MEDPARTNERS INC, S-3/A, 1998-07-27

MEDPARTNERS INC
S-3/A, 1998-07-27
SPECIALTY OUTPATIENT FACILITIES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 27, 1998

REGISTRATION STATEMENT NO. 333-53761

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MEDPARTNERS, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C>
DELAWARE 63-1151076
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification Number)
Organization)
</TABLE>

3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244
(205) 733-8996
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
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SARA J. FINLEY, ESQ.

ASSISTANT GENERAL COUNSEL

MEDPARTNERS, INC.
3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244-2331
TEL: (205) 733-8996
FAX: (205) 982-7709
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
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COPIES OF COMMUNICATIONS TO:

ROBERT E. LEE GARNER, ESQ.
F. HAMPTON MCFADDEN, JR., ESQ.

HASKELL SLAUGHTER & YOUNG, L.L.C.

1200 AMSOUTH/HARBERT PLAZA
1901 SIXTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
TEL: (205) 251-1000
FAX: (205) 324-1133

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE> 2

PROSPECTUS

503,997 SHARES

MEDPARTNERS (TM) LOGO

COMMON STOCK
PAR VALUE $.001 PER SHARE

In accordance with the applicable rules of the Securities and Exchange
Commission (the "Commission"), this Prospectus may be used in connection with
offerings of the Common Stock of MedPartners, Inc., a Delaware corporation
("MedPartners" or the "Company"). This Prospectus relates to the resale by the
holders thereof ("Selling Stockholders") of up to 503,997 shares of Common
Stock, par value $.001 per share (the "Common Stock"), of the Company issued
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in transactions not involving public offerings.

The shares of Common Stock held by the Selling Stockholders may be offered
from time to time in transactions (which may include block transactions) on The
New York Stock Exchange, Inc. ("NYSE"), in negotiated transactions or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders may
effect such transactions by selling the shares directly to purchasers or to or
through underwriters, agents or broker-dealers, and any such underwriters,
agents or broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and the purchasers of
the shares for which such underwriters, agents or broker-dealers may act as
agent or to whom they sell as principal, or both (which compensation as to a
particular underwriter, broker-dealer or agent might be in excess of customary
commissions). See "Selling Stockholders" and "Plan of Distribution".

None of the proceeds from the sale of the shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts, selling commissions and fees and
expenses of counsel and other advisors to the Selling Stockholders) in
connection with the registration of the shares being offered by the Selling
Stockholders. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act. See
"Plan of Distribution".

SEE "RISK FACTORS" AT PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

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THE DATE OF THIS PROSPECTUS IS JULY 27, 1998

<PAGE> 3

AVAILABLE INFORMATION

The Company has filed a Registration Statement (the "Registration
Statement") on Form S-3 under the Securities Act, with the Commission with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement which the Company has
filed with the Commission, certain portions of which have been omitted pursuant
to the rules and regulations of the Commission, and to which portions reference
is hereby made for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning certain
documents are not necessarily complete, and in each instance, reference is made
to the copies of such documents filed as exhibits to the Registration Statement.
Each such statement is qualified in its entirety by such reference.

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (Commission File No.
0-27276), and in accordance therewith files periodic reports, proxy statements
and other information with the Commission relating to its business, financial
statements and other matters. The Registration Statement, as well as such
reports, proxy statements and other information, may be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. and
should be available for inspection and copying at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048
and at Citicorp Center, 500 West Madison Street, Chicago, Illinois. Copies of
such material can be obtained at prescribed rates by writing to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. The Common Stock is
listed on the NYSE. The reports, proxy statements and certain other information
of the Company can be inspected at the office of the NYSE, 20 Broad Street, New
York, New York. See "Incorporation of Certain Documents by Reference".

FORWARD-LOOKING STATEMENTS

This Prospectus contains or incorporates certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations and business of the
Company. The words "estimate", "project", "intend", "expect" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in such
forward looking-statements. For a discussion of certain of such risks and
uncertainties, see "Risk Factors". Investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus. Unless the context otherwise requires, as used herein, the term
"MedPartners" or the "Company" refers collectively to MedPartners, Inc. and its
respective subsidiaries and affiliates.

THE OFFERING

Common Stock offered by the
Selling Stockholders..... 503,997 shares

Common Stock outstanding
before and after the
Offering................. 197,876,690 shares(1)

New York Stock Exchange
symbol................... MDM
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(1) As of May 4, 1998, excluding shares of Common Stock reserved for issuance
pursuant to outstanding stock options.

PLAN OF DISTRIBUTION

The Common Stock may be sold from time to time by Selling Stockholders, or
by pledgees, donees, transferees or other successors-in-interest. Such sales may
be made on one or more exchanges or in the over-the-counter market or in
negotiated transactions, at fixed prices which may be changed, at market prices
prevailing at the time of sale or at prices related to such prevailing price.
The Common Stock may be sold directly to purchasers or to or through
underwriters, agents or broker-dealers by one or more methods. Any underwriters,
broker-dealers or agents may receive compensation in form of commission,
discounts or concessions from Selling Stockholders and/or the purchasers of such
shares for which such underwriters, broker-dealers or agents may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular underwriter, broker-dealer or agent will be negotiated prior to the
sale and may be in excess of customary compensation). In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this Prospectus. See
"Plan of Distribution" and "Selling Stockholders".

RISK FACTORS

See "Risk Factors" beginning on page 3 of this Prospectus for a discussion
of certain factors related to the Company and the Common Stock offered hereby.

RECENT DEVELOPMENTS

The Company experienced several adverse events in the fourth quarter of
1997 and the month of January 1998, including: (i) a fourth quarter pretax
charge of $646.7 million related primarily to the restructuring and impairment
of selected assets of certain of its clinic operations within the physician
practice management division; (ii) a fourth quarter after-tax charge from
discontinued operations of approximately $15.3 million; (iii) a fourth quarter
after-tax charge of $30.9 million related to a cumulative effect of a change in
accounting principles; (iv) a fourth quarter net loss from continuing
operations, excluding the impact of restructuring and asset impairment charges
of $190.0 million; (v) the termination of the merger agreement with PhyCor,
Inc.; (vi) a steep drop in the price of its Common Stock following the
announcement of the termination of the PhyCor merger; and (vii) the filing of
various stockholder class action lawsuits against the Company and certain of its
officers and directors in the aftermath of these events alleging violations of
federal securities laws. See Item 3. "Legal Proceedings" of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 (the "Company's
10-K") incorporated herein by reference.

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<PAGE> 5

In response to certain of these setbacks, assembly of a new management team
began in January 1998 when Richard M. Scrushy was named Chairman of the Board
and acting Chief Executive Officer. In March 1998 E. Mac Crawford was named
President and Chief Executive Officer. Mr. Scrushy will remain Chairman of the
Board and brings his extensive healthcare experience, most recently his 13 years
as Chairman of the Board and Chief Executive Officer of HEALTHSOUTH Corporation,
to this position. Mr. Crawford joins MedPartners from Magellan Health Services,
Inc. (formerly Charter Medical Corporation) where he served as Chairman of the
Board, President and Chief Executive Officer. Mr. Crawford has been credited
with successfully turning around Magellan's operations, transforming the company
from a psychiatric provider operation into a managed care company, and expanding
the company into the rapidly growing market of specialty disease management. On
May 7, 1998, the Company announced that James H. Dickerson, Jr. joined the
Company as Chief Financial Officer. Mr. Dickerson was formerly Chief Financial
Officer of U.S. HealthCare prior to its merger with Aetna and Chief Financial
Officer of Aetna/U.S. HealthCare after the merger. In addition to these
management changes, the Company reorganized and streamlined its physician
practice management ("PPM") organizational structure in an effort to strengthen
management, speed integration and improve operations. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's 10-K incorporated herein by reference.

For the three months ended March 31, 1998, net revenue was $1,743.1
million, compared to $1,481.9 million for the same period in 1997, an increase
of 17.6%. The increase in net revenue primarily resulted from various increases
in PPM, PBM and Contract Medical Services.

Net loss for the first quarter of 1998 was $25.7 million, as compared to
net income of $44.4 million for the same period of 1997. Included in the net
loss for the first quarter of 1998 are several one-time items. These items
include $34.0 million of restructuring expenses, $8.4 million of terminated
merger expenses and a gain on the sale of international operations of $20.1
million. Net loss from operations excluding these non-recurring items was $7.4
million. The restructuring expenses of $34.0 million relate primarily to $24.0
million in corporate severance costs and $10.0 million in costs associated with
the closing of certain clinic operations. The terminated merger expenses of $8.4
million relate primarily to the terminated merger with America Service Group
Inc.

On June 23, 1998, the Company announced its intent to sell its Team Health
operations, one of the nation's largest providers of hospital-based physician
management services, and has retained Salomon Smith Barney to explore the sale
of the unit. Team Health produces revenues of over $690 million on an annualized
basis. Team Health, which became a part of the Company as a result of the
Pacific Physician Services, Inc. ("PPSI") merger in 1996, organizes and manages
physicians and other healthcare professionals engaged in the delivery of
emergency, radiology and other hospital based services to hospitals throughout
the United States. Team Health is currently affiliated with over 2,100 emergency
physicians and 140 radiologists. The business operates over 268 hospital-based
contracts and 58 radiology services contracts in 30 states.

On July 23, 1998, the Company announced, among other things, that: (i)
overall its various business units were performing in line with the Company's
previously stated objectives; (ii) cash flow from operations for the quarter
ended June 30, 1998 was positive; (iii) the Company continues to make progress
in its efforts to restructure its PPM division; and (iv) as of June 30, 1998,
more than $260 million remained available for use under the Company's credit
facility.

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THE COMPANY

The executive offices of MedPartners are located at 3000 Galleria Tower,
Suite 1000, Birmingham, Alabama 35244, and its telephone number is (205)
733-8996.

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective purchasers of the Common Stock should consider carefully the factors
listed below.

RISKS RELATING TO RECENT DEVELOPMENTS

The Company experienced several adverse events during the fourth quarter of
1997 and January 1998, including: (i) a fourth quarter pretax charge of $646.7
million related primarily to the restructuring and impairment of selected assets
of certain of its clinic operations in the Physician Practice Services Division;
(ii) a fourth quarter after-tax charge from discontinued operations of
approximately $15.3 million; (iii) a fourth quarter after-tax charge of $30.9
million related to a cumulative effect of a change in accounting principles;
(iv) a fourth quarter net loss from continuing operations, excluding the impact
of restructuring and asset impairment charges of $190.0 million; (v) the
termination of its merger agreement with PhyCor, Inc.; (vi) a steep drop in the
price of its Common Stock following the announcement of the PhyCor merger
agreement's termination; and (vii) the filing of various stockholder class
action lawsuits against the Company and certain of its officers and directors in
the aftermath of these events alleging violations of federal and state
securities laws. For further discussion of the possible effect of the foregoing
events on the operating results and financial condition of the Company, see
"-- Risks Relating to Certain Legal Matters" herein and Item 3. "Legal
Proceedings" in the Company's 10-K incorporated herein by reference.

In response to certain of these setbacks, assembly of a new management team
began in January 1998 when Richard M. Scrushy was named Chairman of the Board
and acting Chief Executive Officer of the Company. In March 1998, E. Mac
Crawford was named President and Chief Executive Officer of the Company. Mr.
Scrushy will remain Chairman of the Board, while continuing to serve as Chairman
of the Board and Chief Executive Officer of HEALTHSOUTH Corporation, a publicly
traded healthcare company. Mr. Crawford joined MedPartners from Magellan Health
Services, Inc. (formerly Charter Medical Corporation) where he served as
Chairman of the Board, President and Chief Executive Officer. On May 7, 1998,
the Company announced that James H. Dickerson, Jr. joined the Company as Chief
Financial Officer. Mr. Dickerson was formerly Chief Financial Officer of U.S.
HealthCare prior to its merger with Aetna and Chief Financial Officer of
Aetna/U.S. HealthCare after the merger. In conjunction with these management
changes, the Company reorganized and streamlined its PPM Organizational's
structure in an effort to strengthen management, speed integration, improve
operations and facilitate communications. There can be no assurance, however,
that these steps, or any steps that the Company may take in the future, to
address the impact of these setbacks will accomplish their intended purposes. If
they do not, such failure could have a material adverse effect on the operating
results and financial condition of the Company. See "-- Risks Related to the
Company's Changed Growth Strategy" and "-- Possible Volatility of Stock Price".

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RISKS RELATING TO INTEGRATION IN CONNECTION WITH ACQUISITIONS

The Company has recently completed major acquisitions and is still in the
process of integrating those acquired businesses. Acquisitions of PPM companies
and physician practices entail the risk that such acquisitions will fail to
perform in accordance with expectations and that the Company will be unable to
successfully integrate such acquired businesses and physician practices into its
operations. The future profitability of the Company is largely dependent on its
ability to develop and integrate networks of physicians, to manage and control
costs and to realize economies of scale from acquisitions of PPM companies and
physician practices. The histories, geographic location, business models,
including emphasis on managed care and fee-for-service, and cultures of acquired
PPM businesses and physician practices may differ from the Company's past
experiences. The Company faces a significant challenge in its efforts to
integrate the businesses of the Company and the acquired companies so that the
different cultures and the varying emphases on managed care and fee-for-service
can be effectively managed to continue to grow these businesses. Dedicating
management resources to the integration process may detract attention from the
day-to-day business of the Company. Moreover, the integration of the acquired
businesses and physician practices may require substantial capital and financial
investments. These, together with other risks described herein, could result in
the incurrence of substantial costs in connection with acquisitions that may
never achieve revenue levels comparable to the Company's existing physician
networks, which could have a material adverse effect on the operating results
and financial condition of the Company.

The major acquisitions carried out by the Company since January 1995 have
been structured as poolings of interests. As a result, the operating income of
the Company has been reduced by the merger expenses incurred in connection with
those acquisitions, resulting in a net loss for the year ended December 31, 1996
and which contributed to the Company's 1997 results of operations. There can be
no assurance that future merger expenses will not result in further net losses.
Nor can there be any assurance that there will not be substantial future costs
associated with integrating acquired companies; that the Company will be
successful in integrating such companies; or that the anticipated benefits of
such acquisitions will be realized fully. The unsuccessful integration of such
companies or the failure of the Company to realize such anticipated benefits
fully could have a material adverse effect on the operating results and
financial condition of the Company.

RISKS RELATING TO THE COMPANY'S LONG-TERM GROWTH STRATEGY

The Company's new leadership intends to concentrate on further integration
of its existing operations in order to generate internal growth and capture the
opportunities that exist within and across the Company's divisions. The Company
has identified three business objectives: (i) operational integration within
existing business lines; (ii) business integration across divisional lines to
capitalize on internal opportunities; and (iii) strategic relationship
development, on a regional or national basis, with payors, providers, suppliers
and other related businesses. While it is anticipated that the Company will
continue to make selected, strategic acquisitions to continue growing the
Company during this period of consolidation, the primary focus of management and
the Company's 29,000 employees will be on improving the Company's existing
operations.

Risks Relating to Capital Requirements. The Company's long-term growth
strategy requires substantial capital for the acquisition of PPM businesses and
assets of physician practices, and for their effective integration, operation
and expansion. Affiliated physician practices will continue to require capital
for renovation, expansion and additional medical equipment and technology. The
Company believes that its existing cash resources, the use of Common Stock for
selected practice and other acquisitions, and available borrowings under the
$1.0 billion credit facility (the "Credit Facility") with NationsBank, National

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<PAGE> 8

Association, as administrative bank to a group of lenders, or any successor
credit facility, will be sufficient to meet the Company's anticipated working
capital and general corporate needs. On June 9, 1998 the Company completed the
restructuring of the Credit Facility. The Credit Facility is divided into three
tranches, including a one-year term loan which may be extended by the Company
for an additional two years, a three-year term loan and a three-year revolving
line of credit. Initial interest rates are from 250 to 275 basis points above
LIBOR. In future periods the Company may reduce interest rates paid by improving
its debt to cash flow ratio. The Credit Facility is unsecured, but provides for
certain subsidiary guarantees and contains usual and ordinary covenants. As of
June 9, 1998, $770 million was outstanding under the Credit Facility. The
Company expects from time to time to raise additional capital through the
issuance of long-term or short-term indebtedness or the issuance of additional
equity securities in private or public transactions, at such times as management
deems appropriate and the market allows, in order to meet the capital needs of
the Company. There can be no assurance that acceptable financing for future
acquisitions or for the integration and expansion of existing networks can be
obtained. Any of such financings could result in increased interest and
amortization expense, decreased income to fund future expansion and dilution of
existing equity positions.

Dependence on HMO Enrollee Growth. The Company is also largely dependent
on the continued increase in the number of HMO enrollees who use its physician
networks. This growth may come from development or acquisition of other PPM
entities, affiliation with additional physicians, increased enrollment in HMOs
currently contracting with the Company through its affiliated physicians and
additional agreements with HMOs. There can be no assurance that the Company will
be successful in identifying, acquiring and integrating additional medical
groups or other PPM companies or in increasing the number of enrollees. A
decline in enrollees in HMOs could have a material adverse effect on the
operating results and financial condition of the Company. The Company is
statutorily and contractually prohibited from controlling any medical decisions
made by a healthcare provider. Accordingly, affiliated physicians may decline to
enter into HMO agreements that are negotiated for them by the Company or may
enter into contracts for the provision of medical services or make other
financial commitments that are not intended to benefit the Company and which,
accordingly, could have a material adverse effect on the operating results and
financial condition of the Company. See "Business -- Physician Practice
Services" in the Company's 10-K incorporated herein by reference.

Dependence on Affiliated Physicians. Approximately 70% of the Company's
PPM revenue for the year ended December 31, 1997 was derived from or through
contracts between the Company and hospitals, other payors or HMOs. The balance
of the Company's PPM revenue is generated through professional corporations
("PCs") that have entered into contracts directly with HMOs or have the right to
receive payment directly from HMOs for the provision of medical services. The
most significant clinic expense, physician compensation, accounted for 42% of
total expenses in the Company's PPM service area in 1997. Physicians that
generated 2% of PPM revenue in 1997 received a fixed-dollar amount plus a
discretionary bonus based on performance criteria goals. Physician compensation
expense was 46% of this first category of PCs' total net revenue in 1997.
Physicians that were compensated on a fee-for-service basis produced
approximately 5% of the Company's PPM revenue in 1997. Physician compensation
expense pursuant to such agreements represented 50% of this second category of
PCs' total net revenue in 1997. The remaining 23% of PPM revenues were generated
by physicians who were provided a salary, bonus and/or profit-sharing payment
based on the PC's net income. Physician compensation expense pursuant to such
agreements represented 34% of this third category of PCs' net revenues in 1997.
Under each of these arrangements, revenue is assigned to MedPartners by the PC,
and MedPartners is responsible and at risk for all clinic expenses.

The practice management agreements define the responsibilities of the
physicians and the Company and govern all terms and conditions of their
relationship. The practice management agreements have terms generally of 20 to
40 years, subject to termination for cause, which includes bankruptcy or a
material breach. Practice management agreements with certain of the affiliated
practices contain provisions giving the physician practice the option to
terminate the agreement without cause, subject to significant limitations.
Because the Company cannot control the provision of medical services by its
affiliated physicians contractually or otherwise under the laws of California
and most other states in which the Company operates, affiliated physicians may
decline to enter into HMO agreements that are negotiated for them by the Company
or may

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<PAGE> 9

enter into contracts for the provision of medical services or make other
financial commitments which are not intended to benefit the Company and which
could have a material adverse effect on the operating results and financial
condition of the Company.

RISKS RELATING TO CAPITATED NATURE OF REVENUES; CONTROL OF HEALTHCARE COSTS

A substantial portion of the Company's revenue is derived from agreements
with HMOs that provide for the receipt of capitated fees. Under these
agreements, the Company, through its affiliated physicians, is generally
responsible for the provision of all covered outpatient benefits, regardless of
whether the affiliated physicians directly provide the medical services
associated with the covered benefits. The Company is statutorily and
contractually prohibited from controlling any medical decisions made by any
healthcare provider. To the extent that enrollees require more care than is
anticipated or require supplemental medical care that is not otherwise
reimbursed by the HMO, aggregate capitation rates may be insufficient to cover
the costs associated with the treatment of enrollees. If revenue is insufficient
to cover costs, the operating results and financial condition of the Company
could be materially adversely affected. As a result, the Company's success will
depend in large part on the effective management of healthcare costs through
various methods, including utilization management, competitive pricing for
purchased services and favorable agreements with payors. Recently, many
providers, including the Company, have experienced pricing pressures with
respect to negotiations with HMOs. In addition, employer groups are becoming
increasingly successful in negotiating reductions in the growth of premiums paid
for their employees' health insurance, which tends to depress the reimbursement
for healthcare services. At the same time, employer groups are demanding higher
accountability from payors and providers of healthcare services with respect to
measurable accessibility, quality and service. If these trends continue, the
cost of providing physician services could increase while the level of
reimbursement could grow at a lower rate or could decrease. There can be no
assurance that these pricing pressures will not have a material adverse effect
on the operating results and financial condition of the Company. In addition,
changes in healthcare practices, inflation, new technologies, major epidemics,
natural disasters and numerous other factors affecting the delivery and cost of
healthcare could have a material adverse effect on the operating results and
financial condition of the Company.

The Company's financial statements include estimates of costs for covered
medical benefits incurred by HMO enrollees, but not yet reported. While these
estimates are based on information available at the time of calculation, there
can be no assurance that actual costs will approximate the estimates of such
amounts. If the actual costs significantly exceed the amounts estimated and
accrued, such additional costs could have a material adverse effect on the
operating results and financial condition of the Company.

The HMO agreements often contain shared-risk provisions under which
additional revenue can be earned or economic penalties can be incurred based
upon the utilization of hospital and non-professional services by HMO enrollees.
The Company's financial statements contain accruals for estimates of shared-risk
amounts received from or payable to the HMOs that contract with their affiliated
physicians. These estimates are based upon inpatient utilization and associated
costs incurred by HMO enrollees compared to budgeted costs. Differences between
actual contract settlements and amounts estimated as receivable or payable
relating to HMO risk-sharing arrangements are generally reconciled annually.
This may cause fluctuations from amounts previously accrued, which could have a
material adverse effect on the operating results and financial condition of the
Company.

Physician groups that render services on a fee-for-service basis (as
opposed to a capitated plan) typically bill various third-party payors, such as
governmental programs (e.g., Medicare and Medicaid), private insurance plans and
managed care plans, for the healthcare services provided to their patients. A
significant portion of the revenue of the Company is derived from payments made
by these third-party payors. There can be no assurance that payments under
governmental programs or from other third-party payors will remain at present
levels. In addition, third-party payors can deny reimbursement if they determine
that treatment was not performed in accordance with the cost-effective treatment
methods established by such payors or was experimental or for other reasons. Any
material decrease in payments received from such third-party payors could have a
material adverse effect on the operating results and financial condition of the
Company.

6
<PAGE> 10

RISKS RELATING TO CERTAIN LEGAL MATTERS

The Company is party to certain legal actions arising in the ordinary
course of business. MedPartners is named as a defendant in various legal actions
arising primarily out of services rendered by physicians and others employed by
its affiliated physician entities and the hospital it owns, as well as personal
injury and employment disputes. In addition, certain of its affiliated medical
groups are named as defendants in numerous actions alleging medical negligence
on the part of their physicians. In certain of these actions, MedPartners'
and/or the medical group's insurance carrier has either declined to provide
coverage or has provided a defense subject to a reservation of rights.
Management does not view any of these actions as likely to result in an
uninsured award that would have a material adverse effect on the operating
results and financial condition of MedPartners. See Item 3. "Legal Proceedings"
in the Company's 10-K incorporated herein by reference.

In June 1995, Caremark agreed to settle an investigation with certain
agencies of the U.S. government and related state investigative agencies in all
50 states and the District of Columbia (the "OIG Settlement"), as described in
Note 13 of the audited Consolidated Financial Statements of the Company
contained in the Company's 10-K incorporated herein by reference. In its
agreement with the Office of the Inspector General ("OIG") and the Department of
Justice ("DOJ"), Caremark agreed to continue to maintain certain
compliance-related oversight procedures. Should these oversight procedures
reveal credible evidence of legal or regulatory violations, Caremark is required
to report such violations to the OIG and DOJ. Caremark is, therefore, subject to
increased regulatory scrutiny and, in the event it commits legal or regulatory
violations, Caremark may be subject to an increased risk of sanctions or
penalties, including disqualification as a provider of Medicare or Medicaid
services, which would have a material adverse effect on the operating results
and financial condition of MedPartners.

In connection with the matters described above relating to the OIG
Settlement, Caremark is the subject of various non-governmental claims and may
in the future become subject to additional OIG-related claims. Caremark is the
subject of, and may be in the future subjected to, various private suits and
claims being asserted in connection with matters relating to the OIG Settlement
by Caremark's stockholders, patients who received healthcare services from
Caremark and such patients' insurers. MedPartners cannot determine at this time
what costs or liabilities may be incurred in connection with future disposition
of non-governmental claims or litigation. Such additional costs or liabilities,
if incurred, could have a material adverse effect on the operating results and
financial condition of MedPartners.

In May 1996, three home infusion companies, purporting to represent a class
consisting of all of Caremark's competitors in the alternate site infusion
therapy industry, filed a complaint against Caremark Inc. and Caremark
International Inc., as well as two other corporations, in the United States
District Court for the District of Hawaii (Case No. 96-00474 ACK) alleging
violations of the federal antitrust laws, the Racketeer Influenced and Corrupt
Organizations Act ("RICO") and California's unfair business practices statute.
In this action, styled Pharmacare, et al. v. Caremark Inc., Caremark
International Inc., et al., the plaintiffs seek unspecified treble damages and
attorneys' fees and expenses. MedPartners intends to defend this case
vigorously. Although management believes, based on information currently
available, that the ultimate resolution of this matter is not likely to have a
material adverse effect on the operating results and financial condition of
MedPartners, there can be no assurance that the ultimate resolution of the
matter, if adversely determined, would not have a material adverse effect on the
operating results and financial condition of MedPartners.

In March 1998, a group of 22 private payors filed an action styled Blue
Cross and Blue Shield of Alabama et al. v. Caremark Inc. and Caremark
International Inc. (Case No. 98C-1285) in the United States District Court for
the Northern District of Illinois seeking recovery for losses allegedly suffered
by the plaintiffs during the period 1986-1995 as a result of an allegedly
fraudulent scheme conceived and implemented by the defendants to submit and
cause other providers to submit fraudulent claims for payment of healthcare
benefits by the plaintiffs related to Caremark's home infusion business. Two
more private payors have joined the suit as plaintiffs since it was filed.
Caremark sold its home infusion business in 1995. The plaintiffs allege that
Caremark failed to disclose to the plaintiffs the existence and nature of
certain relationships that Caremark

7
<PAGE> 11

had with various physicians and the fact that certain funds were paid to such
physicians without the plaintiffs' knowledge or approval. The action prays for
an unspecified amount in damages and for trebled damages under RICO and other
related fraud claims. Caremark intends to defend this lawsuit vigorously.
Although management believes, based on information currently available, that the
ultimate resolution of this matter is not likely to have a material adverse
effect on the operating results and financial condition of MedPartners, there
can be no assurance that the ultimate resolution of this matter, if adversely
determined, would not have a material adverse effect on the operating results
and financial condition of MedPartners.

In December 1997, a class action was filed in the United States District
Court for the Central District of California styled, Padilla, et al. v.
MedPartners, Inc., et al. (Case No. SACV 97-978). The action purports to be a
class action on behalf of all of the shareholders of Talbert which was acquired
by MedPartners in a cash tender offer transaction closed in September 1997,
pursuant to which each outstanding share of Talbert was acquired for $63 cash
per share. The action alleges that MedPartners violated Rule 14d-10 under the
Securities Exchange Act of 1934, the so-called "all holder, best price" rule, by
reason of provisions in the employment agreements of two senior officers of
Talbert, which provided for a certain contingent payment under certain
circumstances. The complaint requests class certification and claims damages and
interest. The defendants have filed a Motion to Dismiss this action on a number
of grounds, asserting that the complaint fails to state a claim upon which
relief can be granted. Although management believes, based on information
currently available, that the ultimate resolution of this matter is not likely
to have a material adverse effect on the operating results and financial
condition of MedPartners, there can be no assurance that the ultimate resolution
of the matter, if adversely determined, would not have a material adverse effect
on the operating results and financial condition of MedPartners.

On January 7, 1998, MedPartners issued a press release announcing the
termination of its proposed merger with PhyCor, Inc. On that date, MedPartners
also issued another press release announcing certain fourth quarter 1997 charges
and negative earnings estimates. When the Company's results for the year 1997
and the fourth quarter were announced at the end of March 1998, the figures were
revised downward. On January 8, 1998, there was a decline in the market price
for MedPartners' publicly traded securities. Since then, certain persons
claiming to be stockholders of MedPartners have filed complaints in either state
or federal court against MedPartners and certain officers and directors of
MedPartners. Originally, there were two state court actions and 14 federal court
actions, all filed in Birmingham, Alabama. In each of these lawsuits, the
plaintiffs purport to represent a class and generally allege violations of the
Securities Exchange Act of 1934, fraud and various state law claims in
connection with the public disclosure by MedPartners of the termination of the
PhyCor merger and the fourth quarter 1997 charges and earnings estimates. All of
the federal court actions have been consolidated into one case and one state
court action has been dismissed but is being appealed by the plaintiff's
counsel. The remaining state court action was filed against MedPartners and
certain of its officers and directors, purportedly on behalf of all persons who
purchased MedPartners' Threshold Appreciation Price Securities(TM) in the
offering occurring on or about September 16, 1997. Collectively, these
complaints seek class certification, damages and interest, as well as costs and
expenses. MedPartners' management believes that it and MedPartners have acted
properly throughout and intends to defend each of these cases vigorously. All of
these cases are in the most preliminary stages, and their ultimate resolution
cannot be known at this time. Therefore, there can be no assurance that the
ultimate resolution of these matters will not have a material adverse effect on
the operating results and financial condition of MedPartners.

Beginning in September 1994, Caremark was named as a defendant in a series
of lawsuits added to a pending group of actions (including a class action)
brought in 1993 under the antitrust laws by local and chain retail pharmacies
against brand name pharmaceutical manufacturers, wholesalers and prescription
benefit managers other than Caremark. The lawsuits, filed in federal district
courts in at least 38 states (including the United States District Court for the
Northern District of Illinois), allege that at least 24 pharmaceutical
manufacturers provided unlawful price and service discounts to certain favored
buyers and conspired among themselves to deny similar discounts to the
complaining retail pharmacies (approximately 3,900 in number). The complaints
charge that certain prescription benefit managers, including Caremark, were
favored buyers who knowingly induced or received discriminatory prices from the
manufacturers in violation of the Robinson-

8
<PAGE> 12

Patman Act. Each complaint seeks unspecified treble damages, declaratory and
equitable relief and attorney's fees and expenses. All of these actions have
been transferred by the Judicial Panel for Multi-district Litigation to the
United States District Court for the Northern District of Illinois for
coordinated pretrial procedures. Caremark was not named in the class action. In
April 1995, the Court entered a stay of pretrial proceedings as to certain
Robinson-Patman Act claims in this litigation, including the Robinson-Patman Act
claims brought against Caremark, pending the conclusion of a first trial of
certain of such claims brought by a limited number of plaintiffs against five
defendants not including Caremark. On July 1, 1996, the district court directed
entry of a partial final order in the class action approving an amended
settlement with certain of the pharmaceutical manufacturers. The amended
settlement provides for a cash payment by the defendants in the class action
(which does not include Caremark) of approximately $351.0 million to class
members in settlement of conspiracy claims as well as a commitment from the
settling manufacturers to abide by certain injunctive provisions. All class
action claims against non-settling manufacturers as well as all opt out and
other claims generally, including all Robinson-Patman Act claims against
Caremark, remain unaffected by the settlement. The district court has scheduled
a trial of the remaining class action claims for the fall of 1998. It is
expected that trials of the remaining individual conspiracy claims will also
precede the trial of any Robinson-Patman Act claims. MedPartners intends to
defend these cases vigorously. Although management believes, based on
information currently available, that the ultimate resolution of this matter is
not likely to have a material adverse effect on the operating results and
financial condition of MedPartners, there can be no assurance that the ultimate
resolution of this matter, if adversely determined, would not have a material
adverse effect on the operating results and financial condition of MedPartners.

RISKS RELATING TO EXPOSURE TO PROFESSIONAL LIABILITY; LIABILITY INSURANCE

In recent years, physicians, hospitals and other participants in the
healthcare industry have become subject to an increasing number of lawsuits
alleging medical malpractice and related legal theories. Many of these lawsuits
involve large claims and substantial defense costs. Although the Company does
not engage in the practice of medicine or provide medical services, and does not
control the practice of medicine by its affiliated physicians or the compliance
with regulatory requirements directly applicable to the affiliated physicians
and physician groups, there can be no assurance that the Company will not become
involved in such litigation in the future. Through the ownership and operation
of the U.S. Family Care Medical Center, acute care hospital located in
Montclair, California, respectively, the Company could be subject to allegations
of negligence and wrongful acts by its hospital-based physicians or arising out
of providing nursing care, emergency room services, credentialing of medical
staff members and other activities incident to the operation of an acute care
hospital. In addition, through its management of clinic locations and provision
of non-physician healthcare personnel, the Company could be named in actions
involving care rendered to patients by physicians employed by or contracting
with affiliated medical organizations and physician groups.

The Company maintains professional and general liability insurance and
other coverage deemed necessary by MedPartners. Nevertheless, certain types of
risks and liabilities are not covered by insurance and there can be no assurance
that the limits of coverage will be adequate to cover losses in all instances.
In addition, the Company's practice management agreements require the affiliated
physicians to maintain professional liability and workers' compensation
insurance coverage on the practice and on each employee and agent of the
practice, and the Company generally is indemnified under each of the practice
management agreements by the affiliated physicians for liabilities resulting
from the performance of medical services. However, there can be no assurance
that a future claim or claims will not exceed the limits of these available
insurance coverages or that indemnification will be available for all such
claims. See "Business -- Corporate Liability and Insurance" in the Company's
10-K incorporated herein by reference.

GOVERNMENT REGULATION

Federal and state laws regulate the relationships among providers of
healthcare services, physicians and other clinicians. These laws include the
fraud and abuse provisions of the Medicare and Medicaid statutes, which prohibit
the solicitation, payment, receipt or offering of any direct or indirect
remuneration for the referral of patients covered by any federal healthcare
program, including Medicare and Medicaid, or for

9
<PAGE> 13

recommendation, leasing, arranging, ordering or purchasing of services covered
by any federal healthcare program, as well as laws that impose significant
penalties for false or improper billings for physician services. These laws also
impose restrictions on physicians' referrals for designated health services to
entities with which they have financial relationships. Violations of these laws
may result in substantial civil or criminal penalties for individuals or
entities, including large civil monetary penalties and exclusion from
participation in all federal healthcare programs. Such exclusion and penalties,
if applied to the Company's affiliated physicians, could result in significant
loss of reimbursement.

Moreover, the laws of many states, including California (from which a
significant portion of the Company's revenues are derived), prohibit physicians
from splitting fees with non-physicians and prohibit non-physician entities from
practicing medicine. These laws and their interpretations vary from state to
state and are enforced by the courts and by regulatory authorities with broad
discretion. As stated in Note 1 to the Consolidated Financial Statements of the
Company in the Company's Form 10-K incorporated herein by reference, the Company
believes that it has perpetual and unilateral control over the assets and
operations of the various affiliated professional corporations. There can be no
assurance that regulatory authorities will not take the position that such
control conflicts with state laws regarding the practice of medicine or other
federal restrictions. Although the Company believes its operations as currently
conducted are in material compliance with existing applicable laws, there can be
no assurance that the existing organization of the Company and its contractual
arrangements with affiliated physicians will not be successfully challenged as
constituting the unlicensed practice of medicine or that the enforceability of
the provisions of such arrangements, including non-competition agreements, will
not be limited. There can be no assurance that review of the business of the
Company and its affiliates by courts or regulatory authorities will not result
in a determination that could adversely affect their operations or that the
healthcare regulatory environmental will not change so as to restrict existing
operations or expansion thereof. In the event of action by any regulatory
authority limiting or prohibiting the Company or any affiliate from carrying on
its business or from expanding the operations of the Company and its affiliates
to certain jurisdictions, structural and organizational modifications of the
Company may be required, which could have a material adverse effect on the
operating results and financial condition of the Company.

In addition to the regulations referred to above, significant aspects of
the Company's operations are subject to state and federal statutes and
regulations governing workplace health and safety, the operation of pharmacies,
repackaging of drug products, dispensing of controlled substances and the
disposal of medical waste. The Company's operations may also be affected by
changes in ethical guidelines and operating standards of professional and trade
associations and private accreditation commissions such as the American Medical
Association and the Joint Commission on Accreditation of Healthcare
Organizations. Accordingly, changes in existing laws and regulations, adverse
judicial or administrative interpretations of such laws and regulations or
enactment of new legislation could have a material adverse effect on the
operating results and financial condition of the Company. See "-- Risks Relating
to Pharmacy Licensing and Operation".

Approximately 7% of the revenues in 1997 of the Company's affiliated
physician groups were derived from payments made by government-sponsored
healthcare programs (principally, Medicare and state reimbursed programs). As a
result, any change in reimbursement regulations, policies, practices,
interpretations or statutes could adversely affect the operations of the
Company. There are also state and federal civil and criminal statutes imposing
substantial penalties (including civil penalties and criminal fines and
imprisonment) on healthcare providers that fraudulently or wrongfully bill
governmental or other third-party payors for healthcare services. The Company
believes it is in material compliance with such laws, but there can be no
assurance that the Company's activities will not be challenged or scrutinized by
governmental authorities or that any such challenge or scrutiny would not have a
material adverse effect on the operating results and financial condition of the
Company.

Certain provisions of the Social Security Act, commonly referred to as the
"Anti-Kickback Statute", prohibit the offer, payment, solicitation, or receipt
of any form of remuneration in return for the referral of patients or patient
care opportunities, or in return for the recommendation, arrangement, purchase,
lease or order of items or services that are covered by any federal healthcare
program. Many states have adopted similar prohibitions against payments intended
to induce referrals of Medicaid and other third-party payor

10
<PAGE> 14

patients. The Anti-Kickback Statute contains provisions prescribing civil and
criminal penalties to which individuals or providers who violate such statute
may be subjected. The criminal penalties include fines up to $25,000 per
violation and imprisonment for up to five years or both. Additionally, the
Department of Health and Human Services (the "DHHS") has the authority to
exclude anyone, including individuals or entities, who has committed any of the
prohibited acts from participation in any federal healthcare program. If applied
to the Company or any of its subsidiaries or affiliated physicians, such
exclusion could result in a significant loss of reimbursement for the Company,
up to a maximum of the approximately 7% of the revenues of the Company's
affiliated physician groups, which could have a material adverse effect on the
operating results and financial condition of the Company. Although the Company
believes that it is not in violation of the Anti-Kickback Statute or similar
state statutes, its operations do not fit within any of the existing or proposed
federal safe harbors.

Significant prohibitions against physician referrals were enacted by the
federal Omnibus Budget Reconciliation Act of 1993. Subject to certain
exemptions, a physician or a member of his immediate family is prohibited from
referring Medicare or Medicaid patients to an entity providing "designated
health services" in which the physician has an ownership or investment interest
or with which the physician has entered into a compensation arrangement. While
the Company believes it is in compliance with such legislation, future
regulations could require the Company to modify the form of its relationships
with physician groups. Some states have also enacted similar self-referral laws,
and the Company believes it is likely that more states will follow. The Company
believes that its practices fit within exemptions contained in such statutes.
Nevertheless, expansion of the operations of the Company into certain
jurisdictions may require structural and organizational modifications of the
Company's relationships with physician groups to comply with new or revised
state statutes. Such structural and organization modifications could have a
material adverse effect on the operating results and financial condition of the
Company.

The Knox-Keene Health Care Service Plan Act of 1975 (the "Knox-Keene Act")
and the regulations promulgated thereunder subject entities which are licensed
as healthcare service plans in California to substantial regulation by the
California Department of Corporations (the "DOC"). In addition, licensees under
the Knox-Keene Act are required to file periodic financial data and other
information (which generally become available to the public), maintain
substantial tangible net equity on their balance sheets and maintain adequate
levels of medical, financial and operational personnel dedicated to fulfilling
the licensee's statutory and regulatory requirements. The DOC is empowered by
law to take enforcement actions against licensees that fail to comply with such
requirements. In March 1996, the DOC issued to MedPartners Provider Network,
Inc. (formerly Pioneer Provider Network, Inc. ("MPN")), a wholly-owned
subsidiary of the Company, a healthcare service plan license. MPN is a recently
created organization without an operating history, and there is no assurance
that the DOC will view MPN's operations to be fully in compliance with
applicable laws, including the Knox-Keene Act, and regulations. Any material
noncompliance could have a material adverse effect on the operating results and
financial condition of the Company.

RISKS RELATING TO PHARMACY LICENSING AND OPERATION

The Company is subject to federal and state laws and regulations governing
pharmacies. Federal controlled substance laws require the Company to register
its pharmacies with the United States Drug Enforcement Administration and comply
with security, record-keeping, inventory control and labeling standards in order
to dispense controlled substances. State controlled substance laws require
registration and compliance with the licensing, registration or permit standards
of the state pharmacy licensing authority. State pharmacy licensing,
registration and permit laws impose standards on the qualifications of the
applicant's personnel, the adequacy of its prescription fulfillment and
inventory control practices and the adequacy of its facilities. In general,
pharmacy licenses are renewed annually. Pharmacies must also satisfy state
licensing requirements. Any failure to satisfy such pharmacy licensing statutes
and regulations could have a material adverse effect on the operating results
and financial condition of the Company.

11
<PAGE> 15

RISKS RELATING TO HEALTHCARE REFORM; PROPOSED LEGISLATION

As a result of the continued escalation of healthcare costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been, and other proposals may be, introduced in the United States Congress
and state legislatures relating to healthcare reform. There can be no assurance
as to the ultimate content, timing or effect of any healthcare reform
legislation, nor is it possible at this time to estimate the impact of potential
legislation, which may be material, on the Company.

ANTI-TAKEOVER CONSIDERATIONS

Certain provisions of the Company's Third Restated Certificate of
Incorporation (the "Certificate of Incorporation"), the Company's Second Amended
and Restated Bylaws (the "Bylaws") and the Delaware General Corporation Law
("DGCL") could, together or separately, discourage potential acquisition
proposals, delay, or prevent a change in control of the Company. These
provisions include a classified Board of Directors and the issuance, without
further stockholder approval, of preferred stock with rights and privileges
which could be senior to the Company's Common Stock. The Company also is subject
to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. In
addition, the Company Rights Plan (as defined herein), which provides for
discount purchase rights to certain stockholders of the Company upon certain
acquisitions of 10% or more of the outstanding shares of the Company's Common
Stock, may also inhibit a change in control of the Company.

POSSIBLE VOLATILITY OF STOCK PRICE

There may be significant volatility in the market price for the Common
Stock. Quarterly operating results of the Company, changes in general conditions
in the economy, the financial markets or the healthcare industry, adverse
developments with respect to future acquisitions, or other developments
affecting the Company or its competitors, could cause the market price of the
Common Stock to fluctuate substantially. In addition, in recent years, the stock
market and, in particular, the healthcare industry segment, has experienced
significant price and volume fluctuations. This volatility has affected the
market prices of securities issued by many companies for reasons unrelated to
their operating performance. See "-- Risks Relating to Recent Developments".

12
<PAGE> 16

SELLING STOCKHOLDERS

The following table shows the names of the Selling Stockholders and the
number of shares of the Common Stock beneficially owned by them and to be sold
by them under this Prospectus as of the date of this Prospectus.

<TABLE>
<CAPTION>
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES PERCENT OF
BENEFICIALLY TO BE HELD COVERED BY OUTSTANDING SHARES
SELLING STOCKHOLDERS OWNED AFTER OFFERING THIS PROSPECTUS AFTER OFFERING
- -------------------- ------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Ballapuram Adhi(1)........................ 4,607 3,071 1,536 *
Larry B. Amacker, M.D.(3)................. 9,156 4,578 4,578 *
James Amontree(1)......................... 5,807 3,871 1,936 *
Maurice Azar(1)........................... 4,607 3,071 1,536 *
Issa F. Baroudi Trustee, Issa F. Baroudi
Trust(1)................................ 11,461 7,641 3,820 *
Elliott L. Betesh, M.D.(3)................ 2,861 1,430 1,431 *
Saligrama Bhat(1)......................... 9,266 6,177 3,089 *
Hal D. Bishop, M.D.(3).................... 9,156 4,578 4,578 *
Michael Brinson(1)........................ 7,815 5,210 2,605 *
Tina K. Burns, M.D.(3).................... 9,156 4,578 4,578 *
Ena Casanova(1)........................... 3,721 2,480 1,241 *
Luis Casanova(1).......................... 5,807 3,871 1,936 *
Thongadi and Suseela Chandrahasa(1)....... 4,607 3,071 1,536 *
Ki-Mun M. Chang, M.D.(3).................. 9,156 4,578 4,578 *
Benjamin H. Cheek(2)...................... 8,817 4,408 4,409 *
Steven Christesen(1)...................... 4,607 3,071 1,536 *
Thomas Civitella(1)....................... 6,823 4,548 2,275 *
Augustin Collado(1)....................... 5,807 3,871 1,936 *
Terrence Connelly(1)...................... 11,461 7,641 3,820 *
Donna M. Dabov, M.D.(3)................... 4,578 2,284 2,294
Janet W. Dellinger, M.D.(3)............... 9,156 4,578 4,578 *
Doctor's Essential Services, Inc.(6)...... 38,797 32,825 5,972 *
William R. Drewry(3)...................... 6,867 3,433 3,434 *
John W. Ellis, M.D.(3).................... 9,156 4,578 4,578 *
A. Robert Eschleman(1).................... 3,721 2,480 1,241 *
Freddie L. Everson, M.D.(3)............... 4,578 2,289 2,289 *
Thomas Fabian(1).......................... 3,721 2,480 1,241 *
Cynthia S. Fernandez(2)................... 8,817 4,408 4,409 *
Herschel Fischer, M.D.(5)................. 862,979 730,136 132,843 *
Jose Garcia(1)............................ 6,823 4,548 2,275 *
Janice L. Garrison, M.D.(3)............... 9,156 4,578 4,578 *
Ramon Gil(1).............................. 5,807 3,871 1,936 *
Chinnia Gnanashanmugam(1)................. 5,807 3,871 1,936 *
Michael Heagney(1)........................ 3,721 2,480 1,241 *
William A. and Anita S. Holt(1)........... 5,807 3,871 1,936 *
Karen E. Hopper, M.D.(3).................. 9,156 4,578 4,578 *
VNH Limited Partnership(1)................ 4,148 2,074 2,074 *
Terri L. Hyatt, M.D.(3)................... 9,156 4,578 4,578 *
Mazharul Islam(1)......................... 3,721 2,480 1,241 *
Mamoon Jarrah(1).......................... 9,266 6,177 3,089 *
David K. Jennings, M.D.(3)................ 9,156 4,578 4,578 *
John J. Johnson, M.D.(3).................. 9,156 4,578 4,578 *
Brinders Jones, M.D.(3)................... 5,150 2,575 2,575 *
Seth I. Kaufman, M.D.(3).................. 9,156 4,578 4,578 *
Marcus A. and Juana Lara(1)............... 6,823 4,548 2,275 *
Mario Lopez(1)............................ 11,461 7,641 3,820 *
Carlos and Maria Maas(1).................. 7,815 5,210 2,605 *
Bruce Macdonald(1)........................ 3,721 2,480 1,241 *
</TABLE>

13
<PAGE> 17

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

* Less than one percent.

(1) Indicates a Selling Stockholder who is or was an officer and/or director of
IMHC Management Inc., which may be deemed to be an affiliate of the Company
under the Securities Act.

(2) Indicates a Selling Stockholder who is or was an officer and/or director of
OB/GYN Associates of Columbus, which may be deemed to be an affiliate of the
Company under the Securities Act.

(3) Indicates a Selling Stockholder who is or was an officer and/or director of
HealthFirst Medical Group, P.C., which may be deemed to be an affiliate of
the Company under the Securities Act.

(4) Indicates a Selling Stockholder who is or was an officer and/or director of
Karl G. Mangold, Inc., which may be deemed to be an affiliate of the Company
under the Securities Act.

(5) Indicates a Selling Stockholder who is or was an officer and/or director of
Herschel Fischer, Inc., which may be deemed to be an affiliate of the
Company under the Securities Act.

(6) Indicates a Selling Stockholder who is or was an officer and/or director of
Doctor's Essential Services, Inc., which may be deemed to be an affiliate of
the Company under the Securities Act.

None of the Selling Stockholders listed above, except where noted, had any
position, office or material relationship within the past three years with the
Company or any of its affiliates.

14
<PAGE> 18

PLAN OF DISTRIBUTION

The Common Stock may be sold from time to time by the Selling Stockholders,
or by pledgees, donees, transferees or other successors in interest. Such sales
may be made on one or more exchanges or in the over-the-counter market or
otherwise or in negotiated transactions, at fixed prices which may be changed,
at market prices prevailing at the time of sale or at prices related to such
prevailing market price. The Common Stock may be sold directly to purchasers or
to or through underwriters, agents or broker-dealers by one or more of the
following: (a) a block trade in which the broker-dealer so engaged will attempt
to sell the Common Stock as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a
broker-dealer as principal and resale by such broker-dealer for its account; (c)
an exchange distribution in accordance with the rules of such exchange; (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (e) through the writing of options on the Common Stock. In
effecting sales, broker-dealers engaged by the Selling Stockholders may arrange
for other broker-dealers to participate in the resales.

Any underwriters, broker-dealers or agents may receive compensation in the
form of commissions, discounts or concessions from Selling Stockholders and/or
the purchasers of such shares for which such underwriters, broker-dealers or
agents may act as agents or to whom they sell as principals, or both (which
compensation as to a particular underwriter, broker-dealer or agent will be
negotiated prior to the sale and may be in excess of customary compensation).
Such underwriters, broker-dealers and agents and any other participating
underwriters, broker-dealers and agents may be deemed to be "underwriters"
within the meaning of the Securities Act. In connection with such sales, any
commission, discount or concession may be deemed to be an underwriting discount
or commission under the Securities Act. In addition, any securities covered by
this Prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus.

All costs, expenses and fees in connection with the registration of the
Common Stock will be borne by the Company. Commissions and discounts, if any,
attributable to the sales of the Common Stock will be borne by the Selling
Stockholders. The Selling Stockholders may agree to indemnify any broker-dealer
or agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act. The
Company and the Selling Stockholders have agreed to indemnify certain persons
including broker-dealers or agents against certain liabilities in connection
with the offering of the Common Stock, including liabilities arising under the
Securities Act.

EXPERTS

The consolidated financial statements of MedPartners, Inc. appearing in
MedPartners, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1997, have been audited by Ernst & Young LLP, as set forth in their reports
included therein and incorporated herein by reference. Such consolidated
financial statements referred to above are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon by Haskell Slaughter & Young, L.L.C.,
Birmingham, Alabama.

15
<PAGE> 19

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

There are hereby incorporated by reference in this Prospectus the following
documents, all of which were previously filed by the Company with the Commission
(File No. 0-27276):

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.

2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.

3. The Company's Proxy Statement on Schedule 14A filed May 1, 1998, in
connection with the Company's 1998 Annual Meeting of Stockholders.

4. The Company's Current Report on Form 8-K filed January 9, 1998 (relating
to the termination of the PhyCor Merger Agreements; certain fourth quarter
charges and estimates concerning fourth quarter earnings and 1998 operating
results).

5. The Company's Current Report on Form 8-K filed January 26, 1998
(reporting the filing of certain class action lawsuits filed against the
Company).

6. The description of securities to be registered contained in the
Registration Statement filed by the Company with the Commission on Form 8-B
under the Exchange Act and declared effective on November 29, 1995, including
any amendment or reports filed for the purpose of updating such description.

Additionally, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated by reference into
this Prospectus. Any statement contained in a previously filed document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or replaced, to constitute
a part of this Prospectus.

The Company undertakes to provide to any person to whom a copy of this
Prospectus has been delivered, upon the written or oral request of any such
person, without charge a copy of any or all of the documents which have been or
may be incorporated by reference into this Prospectus, other than exhibits to
such documents. Written or oral requests for such copies should be directed to
the Company, 3000 Galleria Tower, Suite 1000, Birmingham, Alabama 35244
(telephone (205) 733-8996).

16
<PAGE> 20

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

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF
COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
The Company........................... 3
Risk Factors.......................... 3
Selling Stockholders.................. 13
Plan of Distribution.................. 15
Experts............................... 15
Legal Matters......................... 15
Incorporation of Certain Documents by
Reference........................... 16
</TABLE>

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

503,997 SHARES

MEDPARTNERS (TM) LOGO
COMMON STOCK
PAR VALUE $.001 PER SHARE
------------

PROSPECTUS

JULY 27, 1998

------------
------------------------------------------------------
------------------------------------------------------
<PAGE> 21

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS.

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the shares of Common Stock, par
value $.001 per share (the "Common Stock"), offered hereby.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $1,310.23
---------
Legal Fees and Expenses..................................... 25,000
Accounting Fees............................................. 10,000
Printing Costs.............................................. 40,000
Miscellaneous Expenses...................................... 3,689.77
---------
Total............................................. 80,000
=========
</TABLE>

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

* Actual amount.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the General Corporation Law of Delaware ("DGCL")
grants corporations the right to limit or eliminate the personal liability of
their directors in certain circumstances in accordance with provisions therein
set forth. The Company's Third Restated Certificate of Incorporation contains a
provision eliminating or limiting director liability to the Company and its
stockholders for monetary damages arising from acts or omissions in the
director's capacity as a director. The provision does not, however, eliminate or
limit the personal liability of a director (i) for any breach of such director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under the Delaware statutory provision making directors personally
liable, under a negligence standard, for unlawful dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which the director
derived an improper personal benefit. This provision offers persons who serve on
the Board of Directors of the Company protection against awards of monetary
damages resulting from breaches of their duty of care (except as indicated
above). As a result of this provision, the ability of the Company or a
stockholder thereof to successfully prosecute an action against a director for a
breach of his duty of care is limited. However, the provision does not affect
the availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. The Commission has taken the
position that the provision will have no effect on claims arising under the
federal securities laws.

Section 145 of the DGCL grants corporations the right to indemnify their
directors, officers, employees and agents in accordance with the provisions
therein set forth. The Company's Second Amended and Restated By-laws provide for
mandatory indemnification rights, subject to limited exceptions, to any
director, officer, employee, or agent of the Company who, by reason of the fact
that he or she is a director, officer, employee, or agent of the Company, is
involved in a legal proceeding of any nature. Such indemnification rights
include reimbursement for expenses incurred by such director, officer, employee,
or agent in advance of the final disposition of such proceeding in accordance
with the applicable provisions of the DGCL.

The Company has agreed to indemnify all of its directors and executive
officers against liability incurred by them by reason of their services as a
director to the fullest extent allowable under applicable law. In addition, the
Company has purchased insurance containing customary terms and conditions as
permitted by Delaware law on behalf of its directors and officers, which may
cover liabilities under the Securities Act.

II-1
<PAGE> 22

ITEM 16. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- -----------
<C> <S> <C>
(4)-1 -- MedPartners, Inc. Rights Agreement, filed as Exhibit (4)-1
to the Company's Registration Statement on Form S-4
(Registration No. 33-00774), is hereby incorporated
herein by reference.
(4)-2 -- Amendment No. 1 to the Rights Plan of MedPartners, Inc.,
filed as Exhibit (4)-2 to the Company's Annual Report on
Form 10-K for the Year ended December 31, 1996, is hereby
incorporated herein by reference.
(4)-3 -- Amendment No. 2 to the Rights Agreement of MedPartners,
Inc., filed as Exhibit (4)-2 to the Company's
Registration Statement on Form S-3 (Registration No.
333-17339), is hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young L.L.C., as to the
legality of the Common Stock of the Company.
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately
following signature pages to the Registration Statement.
(23)-2 -- Consent of Haskell Slaughter & Young L.L.C. (included in the
opinion filed as Exhibit (5)).
(24) -- Powers of Attorney. See the signature pages to the original
filing of this Registration Statement.
</TABLE>

(b) Financial Statements Schedule:

None are applicable.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

(2) For the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the

II-2
<PAGE> 23

Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to Item 14 hereof, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

II-3
<PAGE> 24

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Birmingham, State of Alabama on July 27, 1998.

MEDPARTNERS, INC.

By /s/ EDWIN M. CRAWFORD

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

Edwin M. Crawford

President,

Chief Executive Officer

and Director

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>

* Chairman of the Board July 27, 1998
- -----------------------------------------------------
Richard M. Scrushy

/s/ EDWIN M. CRAWFORD President, Chief July 27, 1998
- ----------------------------------------------------- Executive Officer
Edwin M. Crawford and Director

* Executive Vice President and July 27, 1998
- ----------------------------------------------------- Chief Financial Officer
James H. Dickerson, Jr. (Principal Financial and
Accounting Officer)

* Director July 27, 1998
- -----------------------------------------------------
Larry D. Striplin, Jr.

* Director July 27, 1998
- -----------------------------------------------------
Charles W. Newhall III

* Director July 27, 1998
- -----------------------------------------------------
Ted H. McCourtney

* Director July 27, 1998
- -----------------------------------------------------
Walter T. Mullikin, M.D.

* Director July 27, 1998
- -----------------------------------------------------
John S. McDonald, J.D.

* Director July 27, 1998
- -----------------------------------------------------
Michael D. Martin

* Director July 27, 1998
- -----------------------------------------------------
Rosalio J. Lopez, M.D.
</TABLE>

II-4
<PAGE> 25

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>

* Director July 27, 1998
- -----------------------------------------------------
C.A. Lance Piccolo

* Director July 27, 1998
- -----------------------------------------------------
Roger L. Headrick

* Director July 27, 1998
- -----------------------------------------------------
Harry M. Jansen Kraemer, Jr.

*By: /s/ EDWIN M. CRAWFORD
------------------------------------------------
Edwin M. Crawford
Attorney-in-fact
</TABLE>

II-5
<PAGE> 26
EXHIBIT (23)-1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3,No.333-53761) and the related Prospectus
of MedPartners, Inc. for the registration of shares of its Common Stock and the
incorporation by reference therein of our report dated March 13, 1998, with
respect to the consolidated financial statements of MedPartners, Inc. for the
year ended December 31, 1997, included in its Annual Report on Form 10-K for the
year ended December 31, 1997, and filed with the Securities Exchange Commission.

ERNST & YOUNG LLP

Birmingham, Alabama
July 27, 1998

<PAGE> 27

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- -------- ----------- ------------
<C> <S> <C> <C>
(4)-1 -- MedPartners, Inc. Rights Agreement, filed as Exhibit (4)-1
to the Company's Registration Statement on Form S-4
(Registration No. 333-00774), is hereby incorporated by
reference herein.
(4)-2 -- Amendment No. 1 to the Rights Plan of MedPartners, Inc.,
filed as Exhibit (4)-2 to the Company's Annual Report on
Form 10-K for the Year ended December 31, 1996, is hereby
incorporated herein by reference.
(4)-3 -- Amendment No. 2 to the Rights Agreement of MedPartners,
Inc., filed as Exhibit (4)-2 to the Company's
Registration Statement on Form S-3 (Registration No.
333-17339), is hereby incorporated herein by reference.
(5) -- Opinion of Haskell Slaughter & Young L.L.C., as to the
legality of the Common Stock of the Company
(23)-1 -- Consent of Ernst & Young LLP. See pages immediately
following signature pages to the Registration Statement.
(23)-2 -- Consent of Haskell Slaughter & Young L.L.C. (included in the
opinion filed as Exhibit (5)).
(24) -- Powers of Attorney. See the signature pages to the original
filing of this Registration Statement.
</TABLE>

<PAGE> 1
EXHIBIT 5

[HASKELL SLAUGHTER & YOUNG, L.L.C. LETTERHEAD]

LAW OFFICES
HASKELL SLAUGHTER & YOUNG, L.L.C.
1200 AMSOUTH/HARBERT PLAZA
1901 SIXTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203-2618

FACSIMILE (205) 324-1133
TELEPHONE (205) 251-1000

MONTGOMERY OFFICE
305 SOUTH LAWRENCE STREET
MONTGOMERY, ALABAMA 36104
POST OFFICE BOX 4660
MONTGOMERY, ALABAMA 36103-4660
FACSIMILE (334) 264-7945
TELEPHONE (334) 265-8573

PLEASE REPLY TO: BIRMINGHAM

July 27, 1998

MedPartners, Inc.
3000 Galleria Tower, Suite 1000
Birmingham, Alabama 35244

RE: MEDPARTNERS, INC.--
REGISTRATION STATEMENT ON FORM S-3
(OUR FILE NO. 48367-083)

Gentlemen:

We have served as counsel for MedPartners, Inc., a Delaware
corporation (the "Company" or the "Issuer"), in connection with the registration
under the Securities Act of 1933, as amended, of an aggregate of 503,997 shares
(the "Shares") of the Company's authorized Common Stock, par value $.001 per
share for the account of certain selling stockholders pursuant to Amendment No.
1 to the Company's Registration Statement on Form S-3 (Commission File No.
333-53761) filed with the Securities and Exchange Commission on July 27, 1998
(the "Registration Statement"). This opinion is furnished to you pursuant to the
requirements of Form S-3.

In connection with this opinion, we have examined and are familiar
with originals or copies (certified or otherwise identified to our
satisfaction) of such documents, corporate records and other instruments
relating to the incorporation of the Company and the authorization and issuance
of the Shares as we have deemed necessary and appropriate.

Based upon the foregoing, and having regard for such legal
considerations as we have deemed relevant, it is our opinion that:

1. The Shares have been duly authorized and issued; and

<PAGE> 2

MedPartners, Inc.
July 27, 1998
Page 2

2. Upon sale and delivery of the Shares as contemplated in the
Registration Statement, the Shares will be legally issued, fully paid and
nonassessable.

We do hereby consent to the reference to our Firm under the heading
"Legal Matters" in the Prospectus which forms a part of the Registration
Statement, and to the filing of this opinion as an Exhibit thereto.

Very truly yours,

HASKELL SLAUGHTER & YOUNG, L.L.C.

By/s/Robert E. Lee Garner
-----------------------
Robert E. Lee Garner