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acquirers of their medical practices; and (5) rather than a
noncompete agreement, the "free to compete" provision, which
secured for each petitioner the express right, upon his or her
termination of employment with SWMG/SMF, to have his or her
patients as of the date of affiliation with SMF notified of the
departure and given the option of having the patient's medical
records transferred to the departing physician. In addition, when
petitioners' circumstances before the transaction are considered,
a second tier of benefits they secured in the transaction with SMF
becomes apparent. First, petitioners solved their core economic
problem arising from the advent of managed care; namely, the risk
of loss from having patients requiring extraordinary care. After
the transaction, by virtue of the minimum compensation guaranties,
this risk was largely transferred to SMF, which could better
manage it given SMF's greater patient population and resources.
Second, as a result of their affiliation with a relatively large
health care organization, petitioners secured the benefits of
greater leverage in negotiating contracts with HMO's and greater
efficiencies in providing care, with any resulting enhancement in
revenues inuring to their benefit by virtue of SWMG's compensation
being determined as a percentage of net revenues. In sum, by
transferring their practices to SMF in the transaction at issue,
petitioners ensured for themselves the continued ability to
maintain or improve their accustomed level of earnings from the
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Last modified: March 27, 2008