchange Commission by the parent company of EMCare, Inc., in preparation for an
initial public offering (IPO) of stock.  You can see that the lay executives in charge of
EMCare have received millions of dollars in compensation and stock options derived
largely from physician professional fees.  It is also clear that they focus their
business on lucrative ED contracts.  You will note that this company expresses concerns
over the risks posed by prohibitions on fee-splitting and the corporate practice of
medicine, the core issues AAEM is addressing on your behalf.  Please contact us if we can
be of assistance.

Emergency Medical Services (EMS), EMCare's parent company 

The following information was derived from the October 19, 2005, SEC filing of Emergency
Medical Services LP, EMCare's parent company, in order to prepare for an independent
public offering (IPO) of 7.8 million shares of common stock on the NYSE (Ticker EMS) for
an initial offering price of about $15-17 per share or $125 million in total.

EMCare considers itself to be the largest staffing provider by number of contracts (6 %
of total market) and has non-compete clauses in most contracts.  EMCare identified 5
major national groups: EMCare, Team Health, Sterling Healthcare, The Schumacher Group and
National Emergency Services Healthcare Group.  EMCare has 329 total contracts in 39
states (5.3 million patient visits) and employs 4,500 physicians.   This also includes
some hospitalist (28 contracts) and radiology services.  EMCare believes it has a very
good overall payer mix (with only 2% and 4% of revenues Medicaid and self-pay).

The IPO proceeds to go towards repaying $606 million in long-term debt.  The CEO, William
Sanger, MBA, and President, Don Harvey, of both EMCare and the parent company are not
physicians.  Dighton Packard, MD, Chair of Dept of EM at Baylor, is the CMO of EMCare and
its only physician executive officer.  The reported 2004 total compensation (salary and
bonus) for CEO William Sanger was $1,070,118, for Don Harvey was $729,167 and for Dighton
Packard, MD was $320,571.  Also, EMCare paid $4.9 million in the past two years to BIDON,
Inc. a consulting firm owned by William Sanger, Don Harvey, and a 3rd partner.  In 2005,
William Sanger received stock option grants for about 1.5 million shares estimated to be
worth nearly $10 million.  And, Don Harvey and Dighton Packard, MD, also received stock
option grants estimated to be worth nearly $2.5 million and $325,000, respectively.

EMCare is purchasing 3.5 million shares of stock ($56 million) for its executive stock
option program.  William Sanger owns 450,000 shares and Don Harvey owns 75,000 shares
before the IPO.  Finally, William Sanger was recently given a bonus exceeding $12.5
million for assistance with the sale of the company from Laidlaw to Onex and Don Harvey
was similarly given a $2.2 million bonus.

The SEC filing requires EMS/EMCare to divulge risks to potential stock purchasers.  The
following are excerpts: 

"There can be no assurance that our non-compete agreements related to affiliated
physicians and professional corporations will not be successfully challenged as
unenforceable in certain states. In such event, we would be unable to prevent former
affiliated physicians and professional corporations from competing with us, potentially
resulting in the loss of some of our hospital contracts."

"Laws prohibit the practice of medicine by general business corporations and are intended
to prevent unlicensed persons or entities from interfering with or inappropriately
influencing the physician's professional judgment. They may also prevent the sharing of
professional services income with non-professional or business interests. From time to
time, including recently, we have been involved in litigation in which private litigants
have raised these issues."

"The Medicare Modernization Act amended the Medicare reassignment statute as of December
8, 2003 and now permits our independent contractor physicians to reassign their Medicare
receivables to us under certain circumstances. Because this provision has only recently
been implemented, it could be interpreted in a manner adverse to us, which would
negatively impact our ability to bill for our physicians' services." 

"Under the corporate practice of medicine restrictions of certain states, decisions and
activities such as scheduling, contracting, setting rates and the hiring and management
of non-clinical personnel may implicate the restrictions on corporate practice of
medicine."

"Regulatory authorities or other parties, including our affiliated physicians, may assert
that, we are engaged in the corporate practice of medicine or that our contractual
arrangements with affiliated physician groups constitute unlawful fee-splitting. In this
event, we could be subject to adverse judicial or administrative interpretations, to
civil or criminal penalties, our contracts could be found legally invalid and
unenforceable or we could be required to restructure our contractual arrangements with
our affiliated physician groups."

-----------------------------------

Team Health SEC Report

To EM physicians, 

The following is compiled from a document submitted in August 2005, to the Securities and
Exchange Commission by Team Health, Inc., in preparation for an initial public offering
(IPO) of stock.  At the time TH was owned by three venture capital firms who were looking
to obtain a return on their investment.  EM physician professional fees make up the bulk
of the income for this business entity.  Over $2.5 million of those fees went to Lynn
Massingale, MD FACEP, in compensation or deferred compensation in 2004.  You will note
that this company expresses concerns over the risks posed by prohibitions on
fee-splitting and the corporate practice of medicine, the core issues AAEM is addressing
on your behalf.  Please contact us if we can be of assistance.

Team Health, Inc. 

The following information was derived from the August 16, 2005, SEC filing of Team
Health, Inc., in order to prepare for an independent public offering (IPO) of an unset
number of shares of common stock totaling $172.5 million on the NYSE (Ticker THH).  On
October 13, 2005, Team Health decided instead to sell a large portion of the company to
the Blackstone Group, a private equity firm.

Team Health considers itself to be the largest staffing provider by revenue and number of
visits and has non-compete clauses in most contracts, typically for two years.  Team
Health has 470 hospital contracts in 44 states and employs 4,700 physicians, mid-level
practitioners and nurses.   This also includes some hospitalist, anesthesiology,
pediatrics and radiology services.  Team Health's emergency department subsidiaries
include Emergency Coverage Corporation, Emergency Physician Associates, Emergency
Professional Services, InPhyNet Medical Management, Northwest Emergency Physicians,
Southeastern Emergency Physicians and Team Health West. Other subsidiaries include After
Hours Pediatrics, Daniel and Yeager (locum tenens), Health Care Financial Services
(billing), Spectrum Healthcare Resources (military staffing), Team Health Anesthesia
Management Services and Team Radiology.

According to the SEC report, the 2004 salary and bonus for Team Health's CEO, Lynn
Massingale, MD, was $1.1 million plus an additional $1.5 million in deferred
compensation.  Additionally, Team Health paid $800,000 in 2004 for building leases to a
company 20% owned by Dr. Massingale, who directly owns 348,151 shares of the company.

The SEC filing requires Team Health to divulge risks to potential stock purchasers.  The
following are excerpts: 

"For the lockbox arrangements still in effect, Medicare carriers send payments for the
physician services to a lockbox bank account under the control of the physician. The
physician, fulfilling his contractual obligations to us, then directs the bank to
transfer the funds in that bank account into a company bank account. In return, we pay
the physician an agreed amount for professional services provided and provide management
and administrative services to or on behalf of the physician or physician group.  With
respect to Medicare services that physicians employed by physician-controlled
professional corporations render, Medicare carriers send payments for physician services
to a group account under the group's control. While we seek to comply substantially with
applicable Medicare reimbursement regulations, we cannot assure you that government
authorities would find that we comply in all respects with these regulations."

"There can be no assurance that our non-competition contractual arrangements with
affiliated physicians and professional corporations will not be successfully challenged
in certain states as unenforceable. We have contracts with physicians in many states.
State law governing non-compete agreements varies from state to state. Some states are
reluctant to strictly enforce non-compete agreements with physicians. In such event, we
would be unable to prevent former affiliated physicians and professional corporations
from competing with us, potentially resulting in the loss of some of our hospital
contracts and other business."

"While we seek to comply substantially with existing applicable laws relating to the
corporate practice of medicine and fee splitting, we cannot assure you that our existing
contractual arrangements, including non-competition agreements with physicians,
professional corporations and hospitals will not be successfully challenged in certain
states as unenforceable or as constituting the unlicensed practice of medicine or
prohibited fee-splitting."

"On March 30, 2004, we received a subpoena from the Department of HHS Office of Inspector
General, or OIG, located in Concord, California, requesting certain information for the
period 1999 to present relating to our billing practices...The portions of the complaint
not under seal allege that we engaged in certain billing practices that resulted in our
receipt of duplicate payments for the same medical service and that we misled certain
providers about the entities that were performing their billing services. Additionally,
the portions of the complaint not under seal allege that we terminated the employment of
the individual who filed the complaint in retaliation for that individual's bringing of
these allegations to our attention. We deny these allegations and do not believe that any
of our current or prior billing practices would form the basis for a violation of federal
law."

AAEM 
555 East Wells Street, Suite 1100 
Milwaukee,  WI 53202-3823 
800-884-2236 
Fax: 414-276-3349 
Email: info at aaem.org 
Website: www.aaem.org


Cyrus Shahpar & Brian Potts 
Managing Editors, CAL/AAEM News Service
University of California, Irvine

The CAL/AAEM Archives are available at: http://maillists.uci.edu/mailman/public/calaaem/



		
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