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physicians were deemed to be the patients of SMF's group practice
program, and all income from the rendering of professional
services to these patients was to accrue to SMF.
The PSA contained a noncompete provision, under which SWMG
and its physician shareholder/employees were prohibited from
participating in the ownership, management, operation, or control
of any business or person providing health care services within
the service area covered by the agreement. However, specifically
exempted from this prohibition was any SWMG physician who left
the employment of SWMG.
Pursuant to the PSA, SWMG would receive compensation for its
provision of professional services equal to a percentage of net14
revenues from patients, as follows: 57.75 percent15 of fee-for-
service revenue; 47 to 53 percent of capitation revenue,
depending on average monthly levels; and a sliding scale from 90
14 For this purpose, "net" revenue consisted, in the case of
fee-for-service revenues, of gross revenues less an estimated
percentage to account for contractual discounts and bad debts
and, in the case of capitation revenue, of gross revenue less
amounts equal to the cost of third-party administration, cost of
ancillary services, and other miscellaneous costs. "Net"
revenues for this purpose were not offset by SMF's expenses of
providing clinic locations, nonphysician personnel, or
administrative services such as billing or maintaining patient
records.
15 The parties amended the PSA, wherein the fee-for-service
percentage was initially set at 54.5 percent, to reflect the
percentage noted above on Dec. 1, 1994, retroactive to Nov. 1,
1994.
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Last modified: March 27, 2008