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PROSPECTUS SUPPLEMENT NO. 55 Filed pursuant to Rule 424(b)(3)
To the Prospectus dated January 24, 1997, Registration No.: 333-01926
As Supplemented to Date
8,000 Shares
of
Class B Common Stock of Doctors Health, Inc.
This Prospectus Supplement No. 55 relates to the issuance by Doctors
Health, Inc., a Maryland corporation ("Doctors Health") of 8,000 shares of its
Class B Common Stock, par value $.01 per share (the "Class B Common Stock")
pursuant to the Primary Care Participation Agreement (the "Participation
Agreement") to be entered into between Gerald Family Care, P.C. ("Physician"),
and Doctors Health. This Prospectus Supplement should be read in conjunction
with the Prospectus dated January 24, 1997, the Prospectus Supplement No. 26
(Shareholders Letter Agreement), the Prospectus Supplement No. 29 which contains
the Company's Annual Report on Form 10-K for the period ended June 30, 1997, and
the Prospectus Supplement No. 46 (Current Report on Form 8-K)..
Doctors Health's principal executive office is located at 10451 Mill Run
Circle, Tenth Floor, Owings Mills, Maryland 21117, telephone number (410)
654-5800.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OF ANY
PERSON TO EXCHANGE OR SELL, OR A SOLICITATION FROM ANY PERSON OF AN OFFER TO
EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT, OR
THE SOLICITATION OF A PROXY FROM ANY PERSON, IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF THE SECURITIES TO WHICH THIS
PROSPECTUS SUPPLEMENT RELATES SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED THEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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See "Risk Factors" referred to on page S-2 hereof for certain information
that should be considered in connection with an investment in securities of
Doctors Health.
The date of this Prospectus Supplement is October 31, 1997.
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RISK FACTORS
Financial Performance of Doctors Health
Doctors Health has a limited operating history and for the fiscal years
ended June 30, 1996 and 1997 recorded a net loss of $7.2 million and $16.2
million, respectively. Doctors Health is likely to record a net loss for the
fiscal year ending June 30, 1997. There can be no assurance that after the
Closing Date Doctors Health will earn operating profits.
Risk Factors set forth in the Prospectus dated January 24, 1997
The Risk Factors set forth in the Prospectus are incorporated herein by
reference and should be read carefully by investors.
PROPOSED PRIMARY CARE PARTICIPATION AGREEMENT
The following description of the transactions contemplated by the
Participation Agreement does not purport to be complete and is qualified in its
entirety by reference to the Participation Agreement, a copy of which is
attached to this Prospectus Supplement as Annex A and is incorporated herein.
Physician is urged to read the Participation Agreement in its entirety.
General
Pursuant to the Participation Agreement, (i) Physician agrees to
participate in the managed care agreements that Doctors Health enters into with
Payors who have contracted with Doctors Health with respect to HMO managed care
products ("Doctors Health HMO Plans"), (ii) Physician agrees to provide eligible
persons who elect to enroll in Doctors Health HMO Plans (each, a "Doctors Health
HMO Member") with those primary care services customarily provided by primary
care physicians, as may be required by the Doctors Health HMO Plans, (iii)
Physician will be paid cash in the amount of $60,000 upon execution of the
Participation Agreement and satisfactory completion of credentialling of
Physician by Doctors Health, and (iv) Doctors Health will issue to the Physician
8,000 shares of its Class B Common Stock.
Access to Doctors Health Services; Credentialling
Pursuant to the Participation Agreement, Doctors Health agrees to provide
to Physician, once Physician has 100 Doctors Health Members in his medical
practice and at no cost to Physician, access to the managed care component of
Doctors Health's information system, which offers patient registration, referral
tracking and management and data management capabilities. Doctors Health will
also undertake to credential Physician, at no cost to Physician. Pursuant to
the Participation Agreement, Physician agrees to cooperate with the Doctors
Health credentialling and review process at no cost to Physician.
Exclusive IPA Arrangement
Pursuant to the Participation Agreement, Physician agrees to participate in
the managed care agreements that Doctors Health enters into with Doctors Health
HMO Plans. Physician is required pursuant to the Participation Agreement to
cooperate with Doctors Health in accepting Doctors Health HMO Members under the
Doctors Health HMO Plans, and agrees not to participate or contract with any
other HMO or other payor offering managed care or other risk-type plans directly
or indirectly; provided, however, that if Doctors Health chooses not to pursue a
contract with an identified HMO or is unable to negotiate such a contract within
a commercially reasonable time period, Physician shall be free to pursue a
contract with the identified HMO.
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Capitation Rates; Bonus Pool
The Participation Agreement provides that Doctors Health will determine the
commercial and Medicare primary care base capitation rates using their good
faith best efforts to reflect the prevailing market rate for the county and city
in which Physician provides covered services (the "Primary Care Base Capitation
Rates"). The Primary Care Base Capitation Rates may be adjusted for age and sex
of the Doctors Health HMO members. The Primary Care Base Capitation Rate shall
be adjusted by an amount up to ten percent each based upon (i) a formula for
Commercial HMO Members taking into account certain factors as capitation panel
size, Doctors Health membership growth, scheduled office hours and service and
medical care coordination considerations; and (ii) a formula for Medicare HMO
Members taking into account the number of HMO Members served by Physician's
medical practice. The Commercial and Medicare formulas are set forth on Exhibit
D-21 of the Participation Agreement. All payments of the Primary Care Base
Capitation Rates will be made by Doctors Health directly to Physician, by the
fifth day of the month for the prior month's enrollment. Physician agrees
pursuant to the Participation Agreement not to seek or collect or accept any
reimbursement from Doctors Health HMO Members or the Doctors Health HMO Plans
for any covered services provided to Doctors Health HMO Members, except for
copayments and coinsurance.
The Participation Agreement also provides that Physician may participate in
a bonus pool established by Doctors Health's affiliated physicians. The amount
of bonus awards are determined according to Doctors Health's primary care bonus
system, rewarding high clinical quality, appropriate utilization, patient
satisfaction and retention and the extent of cooperation with other
participating physicians, and Doctors Health. Based upon these factors,
Physician may receive a bonus based upon the surplus generated in Physician's
panel of Doctors Health HMO Members, after managed care expenses, up to a
maximum of 25% of all Primary Care Base Capitation payments received by
Physician that year or the limits provided by applicable health care
regulations. Bonus awards for a calendar year, if any, will be paid by April of
the following year. There can be no assurance that a bonus will be paid in any
given year or, if paid, as to the amount of any bonus. A copy of Doctors
Health's bonus system for primary care physicians is on file at the offices of
Doctors Health and will be made available at the request of Physician.
Obligations of Physician
Pursuant to the Participation Agreement, Physician agrees to abide by and
comply with the relevant provisions of the agreements between Doctors Health and
the Doctors Health HMO Plans. Doctors Health will provide Physician with all
relevant provisions that may apply to such Physician. In such connection, the
Participation Agreement provides that Physician shall work cooperatively and in
good faith with Doctors Health and the other Doctors Health affiliated
physicians providing services to the Doctors Health HMO members. Physicians are
required to (i) prepare and maintain customary medical records for services
provided to Doctors Health HMO Members and provide Doctors Health with access to
such records without charge, (ii) comply with and accept the payment conditions
of the Participation Agreement, (iii) comply with managed care medical standards
adopted by Doctors Health affiliated physicians as part of the arrangements with
the Doctors Health HMO Plans, and (iv) cooperate with Doctors Health's efforts
to contact eligible Medicare and adult medicine patients in Physician's
practice, including providing mailing lists and the use of Physician's name in
correspondence, and (v) sign and submit in a timely manner authorizations,
consents, encounter data and other forms adopted by Doctors Health.
Pursuant to the Participation Agreement, Physician will own and operate all
aspects of his medical practice and will remain responsible for all operations
of the medical practice, including all patient treatment decisions and employee,
office, lease and financial affairs. Doctors Health is not engaged in the
practice of medicine and will not interfere in any patient treatment decisions.
The Participation Agreement provides an agreement by Physician not to
differentiate or discriminate in
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the treatment of patients as to the quality of services delivered because of
race, sex, age, religion, place of residence, health status or source of
payment. Physician is required to make arrangements for 24 hour, seven day per
week coverage to Doctors Health HMO Members through other primary care
physicians who participate in the Doctors Health provider network.
Doctors Health will provide to Physician a list of other physicians and
other health care providers who provide medical services in the Doctors Health
provider network. Other than in cases of a bona fide emergency, the
Participation Agreement requires Physician to utilize the Doctors Health
provider network when arranging for additional medical services required by
Doctors Health HMO Members. Doctors Health may use Physician's name, specialty,
telephone number and business location in marketing, descriptive and other
information relating to the Doctors Health HMO Plans. The Participation
Agreement provides that Physician may be precluded from participating in a
Doctors Health HMO product by one of the Doctors Health HMO Plans. In such
event, Doctors Health will notify Physician, in writing, within 30 days of
learning of such an action, and will assist Physician, if requested, in seeking
to overturn such an action.
Existing Primary Care Capitation Contracts
The Participation Agreement provides that if Physician is a party, directly
or indirectly, to any primary care capitation contract, Physician must notify
Doctors Health of such contract and must use his commercially reasonable best
efforts to assist Doctors Health in replacing such contract with a Doctors
Health HMO Plan, provided that the payment terms of such Doctors Health HMO Plan
are at or above the payment terms of such existing contract.
Quality Assurance/Utilization Review Programs
Pursuant to the Participation Agreement, Physician will participate in all
utilization review, quality assurance and credentialling programs operated by
Doctors Health to assure or improve the quality and effective utilization of
health care services to the Doctors Health HMO Members. In such connection,
Physician agrees (i) not to hold Doctors Health or any other participants in
such quality assurance/utilization review programs responsible for reasonable
recommendations made or actions taken in good faith with respect to Physician,
and (ii) to participate in all programs developed by Doctors Health that are
designed to resolve Doctors Health HMO Member grievances.
Doctors Health Protocols
Pursuant to the Participation Agreement, Physician agrees to follow the
protocols and practice procedures which have been developed by Doctors Health's
affiliated physicians which are applicable to physician participants in the
Doctors Health provider network. In such connection, if Physician should ever
deem any aspect of such protocols to be medically inappropriate or otherwise
inappropriate for utilization, Physician may notify Doctors Health in writing
with sufficient specificity to enable Doctors Health to respond to Physician's
concerns.
Term; Termination
The Participation Agreement will terminate five years from its effective
date unless earlier terminated pursuant to its terms.
Doctors Health may terminate the Participation Agreement by notice in
writing to Physician (i) if Physician materially breaches the Participation
Agreement and such breach continues for 30 days after written notice is given to
Physician by Doctors Health specifying the nature of such breach, or (ii) for
"good cause." The Participation Agreement defines "good cause " to mean the
occurrence of any one of the following: (a) Physician's membership in any
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professional organization is terminated for cause related to professional
conduct, or Physician resigns from any professional organizations under the
threat of disciplinary action for professional conduct, (b) Physician is
indicted for a charge of committing a felony or any misdemeanor involving moral
turpitude, (c) Physician fails to comply with rules, regulations and policies
imposed with regard to Medicare programs or fails to preserve his or her
eligibility to participate in Medicare programs, (d) physician fails to comply
with any material Doctors Health protocols, (e) Physician takes any action which
puts a Doctors Health HMO Member's health at risk, or (f) Physician loses his or
her license or certificate to practice medicine.
Physician may terminate the Participation Agreement upon 90 days written
notice to Doctors Health if Doctors Health fails to perform its obligations to
Physician to pay any amounts required to be paid by Doctors Health to Physician.
Maintenance of Liability Insurance
The Participation Agreement provides that Physician must maintain, at his
expense, general and professional liability insurance coverage of not less than
$1 million per claim and $3 million per year. Physician is required pursuant to
the Participation Agreement to provide Doctors Health with copies of such
policies or other evidence of compliance with such insurance requirements and is
required to notify Doctors Health of any changes or cancellations to any such
policy. In the event of a cancellation of a policy, Physician is required to
purchase an extension of coverage endorsement within 10 days of written notice
of discontinuance and must provide Doctors Health with a copy of such
endorsement. Pursuant to the Participation Agreement, Physician must also
notify Doctors Health promptly when any patient of Physician files a claim or
any notice of intent to commence legal action alleging professional negligence
against Physician, or of the settlement of any such claim, or if a judgment is
entered against Physician in any such claim.
RESALE OF CLASS B COMMON STOCK
The shares of Class B Common Stock offered by this Prospectus Supplement
have been registered under the Securities Act of 1933, as amended. The shares
will be subject to the Stockholders Agreement attached hereto as Annex B and
therefore, will not be freely transferable. In addition, there is no public
market for the Class B Common Stock.
LEGAL MATTERS
The validity of the Class B Common Stock offered hereby have been passed
upon for the Company by Venable, Baetjer and Howard, LLP, Baltimore, Maryland.
ANNEXES
Annex A - Participation Agreement between Doctors Health, Inc. and Gerald
Family Care, P.C.
Annex B - Shareholders Letter Agreement, delivered to Physician as
Prospectus Supplement No. 26
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