<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
==============
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File Number 33-22011-A
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
---------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Florida 59-2858209
------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
4900 North Habana Ave., Tampa,FL 33614
-------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code: (813) 870-4230
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at June 30, 1996
Common stock, par value $1.00 per share 448 shares
- --------------------------------------- ----------
Documents incorporated by reference
NONE
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TABLE OF CONTENTS
FORM 10-QSB QUARTERLY REPORT - June 30, 1996
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements 3 - 9
Item 2. Management's Discussion and Analysis or
Plan of Operation 10 - 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13 - 16
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security
Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
2
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
---------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 656,866 $ 643,988
Distributions receivable from investments 133,520 44,000
Prepaid expenses 2,685 8,038
---------- ----------
TOTAL CURRENT ASSETS 793,071 696,026
Equity investments 689,811 690,956
Other investments, noncurrent 20,000 20,000
---------- ----------
TOTAL ASSETS $1,502,882 $1,406,982
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 25,563 $ 18,625
Income taxes payable 8,324 22,156
---------- ----------
TOTAL CURRENT LIABILITIES 33,887 40,781
Deferred income taxes 35,518 35,518
Stockholders' equity:
Common stock, $1 par value, 7,500 shares
authorized, 429 shares issued and
outstanding at June 30, 1996 and 422 shares
issued and outstanding at December 31, 1995 429 422
Common stock subscribed, 19 shares at June 30,
1996 and 5 shares at December 31, 1995 19 5
Subscriptions receivable (53,800) (10,000)
Additional paid-in capital 752,808 685,477
Retained earnings 734,021 654,779
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,433,477 1,330,683
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,502,882 $1,406,982
========== ==========
</TABLE>
The accompanying notes
are an integral part of these financial statements.
3
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the six For the six For the three For the three
months ended months ended months ended months ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Equity in net earnings
of investees $93,855 $20,025 $63,004 $ 5,020
Distribution income 77,040 61,690 38,520 34,190
------- ------- ------- -------
170,895 81,715 101,524 39,210
Expenses:
General and administrative 61,084 51,476 38,814 28,448
------- ------- ------- -------
Operating income 109,811 30,239 62,710 10,762
Interest income 12,099 9,749 5,942 4,966
------- ------- ------- -------
Income before income taxes 121,910 39,988 68,652 15,728
Income taxes (42,668) (5,998) (24,028) (2,359)
------- ------- ------- -------
Net income $79,242 $33,990 $44,624 $13,369
------- ------- ------- -------
Net income per common share $ 187 $ 87 $ 105 $ 34
======= ======= ======= =======
Weighted average shares outstanding
and subscribed 424.7 389.5 426.7 389.0
======= ======= ======= =======
</TABLE>
The accompanying notes
are an integral part of these financial statements.
4
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, 1996 June 30, 1995
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 79,242 $ 33,990
Adjustments to reconcile net income
to net cash used in operating activities:
Equity in net earnings of investees (93,855) (20,025)
Distribution income (77,040) (61,690)
Changes in operating assets and liabilities:
Prepaid expenses 5,353 5,375
Accrued expenses 6,938 688
Income taxes payable (13,832) (27,052)
-------- --------
Net cash used in operating activities (93,194) (68,714)
INVESTING ACTIVITIES
Distributions received 82,520 67,320
-------- --------
Net cash provided by investing activities 82,520 67,320
FINANCING ACTIVITIES
Proceeds from issuance of common stock 26,600 28,000
Redemptions of common stock (3,048) (2,626)
-------- --------
Net cash provided by financing activities 23,552 25,374
-------- --------
Increase in cash and cash equivalents 12,878 23,980
Cash and cash equivalents at beginning of period 643,988 473,781
-------- --------
Cash and cash equivalents at end of period $656,866 $497,761
======== ========
</TABLE>
The accompanying notes
are an integral part of these financial statements
5
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
The financial statements included herein have been prepared by St. Joseph's
Physician Associates, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments necessary to present fairly the financial position of the
Company as of June 30, 1996 and December 31, 1995, and the results of its
operations and its cash flows for the three months and six months ended June
30, 1996 and 1995.
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
The Company was organized on November 20, 1987 as a Florida corporation. The
Company was organized to establish and operate an association of qualified
physicians for the purpose of engaging directly or indirectly in health care
related ventures.
In February 1989, the Company acquired 2,500 shares of the common stock of St.
Joseph's Physicians-Healthcenter Organization, Inc. (the "PHO") for $20 per
share. The 2,500 shares represent 50% of the outstanding common stock of the
PHO. The remaining 2,500 common shares of the PHO are owned by St. Joseph's
Enterprises, Inc., which also owns 100% of the PHO's 6,250 preferred shares.
The Company earns equity in the net earnings of the PHO at 22.22% of the PHO's
earnings after deducting a 6% cumulative dividend for the 6,250 preferred
shares. The PHO was organized for the purpose of engaging directly or
indirectly in health care related ventures.
In June 1989, the Company acquired 4,000 shares of the common stock in
Hospitals' Home Health Care of Hillsborough County, Inc. d/b/a St. Joseph's
Home Health Services ("HHC") for $10 per share. The 4,000 shares represent 50%
of the outstanding common stock of HHC. HHC was organized for the purpose of
providing medical services to patients in the home environment.
Equity Investments
The Company accounts for its investments in the PHO and HHC on the equity
method. Accordingly, these investments have been stated in the accompanying
balance sheets at the cost of acquisition plus the Company's equity in the
undistributed earnings/losses since acquisition, less distributions to the
Company. None of the assets or liabilities of the investments are included in
the balance sheets except to the extent of the Company's interests in the
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NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (con't):
Equity Investments (con't)
underlying net assets included in equity investments. The excess of the cost
of acquisition of the investment in HHC over the Company's interest in the
underlying net liabilities at the date of acquisition was $84,264 and is being
amortized as a component of equity in net earnings of investees over forty
years. As of June 30, 1996, the unamortized excess cost of acquisition of the
investment in HHC was $69,521. The Company's net earnings/losses resulting
from its proportionate share of the investees' revenues and expenses are
included in the statement of income.
Other Investments, Noncurrent
The Company owns five limited partnership units in St. Joseph's Same-Day
Surgery Center, Ltd. ("SDS"). The investment is accounted for at cost due to
the limited percentage interest in the partnership and inability to exercise
significant influence over the partnership. Distributions are recorded as
income when declared and reported as distribution income.
Subscriptions Receivable
Subscriptions receivable relate to agreements to purchase common stock of the
Company. Funds relating to such purchases were received after June 30, 1996 or
will be paid in installments during 1996, 1997, and 1998.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of
three months or less when purchased to be cash equivalents.
Income Per Common Share
Income per common share is based on the weighted average number of common
shares outstanding during the period.
NOTE 2 - RELATED PARTIES:
The members of the Board of Directors of the Company are also members of the
medical staff of St. Joseph's Hospital, Inc., which is owned by St. Joseph's
Health Care Center, Inc. St. Joseph's Health Care Center, Inc. provides
administrative support to the Company at no charge. Additionally, all limited
partner investors in PHO's ventures are investors in the Company. In addition,
all physicians who hold provider contracts with a subsidiary of the PHO are
investors in the Company.
7
<PAGE> 8
NOTE 2 - RELATED PARTIES (con't):
On October 1, 1991, the Company hired an executive director to provide and
facilitate the efficient operations of the Company. Prior to April 29, 1996,
the executive director was a member of the Company's Board of Directors. Under
the terms of a funding agreement dated October 1, 1991, the PHO agreed to
reimburse the Company for compensation paid to the executive director up to the
limits set forth in the Executive Director Agreement. The funding agreement
was terminated by the PHO effective January 1, 1996. Accordingly, the Company
is responsible for paying the compensation of the executive director without
reimbursement from the PHO. For the three months and six months ended June 30,
1996, $10,000 and $20,000, respectively, of compensation and reimbursement was
paid or accrued.
8
<PAGE> 9
NOTE 3 - EQUITY INVESTMENTS:
A summary of the changes in equity investments is presented below:
<TABLE>
<CAPTION>
HHC PHO Total
-------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1995 $589,486 $101,470 $690,956
Equity in net earnings of investees 72,031 21,824 93,855
Dividend distribution declared but
not yet paid (95,000) 0 (95,000)
-------- -------- --------
Balance at June 30, 1996 $566,517 $123,294 $689,811
</TABLE>
The condensed balance sheets of the equity investees are as follows:
<TABLE>
<CAPTION>
Balance Sheets June 30, 1996 December 31, 1995
---------------------- ----------------------
HHC PHO HHC PHO
---------- -------- ---------- --------
(unaudited)
Assets:
<S> <C> <C> <C> <C>
Currents assets $1,904,118 $478,214 $1,873,999 $337,592
Noncurrent assets 43,414 251,018 9,217 274,867
---------- -------- ---------- --------
Total assets $1,947,532 $729,232 $1,883,216 $612,459
========== ======== ========== ========
Liabilities and stockholders'
equity:
Current liabilities $ 594,837 $163,642 $ 676,697 $152,267
Long-term liabilities 168,697 0 168,697 0
Stockholders' equity 1,183,998 565,590 1,037,822 460,192
---------- -------- ---------- --------
Total liabilities and
stockholders' equity $1,947,532 $729,232 $1,883,216 $612,459
========== ======== ========== ========
</TABLE>
The condensed statements of income of the equity investees are as follows:
<TABLE>
<CAPTION>
For the 6 Months Ended For the 3 Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------- --------- ---------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Statement of Income - HHC
Revenues $1,409,338 $ 898,333 $ 766,475 $ 413,748
Expenses 1,207,237 775,023 632,508 365,909
---------- --------- ---------- ---------
202,101 123,310 133,967 47,839
Income tax provision 55,925 31,339 45,706 16,993
---------- --------- ---------- ---------
Net income $ 146,176 $ 91,971 $ 88,261 $ 30,846
========== ========= ========== =========
Statement of Income - PHO
Equity in partnership earnings $ 49,556 $ 54,266 $ 27,281 $ 26,756
Other revenues 174,604 22,321 165,206 10,248
Expenses 78,366 180,506 63,249 77,386
---------- --------- ---------- ---------
145,794 (103,919) 129,238 (40,382)
Income tax provision 43,828 262 40,048 0
---------- --------- ---------- ---------
Net income(loss) $ 101,966 $(104,181) $ 89,190 $ (40,382)
========== ========= ========== =========
</TABLE>
9
<PAGE> 10
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
PART I - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
June 30, 1996
Liquidity
Cash resources of the Company increased by $12,878 during the first six months
of 1996 and $23,980 during the same time period in 1995. Cash resources
resulted from the quarterly distributions received with respect to the five
limited partnership units in St. Joseph's Same-Day Surgery Center, Ltd. ("SDS")
and proceeds from the sale of additional common stock, offset by expenditures
for operating expenses and estimated tax payments. A smaller increase in cash
resources was realized in 1996 compared to 1995 due to the termination of the
PHO agreement to reimburse the compensation paid to the Executive Director of
the Company effective January 1, 1996 (See Note 2 to the Financial Statements)
and the payment during 1996 of the Executive Director compensation without
reimbursement from the PHO.
On May 26, 1995, St. Joseph's Health Network, Inc. ("SJHN"), a 100%-owned
subsidiary of the St. Joseph's Physicians-Healthcenter Organization, Inc. (the
"PHO"), was incorporated. SJHN, a physician-hospital organization, will
negotiate at-risk products with managed care organizations on behalf of its
membership to provide high quality, competitively priced health care services
for persons residing or employed in the Tampa area. In the near future, the
Company might find it appropriate to assist the PHO with providing additional
capitalization for SJHN. The amount of funding, if any, has not been
determined at this time. However, the Company's contribution to such funding
would be determined taking into account the Company's available liquidity and
its other anticipated cash needs. Additional liquidity for SJHN is expected to
be received from other sources, including possibly from provider credentialing
fees, additional equity contributions from the PHO and/or other sources, and/or
borrowings.
During the second quarter of 1996, the Board of Directors of Hospitals' Home
Health Care of Hillsborough County, Inc. ("HHC") declared a dividend in the
amount $95,000 to be paid to the Company during the third quarter of 1996. On
June 30, 1996, a $38,520 distribution with respect to the five SDS limited
partnership units was declared and will be received during the third quarter of
1996. In addition, proceeds of $37,200 from the sale of additional SJPA common
stock is expected to be received during the third quarter of 1996.
10
<PAGE> 11
Management believes that current cash reserves, additional distributions with
respect to the five SDS limited partnership units, the distribution from HHC,
as well as the proceeds of additional sales of its common stock will provide
adequate short-term funding of the Company's on-going operations. However,
because of the PHO's decision to no longer fund the Executive Director's
compensation and the Company's decision to use its other cash flows to keep the
employment arrangement with the Executive Director in force and effect, it is
possible that the Company will not be in a position to fund new projects that
could arise in the future.
Capital Resources
From time to time, the Company may find it appropriate to pursue additional
private offerings of its common stock. On June 30, 1996, the Company completed
a private offering in which subscriptions for 22 shares of common stock at
$3,200 per share were received. Although there can be no assurance, the
Company does not anticipate substantial difficulty in raising additional funds,
should the need arise.
Results of Operations
Equity in net earnings of investees is the result of the Company's investment in
the PHO and HHC. As a result of an increase in the profitability of the PHO and
HHC, the equity in net earnings has increased during the second quarter and the
first six months of 1996, as compared to the same time period in 1995. The
increase in the profitability of the PHO is a result of a decrease in the
significant expenditures for the evaluation and implementation of new ventures
and the recognition of provider member fees associated with SJHN. The increased
profitability of HHC is the result of a significant increase in intravenous
("I.V.") therapy revenue in 1996, as compared to 1995.
The Company owns five SDS limited partnership units and receives quarterly
distributions on such units. Distribution income for the second quarter and
the first six months of 1996 was higher than the same period in 1995. The
distribution was calculated by taking into account anticipated operating cash
needs of SDS with the intent of maintaining appropriate reserves.
Interest earnings represent interest on bank deposits. The increase between
1996 and 1995 is due to increased cash balances and an increase in interest
rates.
General and administrative expenses increased during the second quarter and
first six months of 1996 as compared to the same time periods of 1995.
Expenditures incurred in the second quarter and
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first six months of 1995 for consulting services relating to the evaluation of
new ventures and for legal expenses for legislative activities have not been
incurred in 1996 . However, additional expenditures have been made relating to
legal fees for assistance with long range planning, revision of the Right of
First Refusal document, preparation of Escrow Agreement documents relating to
the St. Joseph's Diagnostic Center, Ltd. divestiture, and the unreimbursed
compensation of the Executive Director (prior to January 1, 1996, the Executive
Director compensation had been reimbursed by the PHO). It is anticipated that
over the near term, general and administrative expenses will continue to be
incurred at comparable levels.
During the second quarter of 1996, the Company had net income of $44,624.
Therefore, the net income per common share was $105 for the second quarter of
1996. The net income per common share for the same quarter last year was $34
per share. The increase in the net income per common share for the second
quarter of 1996 was due to an increase in net income offset slightly by a
greater number of shares outstanding.
Several new laws and regulations affecting the healthcare business were adopted
at both the state and federal levels during 1992, 1993, 1994, 1995, and 1996.
Healthcare reform legislation was passed by the Florida Legislature during its
Session that ended on May 4, 1996. Additional healthcare reform is being
considered in 1996 at the federal level. Some of the legislation and regulation
could have a significant adverse impact on the Company, its related investments,
and the stockholders of the Company. The Company is continuing to monitor and
evaluate the impact of such changes in the laws and regulations.
12
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ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Limiting Fee Schedule Litigation
On July 10, 1992, the Company joined several other entities in filing a lawsuit
in state court against the State of Florida seeking a declaratory judgment on
the constitutionality of the limiting fee schedule on entities that provide
specified "designated health services" that was included in the Patient
Self-Referral Act of 1992 and requesting that an injunction be granted to stop
the enforcement of the limiting fee schedule. The fee limits originally were
scheduled to take effect on July 1, 1992, but enforcement was temporarily
restrained by an order of the United States District Court for the Northern
District of Florida in a separate lawsuit filed by unrelated parties (the
"Federal Case"). The state court action was filed as a protective measure, in
case the federal court in the Federal Case (which agreed to hear the case and
rule quickly) upheld the constitutionality of the fee limits. The state court
action was one of several (the others being filed by unrelated parties) that
were filed in the Circuit Court of the Second Judicial Circuit, Leon County,
Florida, all of which cases were consolidated under the name Physical Therapy
Rehabilitation Center of Coral Springs, Inc. v. State of Florida (the "State
Case"). Shortly after the lawsuit in which the Company is a party was filed,
the United States District Court for the Northern District of Florida, in the
Federal Case, struck down the fee limits as an unconstitutional violation of
the Equal Protection Clause of the United States Constitution, and entered an
injunction against enforcement. The state court hearing the State Case then
entered a temporary injunction against enforcement, based upon the injunction
entered in the Federal Case.
The injunction entered in the Federal Case was appealed to the United States
Eleventh Circuit Court of Appeals, and, on February 15, 1994, the Eleventh
Circuit Court of Appeals reversed the trial court, upholding that the fee limits
do not violate the Equal Protection Clause of the United States Constitution. A
motion for reconsideration was filed with the Eleventh Circuit Court of Appeals,
and that motion was denied in April 1994. Subsequently, a petition of
certiorari was filed with the United States Supreme Court, but the Supreme Court
subsequently denied certiorari. As a result, the decision of the Eleventh
Circuit Court of Appeals on the constitutionality of the fee limits under the
Equal Protection Clause of the United States Constitution stands.
In the meantime, as a result of the Eleventh Circuit Court of
13
<PAGE> 14
Appeals' reversal of the federal trial court, the Florida Agency For Health Care
Administration ("AHCA") decided to actively pursue the State Case. AHCA went
back to the state trial court and argued that (1) there is no independent basis
for the state temporary injunction and (2) in any event, the state temporary
injunction should not be entered unless every party who would be protected by
the injunction files a bond with the state trial court. On June 23, 1994, the
trial court ruled that its temporary injunction would stay in place, but anyone
wanting the protection of the injunction would need to post a $1,000 bond. AHCA
was not pleased with these decisions, and it filed an appeal with the Florida
First District Court of Appeals on July 18, 1994.
The state trial court continued to review various motions that were filed by
the plaintiffs, and, on July 7, 1994, the state trial court declared the
limiting fee schedule unconstitutional, under the Florida Constitution, for
providers of the "designated health services" specified in the Patient
Self-Referral Act of 1992 (other than providers of radiation therapy services).
AHCA filed an appeal of this decision with the Florida First District Court of
Appeals on August 8, 1994. The Florida First District Court of Appeals has
ruled that, because the state trial court's original June 23, 1994 order was
already subject to appeal, the trial court did not have jurisdiction to enter
its July 7, 1994 ruling on unconstitutionality. As a result, all that remained
for review by the Florida First District Court of Appeals was the state trial
court's June 23, 1994 ruling.
In the meantime, on February 13, 1995, in a case known as Kagan v. State of
Florida, the Circuit Court of the Second Judicial Circuit, Leon County,
Florida, again ruled that the limiting fee schedule is unconstitutional, under
the Florida Constitution, for providers of diagnostic imaging services. This
case was appealed by AHCA to the Florida First District Court of Appeals on
March 9, 1995.
Oral argument in the State Case originally was scheduled before the Florida
First District Court of Appeals on June 29, 1995. However, the Court cancelled
the oral argument and, instead, scheduled an attorneys' conference to determine
how best to resolve the multiple appeals relating to the State Case and the
Kagan decision. As a result of the attorneys' conference, the First District
Court of Appeals entered a new order that (1) allowed the state trial court to
enter a new order in the State Case (replacing the original July 7, 1994
decision) declaring the limiting fee schedule unconstitutional under the
Florida Constitution, and (2) consolidated all of the appeals into one case.
Under the new order of the First District Court of Appeals, the issues in the
appeal were framed as (1) whether the limiting fee schedule is unconstitutional
under the Florida Constitution, (2) whether the limiting fee schedule is
14
<PAGE> 15
an unlawful delegation of legislative authority, and (3) if the limiting fee
schedule is deemed constitutional and not an unlawful delegation of legislative
authority, then whether the state trial court's June 23, 1994 ruling should be
modified or dissolved. In an opinion filed on January 4, 1996, the First
District Court of Appeals ruled that the limiting fee schedule is
unconstitutional under the Florida Constitution and should be stricken from the
Patient Self-Referral Act of 1992. AHCA has filed an appeal of this decision
with the Florida Supreme Court, its brief having been filed on March 25,
1996. All parties have now filed their responsive briefs. No date has been
set for oral argument, and the Florida Supreme Court has the discretion to rule
on the appeal without oral argument.
Two bills that were passed by the Florida Legislature during its Session that
ended on May 4, 1996, included provisions that repeal the limiting fee schedule
retroactive to the original date on which it was to become effective (July 1,
1992). One of the bills also prohibits any governmental agency from imposing
or collecting an administrative fine from a provider for failure to comply with
the limiting fee schedule. Both bills became law in May 1996 when the Governor
did not veto them.
Notice of these two bills was filed with the Florida Supreme Court, and the
Supreme Court issued an order dismissing the State Case. As a result, all
litigation relating to the limiting fee schedule is now complete.
Declaratory Statement Action With Respect to HHC
The language of the Patient Self-Referral Act of 1992 is ambiguous in many
respects. One such ambiguity can be found in the definition of an "investor,"
which relates to whether a stockholder in the Company is deemed indirectly to
be an "investor" in SDS or HHC. A provision of the Patient Self-Referral Act
of 1992 allows a person or an entity that could be affected by the prohibitions
included in the Patient Self-Referral Act of 1992 to request that AHCA, or the
applicable professional board under the Florida Department of Business and
Professional Regulation, issue a declaratory statement defining how the
applicable state agency interprets an ambiguous provision of the Patient
Self-Referral Act of 1992. Using this procedure, a Petition for Declaratory
Statement was filed by Charles E. Cernuda, M.D. and the Company (the
"Declaratory Statement Action"), seeking an interpretation from the Board of
Medicine of the Department of Business and Professional Regulation (the
"Board") on whether a stockholder in the Company is deemed to indirectly be an
"investor" in HHC, thereby prohibiting the stockholder in the Company from
referring a patient to HHC for physical therapy services, occupational and
speech therapy services or clinical laboratory services that are rendered as an
incident to other home health services provided by HHC.
15
<PAGE> 16
In a Final Order issued on March 16, 1995, the Board of Medicine ruled that the
definition of "investor" should be broadly interpreted and concluded that each
stockholder's investment interest in the Company results in such stockholder
also being an "investor" in HHC (by virtue of the Company's ownership of 50% of
the outstanding stock of HHC). Accordingly, the Board concluded that the
stockholders of the Company are subject to the absolute prohibition for
referrals to HHC for the "designated health services" that are specified in the
Patient Self-Referral Act of 1992.
To the knowledge of the Company's management, there are no other material
pending legal proceedings, other than ordinary routine litigation incidental to
the business of the Company or the businesses in which the Company has
ownership interests, to which the Company, or any business in which the Company
has an ownership interest, is a party, or of which, any of their property is
the subject.
16
<PAGE> 17
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 29, 1996, the annual stockholders meeting of the Company was held.
Directors elected at the meeting were:
Number of Votes
For Withheld
---------------
Benedict Maniscalco, M.D. (term expiring 2000) 196 6
Bill Luria, M.D. (term expiring 2000) 194 8
Aaron Laden, M.D. (term expiring 1997) 198 4
Other directors whose term of office continued after the meeting were:
Andrew Boyer, M.D. N. Bruce Edgerton, M.D.
Anthony Brannan, M.D. Thomas Mawn, M.D.
Norman Castellano, M.D. Michael Wasylik, M.D.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27 - Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
None
17
<PAGE> 18
SIGNATURES
August 14, 1996
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ST. JOSEPH'S PHYSICIAN ASSOCIATES, INC.
---------------------------------------
(Registrant)
Date: August 14, 1996 /s/ Norman Castellano, M.D.
---------------------------------------
Norman Castellano, M.D., President
St. Joseph's Physician Associates, Inc.
Date: August 14, 1996 /s/ Andrew G. Boyer, M.D.
---------------------------------------
Andrew G. Boyer, M.D., Treasurer and
Principal Financial Officer
St. Joseph's Physician Associates, Inc.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ST. JOSEPH'S
PHYSICIAN ASSOCIATES, INC. JUNE 30, 1996 BALANCE SHEET AND INCOME STATEMENT FOR
THE SIX MONTH PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 656,866
<SECURITIES> 0
<RECEIVABLES> 133,520
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 793,071
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,502,882
<CURRENT-LIABILITIES> 33,887
<BONDS> 0
0
0
<COMMON> 699,456
<OTHER-SE> 734,021
<TOTAL-LIABILITY-AND-EQUITY> 1,502,882
<SALES> 0
<TOTAL-REVENUES> 182,994
<CGS> 0
<TOTAL-COSTS> 61,084
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 121,910
<INCOME-TAX> 42,668
<INCOME-CONTINUING> 79,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,242
<EPS-PRIMARY> 187.00
<EPS-DILUTED> 0
</TABLE>
