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compensation expense takes no account whatsoever of the $35,000
"Physician Access Bonus" that each SWMG physician received. More
fundamentally, the Dutcher appraisal takes no account of the
various contractual rights and other intangible benefits that
petitioners and the other SWMG physicians sought and obtained in
the transaction with SMF, such as avoiding signing noncompete
agreements and obtaining preferred working conditions. Because it
does not fully account for the benefits that petitioners received
in the transaction with SMF, the Dutcher appraisal does not
establish that petitioners contributed property to SMF that
exceeded the values of the benefits they received in return.35
The quid pro quo nature of the transfer of petitioners'
medical practices (including both the tangible and intangible
assets) in exchange for the package of cash and contractual rights
35 Undoubtedly, some portion of the compensation and
benefits provided to the SWMG physicians in connection with their
posttransaction employment (through SWMG) with SMF is
attributable to the posttransaction services performed. However,
petitioners have not demonstrated what portion is attributable to
the services they provided, such as by showing what the fair
market values of those services were. The fair market values of
the services petitioners provided to SMF might be shown, for
example, by a comparison to the compensation paid to similarly
experienced physician-employees of an integrated delivery system
health care provider where the physician-employees had not
transferred existing medical practices to the employer. Whether
such an arrangement would have exhibited compensation comparable
to petitioners' in terms of salaries, initial $35,000 bonuses, no
requirements to execute noncompete agreements, etc. is a matter
of speculation on this record. Although Mr. Dutcher stated in
his appraisal that "it is my opinion the physician compensation
offered SWMG shareholders by Sutter had no market value beyond
the value of their professional medical services", there is no
data or analysis to support this conclusion.
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Last modified: March 27, 2008