Corporate Practice

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 n on-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."