As filed with the Securities and Exchange Commission April 17, 1998
Registration Statement No. 33-
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SECURITIES AND EXCHANGE COMMISION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SHERIDAN HEALTHCARE, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3252967
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
(954) 987-5822
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Mitchell Eisenberg, M.D.
Chairman, President and Chief Executive Officer
Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
(954) 987-5822
(Name, address, including zip code, and telephone number, including area
code, of Registrant's agent for service)
With a copy to:
Kevin M. Dennis, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
- ----------------------------- ----------------------- -------------------------
Title of Securities Being Proposed Maximum Amount of
Registered Aggregate Offering Registration
Price(1) Fee
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Common Stock, par value $16,810,000.00 $4,959.00
$.01 per share
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(1) Based upon the average of the high and low sale prices of the Common Stock
of Sheridan Healthcare, Inc. reported on the NASDAQ National Market on
April 15 , 1998 and estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED APRIL 17, 1998
PROSPECTUS
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1,000,000 Shares
SHERIDAN HEALTHCARE, INC.
Common Stock
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This Prospectus relates to the registration of 1,000,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Sheridan Healthcare, Inc. ("Sheridan" or the "Company"). All of the shares of
Common Stock are being offered by the Company. The Common Stock is quoted on the
NASDAQ National Market ("NASDAQ") under the symbol "SHCR." On April ___, 1998,
the last reported sale price for the Company's Common Stock was ___ per share.
-----------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------------------------
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 PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
PRICE PROCEEDS
TO PLACEMENT TO
PUBLIC FEE (1) COMPANY (2)
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PER SHARE.......... $ $ $
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TOTAL............. $ $ $
================================================================================
(1) The Company has agreed to indemnify the Placement Agent against certain
liabilities under the Securities Act of 1933, as amended, see "Plan of
Distribution".
(2) Before deducting expenses of the offering estimated at $
-------------- ,
payable by the Company.
-----------------------------
The Common Stock offered hereby is offered for sale by the Company to one
or more select accredited institutional investors. The Common Stock offered
hereby is being offered on a best efforts basis and the offering will terminate
fifteen business days following the date hereof. Purchasers of the shares
offered hereby must purchase a minimum of 300,000 shares. There are no
arrangements to place the funds received in an escrow trust or similar
arrangement. It is expected that the delivery of certificates representing the
shares of Common Stock will be made against payment for the shares in
- -----------------, ------------------- on or about April , 1998. ---
The date of this Prospectus is April , 1998.
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2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained upon written request from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The Company is required to file
electronic versions of these reports, proxy statements and other information
with the Commission via the Commission's Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") System. The Commission maintains a site on the World Wide
Web (http://www.sec.gov) that contains all EDGAR filings. In addition, material
filed by the Company can be inspected at the offices of The NASDAQ Stock market,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the Common Stock. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement, including exhibits thereto, may be
inspected and copied at the locations described above. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated in this Prospectus by
reference: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (File No. 0-26806), as filed on March 30, 1998, and
amended on Form 10-K/A, as filed on April 17, 1998; (ii) the Company's Current
Report on Form 8-K filed March 19, 1998, as amended on Form 8-K/A, as filed on
April 16, 1998; and (iii) the description of the Company's Common Stock
contained in its Registration Statement on Form 8-A filed September 20, 1995,
including any amendment or report filed for the purpose of amending such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the filing of a post-effective amendment hereto that indicates that all
securities offered hereunder have been sold or that deregisters all such
securities then remaining unsold shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in an applicable Prospectus Supplement) or in any subsequently filed
document that is incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus or any Prospectus Supplement, except as so
modified or superseded.
3
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY
OWNER (BENEFICIAL OR OF RECORD) OF COMMON STOCK, TO WHOM A COPY OF THIS
PROSPECTUS IS DELIVERED, AT THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO
JAY A. MARTUS, ESQ., VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL, SHERIDAN
HEALTHCARE, INC., 4651 SHERIDAN STREET, SUITE 400, HOLLYWOOD, FLORIDA 33021,
TELEPHONE (954) 987-5822.
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. These forward-looking statements are subject to risks and
uncertainties that would cause actual results to differ materially from those
projected. Those risks and uncertainties include fluctuations in the volume of
services delivered by the Company's affiliated physicians, changes in
reimbursement rates for those services, uncertainty about the ability to collect
the appropriate fees for those services, the loss of significant hospital or
third-party payor relationships, and changes in the number of patients using the
Company's physician services as well as those items described in "Risk Factors".
THE COMPANY
The Company is a physician practice management company that provides and
manages practices that provide specialist physician services at hospitals and
ambulatory surgical facilities in the areas of anesthesia, neonatology,
pediatrics, obstetrics, pain management and emergency services. In addition, it
owns and operates, or manages, office-based obstetrical, general surgical,
gynecologic-oncology, perinatology and primary care practices. The Company
derives substantially all of its revenue from the medical services provided by
the physicians who are employed by the Company or whose practices are managed by
the Company. The Company generates revenue from its specialist physician
services by directly billing third-party payors or patients on a fee-for-service
or discounted fee-for-service basis. In addition, several hospitals at which the
Company provides specialist physician services pay subsidies to the Company to
supplement revenue from billings to third-party payors. The Company generates
revenue from its office-based physician services pursuant to various payment
arrangements, including shared-risk capitation arrangements, fee-for-service or
discounted fee-for-service arrangements and other capitation arrangements.
The Company's objective is to expand its business by increasing the
number of hospitals and other health care facilities at which it provides
specialist physician services, providing physician services in additional
specialties to existing hospital customers and acquiring or managing additional
physician practices. One of the Company's key strategies is to create integrated
networks providing women's and children's healthcare services, consisting of
both hospital-based and office-based physicians in various complementary
specialties that support the Company's hospital customers. As of April 8, 1998,
the Company employed, or managed the practices of, approximately 241 physicians
practicing under 52 specialty service contracts with 35 health care facilities
and at 24 office locations.
The Company's principal executive offices are located at 4651 Sheridan
Street, Suite 400, Hollywood, Florida 33021, and its telephone number is (954)
987-5822.
THE OFFERING
Common Stock Offered 1,000,000 shares
Common Stock to be outstanding after
the offering 9,197,736 shares
NASDAQ National Market Symbol SHCR
4
RECENT DEVELOPMENTS
During the period from January 1998 to March 1998 the company completed
four transactions with physician practices for aggregate consideration of
approximately $37.3 million of which approximately $17.2 million was paid in
cash and approximately $20.1 million was paid through the issuance of
approximately 1,384,000 shares of the Company's common stock. In connection with
such transactions the Company entered into long-term management agreements with
a hospital-based anesthesia practice with twelve physicians, a hospital-based
anesthesia and pain management practice with eight physicians and an
office-based gynecologic-oncology practice with two physicians. These practices
are all located in Florida. The Company also entered into a long-term management
agreement with an office-based perinatology practice with two physicians that is
located in Texas (the "Perinatology Transaction").
The Company may be obligated to issue additional shares of Common Stock
(the "Additional Shares") as consideration for the Perinatology Transaction if
the total value of cash received and the fair market value of shares of Common
Stock held by each shareholder of the two entities through which the acquired
practice is conducted, as of March 4, 1999, is not equal to a specified dollar
value. Under the Company's Charter and the Delaware General Corporation Law, the
Board of Directors had the authority to approve the issuance of the Common
Stock. However, because the Additional Shares could, if issued, be equal to or
in excess of 20% of the number of shares outstanding prior to the issuance of
such shares, Rule 4310 of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") requires that stockholder approval be
obtained in order for the Additional Shares in excess of the 20% level to be
listed on Nasdaq. Accordingly, the Company shall be soliciting stockholder
approval for the issuance of such additional shares.
Effective April 1, 1998 the Company completed the sale of a primary care
practice with two office locations for an aggregate price of approximately $3.5
million. As consideration for the sale the Company received from the buyer a
promissory note pursuant to which payments are made based on a 20-year
amortization schedule, with a balloon payment at the end of the fifth year. The
annual interest rate on the note is 7.5%. The practices generated approximately
$ 8.2 million in net revenue for the year ended December 31, 1997. The Company
did not realize a significant gain or loss on the transaction.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of the Company's Common Stock.
RISKS ASSOCIATED WITH THE COMPANY'S GROWTH STRATEGY
A key element of the Company's strategy involves growth through
acquisition of physician practices. The Company is subject to various risks
associated with this strategy, including the risk that the Company will be
unable to identify and recruit suitable acquisition candidates in the future.
The growth and profitability of the Company is also largely dependent on the
Company's ability to effectively integrate the acquired practices to maintain or
increase reimbursement levels, to manage and control costs, and to realize
economies of scale. Any failure of the Company to consummate economically
feasible acquisitions, effectively integrate acquired practices or price its
services appropriately could have a material adverse effect on the Company's
financial condition or results of operations.
5
RISKS ASSOCIATED WITH GROWTH FROM NEW CONTRACTS AND SERVICES
The Company's growth strategy is also based on obtaining new contracts
for the provision of specialist physician services. There is substantial
competition for such contracts and the Company is increasingly involved in a
competitive bidding process that requires the Company to accurately project
revenues and expenses on a forward basis with limited information. The
integration of new contracts, as well as the maintenance of existing contracts,
is made more difficult by increasing pressures from health care payors to reduce
reimbursement rates at a time when the cost of providing medical services
continues to increase. Any failure of the Company to identify opportunities for
new contracts and services, effectively integrate new contracts, and price its
services appropriately could have a material adverse effect on the Company's
operating results.
RISKS RELATING TO CAPITAL REQUIREMENTS
The Company's acquisition of physician practices requires substantial
capital investment. Capital is typically needed not only for the acquisition of
the physician practices, but also for the effective integration, operation and
expansion of the practices as well as the start-up of new contracts for
specialist physician services. The practices may require capital for renovation
and expansion and for the addition of medical equipment and technology.
Therefore, the Company will need to raise capital through the issuance of
long-term or short-term indebtedness or the issuance of its equity securities in
private or public transactions in order to complete further acquisitions and
expansion. This could result in dilution of existing equity positions and
increased interest expense. There can be no assurance that acceptable financing
for future acquisitions or for the integration and expansion of existing
physician practices can be obtained on suitable terms, if at all.
RISKS ASSOCIATED WITH EXPANSION INTO NEW GEOGRAPHIC MARKETS
In pursuing its growth strategy, the Company intends to expand its
presence into new geographic markets. Expansion of the operations of the Company
to other jurisdictions could require additional structural and organizational
modifications of the Company's form of relationship with hospitals or physician
practices. Those changes, if any, could have an adverse effect on the Company.
The laws in most states regarding the corporate practice of medicine and the
laws relating to self-referral have been subject to limited judicial and
regulatory interpretation and, therefore, no assurances can be given that if the
Company's activities are challenged that they will be found to be in compliance
with all applicable laws and regulations. The Company may also face competitors
with greater knowledge of such markets than the Company. There can be no
assurance that the Company will be able to effectively establish a presence in
these new markets.
COMPETITION
The provision of health care services and physician practice management
services are both competitive businesses in which the Company competes for
contracts with numerous entities in the health care industry. The Company also
competes with traditional providers and managers of health care services for the
recruitment of employed or managed physicians. In addition, the Company, in
pursuing its growth strategy, faces competitive pressures for the acquisition
of, and the provision of management services to, additional hospital-based and
office-based physician practices. Several companies, both publicly and privately
held, that have greater resources than the Company are pursuing the acquisition
of the assets of physician practices and management contracts with physician
practices. There can be no assurance that the Company will be able to continue
to compete effectively with such competitors, that additional competitors will
not enter the market, or that such competition will not make it more difficult
to acquire the assets of, and provide management services to, physician
practices on terms beneficial to the Company.
VOLATILITY OF STOCK PRICE
Historically there has been and there may continue to be volatility in
the market price for the Company's Common Stock. Quarterly operating results of
the Company and their relationship to analysts' projections, changes in general
conditions in the economy, the financial markets or the healthcare industry, 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.
6
SHARES OF ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after
this offering could adversely affect the market price of the Common Stock. In
addition to the 1,000,000 shares of Common Stock offered hereby and the
3,825,000 shares of Common Stock issued in the Company's initial public
offering, 2,975,459 shares of Common Stock owned by current stockholders of the
Company are currently eligible for sale in the public market, 13,564 shares will
be eligible for sale beginning in November 1998, 460,120 shares will be eligible
for sale beginning in January 1999 and 923,593 shares will be eligible for sale
beginning in March 1999. All of the executive officers and directors of the
Company, who currently hold 347,013 shares, have agreed not to publicly offer,
sell or otherwise dispose of any shares of Common Stock owned by them for 60
days from the date of this prospectus without the consent of the Placement
Agent. Upon the later of the expiration of such agreement or such dates,
pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), such stockholders may sell such shares without registration,
subject to certain limitations, including limitation on volume of sales. If such
stockholders should sell or otherwise dispose of a substantial amount of Common
Stock in the public market, the prevailing market price for the Common Stock
could be adversely affected.
CONCENTRATION OF REVENUE
A significant portion of the Company's revenue is derived from
delivering or managing hospital-based physician services from hospitals that are
under common ownership by a limited number of entities. Of the Company's total
net revenue in 1997, approximately $21.8 million, or 22.1%, was derived from
anesthesia, obstetrics and neonatology services delivered at three hospitals
owned and operated by the South Broward Hospital District. In addition,
approximately $21.8 million, or 22.2% of the Company's total net revenue in
1997, was derived from anesthesia, neonatology, pediatric and emergency services
delivered at 11 hospitals and two ambulatory surgical facilities owned and
operated by Columbia/HCA Healthcare Corp. In addition, approximately $11.7
million, or 11.9% of the Company's total net revenue in 1997, was derived from
anesthesia, neonatology, pediatric, emergency and management services delivered
at seven hospitals owned and operated by Tenet Healthcare Corporation. The loss
of any of these arrangements or relationships would have a material adverse
effect on the Company's business.
A significant portion of the Company's revenue from both hospital-based
and office-based physician services is derived from various arrangements,
including fee-for-service and capitation arrangements, with Humana Medical
Plans, Inc., a third-party payor, and its affiliates. During 1997, the Company
derived total net revenue of approximately $14.1 million from Humana and its
affiliates, which accounted for 14.3% of the Company's total net revenue and
included approximately $7.7 million in shared-risk capitation revenue that was
eliminated as part of the sale of practices discussed under "Material Changes".
The loss of any existing contracts or arrangements with Humana could have a
material adverse effect on the Company's business.
EXPOSURE TO PROFESSIONAL LIABILITY
Due to the nature of its business, the Company from time to time becomes
involved as a defendant in medical malpractice lawsuits, some of which are
currently ongoing, and is subject to the attendant risk of substantial damage
awards. The most significant source of potential liability in this regard is the
negligence of physicians employed or contracted by the Company or the practices
it manages. To the extent such physicians are employees of the Company or were
regarded as agents of the Company in the practice of medicine, the Company
would, in most instances, be held liable for their negligence. In addition, the
Company could be found in certain instances to have been negligent in performing
its management services under contractual arrangements even if no agency
relationship with the physician were found to exist. The Company's contracts
with hospitals and third party payors generally require the Company to indemnify
such other parties for losses resulting from the negligence of physicians who
were employed or managed by or affiliated with the Company. The Company
maintains professional and general liability insurance on a claims made basis in
amounts deemed appropriate by management, based upon historical claims and the
nature and risk of its business. There can be no assurance, however, that an
existing or future claim or claims will not exceed the limits of available
insurance coverage, that any insurer will remain solvent and able to meet its
obligations to provide coverage for any such claim or claims or that such
coverage will continue to be available or available with sufficient limits and
at reasonable cost to adequately and economically insure the Company's
operations in the future. A judgement against the Company in excess of such
coverage could have a material adverse effect on the Company.
7
LIMITATIONS ON REIMBURSEMENT
Substantially all of the Company's revenues are derived from third party
payors, such as governmental programs (primarily Medicare and Medicaid), private
insurance plans and managed care organizations. Reflecting current trends in the
health care industry, these third party payors increasingly are negotiating with
health care providers such as the Company concerning the prices charged for
medical services by its owned and managed practices, with the goal of lowering
reimbursement and utilization rates. The profitability of the Company may be
adversely affected by changes in Medicare and Medicaid reimbursement, cost
containment decisions of third party payors and other payment factors over which
the Company has no control.
A significant portion of the Company's revenue is derived from
delivering medical services to patients who are covered under various Medicare
and Medicaid health care programs. Approximately 15.8% of the Company's total
net revenue in 1997 was derived from the assignment of Medicare and Medicaid
benefits to the Company by patients of the Company's affiliated physicians. In
addition, approximately 7.9% of the Company's total net revenue in 1997 was
derived from capitation payments from health maintenance organizations for
patients who had assigned their Medicare or Medicaid benefits to the health
maintenance organizations. Medicare and Medicaid reimbursement policies are
subject to sweeping change and those programs are under significant pressure to
reduce the costs of providing health care services.
The federal Medicare program adopted a system of reimbursement of
physician services, known as the resource based relative value scale ("RBRVS"),
which took effect in 1992 and was implemented on December 31, 1996. The Company
expects that the RBRVS fee schedule and other future changes in Medicare
reimbursement, for the services it provides, will increase at or above the
overall rate of inflation throughout the U.S. economy, though there can be no
assurance that these increases will occur.
On August 5, 1997, the President signed into law a number of Medicare
provisions as part of the Balanced Budget Act of 1997. When compared with
projected Medicare levels under current law, the legislation could reduce
Medicare spending by $115 billion over 5 years. The vast majority of these
savings would come from reductions in payments for services of healthcare
facilities, practitioners and other providers. The legislation will eliminate
disparities in payment rates for similar services by physicians in different
specialties effective January 1, 1998. Beginning in 1998, inflation increases
will be adjusted based on a "sustainable growth rate" defined with reference to
the change in (i) the number of Medicare beneficiaries, (ii) the gross domestic
product per capita, and (iii) the level of expenditures for physician services.
The Company has experienced a reduction in reimbursement for certain medical
services provided by its physicians with a specialty in surgery due to this
legislation. This reduction has not been significant. The legislation will also
revise Medicare payments for practice expense costs and change payments to
managed care plans from the current rate of 95% of fee-for-service rates in the
area, to a nationwide average per capita fee for service spending, with an
adjustment factor for local area wage rates. Any further reductions in payment
for the services offered by the Company could have an adverse effect on the
Company's results of operations and financial condition.
Some private insurance plans and managed care organizations with which
the company has contracts or to whose members it provides medical services have
limited operating histories. A default of a third-party payor and non-payment
for the Company's medical services could have an adverse effect on the Company's
results of operations and financial condition.
SIGNIFICANT GOVERNMENT REGULATION
Because the Company is a participant in the health care industry, its
operations and relationships are subject to extensive and increasing regulation
by a number of governmental entities at the federal, state and local levels. The
Company is also subject to laws and regulations relating to business
corporations in general. The Company believes its operations are in material
compliance with applicable laws. However, the assortment of laws and regulations
affecting the Company's business is complex, in many cases un-clear and many
provisions have not been the subject of regulatory or judicial interpretation
and there can be no assurance that a review of the Company's business by courts
or regulatory authorities will not result in a determination that the Company
has not complied fully with all applicable laws and regulations in one or more
aspects of its business or that could otherwise adversely affect the operations
of the Company. Further, there can be no assurance that the health care
regulatory environment will not change so as to restrict the Company's existing
operations or their expansion.
8
The laws of many states prohibit business corporations such as the
Company from practicing medicine and employing physicians to practice medicine
and certain self-referral laws and regulations restrict the activities of
physicians who are employed by entities in which they have ownership interests.
The structure of the Company's operations in certain states is influenced by the
laws prohibiting business corporations from practicing medicine and the
structure of the Company's arrangements with physicians, who may be restricted
by self-referral laws, is influenced by those self-referral laws and
regulations.
Expansion of the operations of the Company to other jurisdictions could
require additional structural and organizational modifications of the Company's
form of relationship with hospitals or physician practices. Those changes, if
any, could have an adverse effect on the Company. The laws in most states
regarding the corporate practice of medicine and the laws relating to
self-referral have been subject to limited judicial and regulatory
interpretation and, therefore, no assurances can be given that if the Company's
activities are challenged that they will be found to be in compliance with all
applicable laws and regulations.
In addition to prohibiting the practice of medicine, numerous states
prohibit entities like the Company from engaging in certain health care related
activities such as fee-splitting with physicians. Florida, for instance, enacted
in April 1992 a Patient Self-Referral Act that severely restricts patient
referrals for certain services, prohibits mark-ups of certain procedures,
requires disclosure of ownership in businesses to which patients are referred
and places other regulations on health care providers. The Company believes that
its Florida practices fit within the group practice exemption contained in the
Patient Self-Referral Act. However, investments or contractual relationships
with businesses not specifically operated by the Company would, in some cases,
be prohibited. The Company believes that it is likely that other states will
adopt similar legislation. Accordingly, expansion of the operations of the
Company to jurisdictions may require it to comply with such jurisdictions'
regulations which could lead to structural and organizational modifications of
the Company's form of relationship with hospitals or physician practices in
those states. Those changes, if any, could have an adverse effect on 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 Medicare or
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease, or order of items or services
that are covered by Medicare or state health programs. The Anti-kickback Statute
is broad in scope and has been broadly interpreted by courts in many
jurisdictions. Read literally, the statute places at risk many business
arrangements, potentially subjecting such arrangements to lengthy, expensive
investigations and prosecutions initiated by federal and state governmental
officials. Many states have adopted similar prohibitions against payments
intended to induce referrals of Medicaid and other third-party payor patients.
The Company believes that it has not violated the Anti-kickback Statute.
Violation of the Anti-kickback Statute is a felony, punishable by fines up to
$25,000 per violation and imprisonment for up to five years. In addition, the
Department of Health and Human Services may impose civil penalties excluding
violators from participation in Medicare or state health programs.
The federal government has published regulations that provide
exceptions, or "safe harbors," for transactions that will be deemed not to
violate the Anti-kickback Statute. Among the safe harbors included in the
regulations were provisions relating to the sale of practitioner practices,
management and personal service agreements, and employee relationships. Although
the Company believes that it is not in violation of the Anti-kickback Statute,
some of its operations do not fit within any of the existing or proposed safe
harbors, and, accordingly, there can be no assurance that the Company's
practices will not be found to be in violation of the statute, and any such
finding could have a material adverse effect on the Company.
9
Significant prohibitions against physician referrals were enacted by
Congress in the Omnibus Budget Reconciliation Act Of 1993. These prohibitions,
commonly known as "Stark II," prohibit, subject to certain exemptions, a
physician or a member of his immediate family 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 including the physician's
own group practice. The designated health services include radiology and other
diagnostic services, radiation therapy services, physical and occupational
therapy services, durable medical equipment, parenteral and enteral nutrients,
equipment, supplies, prosthetics, orthotics, outpatient prescription drugs, home
health services, and inpatient and outpatient hospital services. The penalties
for violating Stark II include a prohibition on payment by these government
programs and civil penalties of as much as $15,000 for each violative referral
and $100,000 for participation in a "circumvention scheme." While the Company
believes it is in compliance with the Stark legislation, there can be no
assurance this is the case. Moreover, the violation of Stark I or II by the
Company could result in significant fines or penalties and exclusion from
participation in the Medicare and Medicaid programs. Such penalties or
exclusion, if applied to the Company, could result in significant loss of
reimbursement which would adversely affect the Company.
On March 27, 1996, the United States Department of Health and Human
Services promulgated regulations pursuant to the requirements of the Omnibus
Budget Reconciliation Act of 1990 concerning physician incentive plans. The
regulations provide that physician incentive plans may operate only if no
specific payment is made directly or indirectly under the plan as an inducement
to reduce or limit medically necessary services furnished to a specific
enrollee. These regulations only apply to enrollees who are entitled to Medicare
or Medicaid benefits under a prepaid health plan. The Company does not believe
these regulations will have a material effect on the Company's current
operations, including its contractual arrangements with its physicians and
prepaid health plans.
Because the Company intends to maintain certain of the health care
practices that it acquires as separate legal entities, they may be deemed
competitors subject to a range of antitrust laws which prohibit anti-competitive
conduct, including price fixing, concerted refusals to deal and division of
market. The Company intends to comply with such state and federal laws as may
affect its operations, but there is no assurance that the review of the
Company's business by courts or regulatory authorities will not result in a
determination that could adversely affect the operations of the Company.
There are also state and federal civil and criminal statutes imposing
substantial penalties, including civil and criminal fines and imprisonment, on
health care providers which fraudulently or wrongfully bill governmental or
other third-party payors for health care services. The federal law prohibiting
false billings allows a private person to bring a civil action in the name of
the United States government for violations of its provisions. The Company
believes it is in material compliance with such laws, but there is no assurance
that the Company's activities will not be challenged or scrutinized by
governmental authorities. Moreover, technical Medicare and other reimbursement
rules affect the structure of physician billing arrangements. The Company
believes it is in material compliance with such regulations, but regulatory
authorities may differ and in such event the Company may have to modify its
physician billing arrangements. Noncompliance with such regulations may
adversely affect the operation of the Company and subject it to penalties and
additional costs.
Laws in all states regulate the business of insurance and the operation
of HMOs. Many states also regulate the establishment and operation of networks
of health care providers. While these laws do not generally apply to the hiring
and contracting of physicians by other health care providers or to companies
which participate in capitated arrangements, there can be no assurance that
regulatory authorities of the states in which the Company operates would not
apply these laws to require licensure of the Company's operations as an insurer,
as an HMO or as a provider network. The Company believes that it is in
compliance with these laws in the states in which it does business, but there
can be no assurance that future interpretations of insurance laws and health
care network laws by the regulatory authorities in these states or in the states
into which the Company may expand will not require licensure or a restructuring
of some or all of the Company's operations.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CHARTER AND BY-LAW PROVISIONS
Certain provision of the Company's certificate of incorporation, by-laws
and Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company and limit the
price that certain investors might be willing to pay in the future for shares of
the Common Stock. These provisions include a classified Board of Directors and
the ability of the Board of Directors to authorize the issuance, without further
stockholder approval, of preferred stock with rights and privileges which could
be senior to the Common Stock. The Company also is subject Section 203 of the
Delaware General Corporation Laws 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 stockholder became an interested stockholder.
DEPENDENCE ON KEY MANAGEMENT
The Company is highly dependent on its senior and middle management. The
loss of key management personnel or inability to attract, retain and motivate
sufficient number of qualified management personnel could adversely affect the
Company's business. In addition, the Company may enter into employment
agreements with key physicians and administrative personnel of acquired
practices. The loss of these key personnel could adversely affect the
performance of the acquired practice and the Company.
10
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered hereby will be approximately $ million. The Company intends
-----
to utilize the entire proceeds to repay a portion of the Company's outstanding
indebtedness under the Company's revolving credit facility with NationsBank
National Association ("NationsBank"). The revolving credit facility currently
bears interest at the weighted average rate of 7.60% and is payable in December
2000. The Company utilized the proceeds of the currently outstanding
indebtedness under its credit facility to finance the acquisition of certain
physician practices and for working capital and other general corporate
purposes.
PLAN OF DISTRIBUTION
The Shares offered hereby are being offered for sale directly by the
Company to a limited number of accredited institutional investors and affiliates
of such accredited institutional investors in minimum purchase amounts of
300,000 shares. The price of the Shares offered hereby will be determined
through negotiations between the Company and prospective purchasers of the
Shares. Pacific Growth Equities, Inc. (the "Placement Agent") has been retained
to assist the Company, on a best efforts basis, in arranging sales of 1,000,000
shares to be sold in the offering. The Placement Agent is not obligated to
purchase any of the shares offered hereby. No investor funds will be accepted
prior to the effectiveness of the Registration Statement. There can be no
assurance that the Company will be successful in selling any or all of the
Shares offered hereby.
The Company has agreed to pay to the Placement Agent a fee equal to 5%
of the purchase price of the shares. The Company has also agreed to indemnify
the Placement Agent against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for
the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements and schedule incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent certified public accountants,
as indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of that firm as experts in giving those reports.
11
========================================== =================================
No dealer, salesperson or other
individual has been authorized to give
any information or make any
representations not contained in this
Prospectus. If given or made, such
information or representation must not 1,000,000 SHARES
be relied upon as having been authorized
by the Company or the Selling SHERIDAN
Stockholders. This Prospectus does not HEALTHCARE, INC.
constitute an offer to sell, or a
solicitation of an offer to buy, the
Common Stock in any jurisdiction where,
or to any person to whom, it is unlawful
to make such offer or solicitation. COMMON STOCK
Neither the delivery of this Prospectus
nor any sale made hereunder shall, under
any circumstances, create an implication
that there has not been any change in
the facts set forth in this Prospectus
or in the affairs of the Company since
the date hereof.
---------------------------------
Prospectus
---------------------------------
April , 1998
---
========================================== =================================
II-24
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
--------------------------------------------
The expenses in connection with the issuance and distribution of the
securities being registered are set forth in the following table (all amounts
except the registration fee are estimated):
Registration fee -- Securities and Exchange Commission..... $ 4,959.00
Accountants' fees and expenses............................. *
Blue Sky fees and expenses................................. *
Legal fees and expenses (other than Blue Sky).............. *
Miscellaneous.............................................. *
-----------
TOTAL................................................... $ *
===========
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with Section 145 of the General Corporation Law of the
State of Delaware, Article VII of the Company's Third Amended and Restated
Certificate of Incorporation (the "Certificate") provides that no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the 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) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit. In addition, the Certificate provides that if the Delaware General
Corporation Law is amended to authorize the further elimination or limitation of
the liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws provides for
indemnification by the Company of its officers and certain non-officer employees
under certain circumstances against expenses (including attorneys fees,
judgments, fines, taxes, penalties and amounts paid in settlement) reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the Company if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
criminal actions or proceedings, if such person had no reasonable cause to
believe his or her conduct was unlawful.
The Amended and Restated Stockholders' Agreement, filed as Exhibit 4.2
to the Company's registration statement on Form S-1 (File No. 33-93290) filed on
June 8, 1995, as amended (the "Form S-1"), provides for indemnification by the
Company of its existing principal stockholders and the controlling persons of
such stockholders against certain liabilities arising under the securities laws.
Under Section 7 of the Underwriting Agreement filed as Exhibit 1.1 to
the Form S-1, the underwriters of the Company's initial public offering have
agreed to indemnify, under certain conditions, the Company, its directors,
certain of its officers and persons who control the Company within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"), against
certain liabilities.
The Company carries directors' and officers' liability insurance
covering its directors and officers.
II-2
Item 16. Exhibits.
3.1 Form of Placement Agreement between the Company and the
Placement Agent dated April , 1998.
---
3.2 Form of Common Stock Purchase Agreement between the Company
and certain purchasers dated April , 1998.
---
4.1 Third Amended and Restated Certificate of Incorporation, as
amended effective May 27, 1997 (incorporated herein by
reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997).
4.2 Amended and Restated By-laws (incorporated herein by
reference to Exhibit 3.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995).
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the legality
of the securities being registered.
23.1 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
-------------
(a) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in this 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.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company 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 Company 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
(c) The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the Form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registrant statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be initial bona fide offering thereof.
II-4
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 Hollywood, State of Florida, on April 17, 1998.
SHERIDAN HEALTHCARE, INC.
By: /s/ Mitchell Eisenberg
------------------------------------------
Mitchell Eisenberg, M.D.
Chairman, President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Mitchell Eisenberg, M.D. and Jay A. Martus, Esq., and each of them, as her or
his true and lawful attorney-in-fact and agent, with full power of substitution,
for her or him and in her or his name, place and stead, in any and all
capacities to sign any or all amendments or post-effective amendments to this
registration statement (or any registration statement for the same offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933), and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or her or his substitute may lawfully do or cause to be done by virtue hereof.
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 date indicated.
Signature Title Date
/s/ Mitchell Eisenberg, M.D. Chairman of the Board of, April 17, 1998
- ---------------------------- Directors, President and
Mitchell Eisenberg, M.D. Chief Executive Officer
(Principal Executive Officer)
/s/ Michael F. Schundler Chief Operating Officer and April 17, 1998
- ------------------------- Chief Financial (Principal
Michael F. Schundler Financial Officer and
Principal Accounting Officer)
/s/ Lewis D. Gold, M.D. Executive Vice President- April 17, 1998
- ---------------------------- Business Development and
Lewis D. Gold, M.D. Director
/s/ Henry E. Golembesky, M.D. Director April 17, 1998
- -----------------------------
Henry E. Golembesky, M.D.
/s/ Jamie Hopping Director April 17, 1998
- -----------------------------
Jamie Hopping
/s/ Neil A. Natkow, D.O. Director April 17, 1998
- -----------------------------
Neil A. Natkow, D.O.
II-5
EXHIBIT INDEX
Exhibit No. Description
3.1 Form of Placement Agreement between the Company and the
Placement Agent dated April , 1998.
---
3.2 Form of Common Stock Purchase Agreement between the Company
and certain purchasers dated April , 1998.
---
4.1 Third Amended and Restated Certificate of Incorporation, as
amended effective May 27, 1997 (incorporated herein by
reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997).
4.2 Amended and Restated By-laws (incorporated herein by
reference to Exhibit 3.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995).
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the legality
of the securities being registered.
23.1 Consent of Arthur Andersen LLP, Independent Certified Public
Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
* To be filed by amendment
II-6