PPN - the company

Patient-Physician Network Holding Company, L.L.C. (PPNHCo), a Texas corporation (the "Company"), was formed by physicians who are members of the Plano Physician's Group (PPG) to respond to the changing environment of the healthcare delivery system. The Company was incorporated in February 1996 and began formal operations officially April 1, 1997.The Company is to introduce the concept of healthcare reengineering by helping physicians to combine quality of care issues with cost, utilization and outcome data. This is being accomplished through the creation of an entity, named Patient-Physician Network ("PPN"), a Texas nonprofit 5.01a corporation, participating in healthcare contracting with third party payors (including government healthcare programs).

The Company earns revenue by providing management, administrative, financial and marketing services to the PPG and other area Medical Groups. "Medical Groups" refers to independent practice associations ("IPAs"), and such additional integrated medical groups and individual practitioners that PPN may contract with now or in the future.

The principal executive office of the PPNHCo is located at 1200 Coit Road, Suite 109, Plano, Texas 75075, and the Company's telephone number is (972) 612-7273.

The PPNHCo Perspective on Healthcare Business

The PPNHCo believes that managed healthcare increasingly is taking over healthcare delivery in the United States. Managed healthcare contemplates a fundamental realignment of financial incentives between the physician, patient and payor. This realignment changes the focus of healthcare from a patient choice, fee-for-service environment to one where patient access to and choice of physicians becomes more limited. As a result of the growth in managed care, the financial risk of providing healthcare services within premium limits is retained increasingly by the physician and other healthcare providers, rather than the third party payors. The acceptance of this financial risk has created the need for physicians to become more aware of the business aspects of medicine. The integration of quality of care issues with cost, utilization and outcomes has required the physician to add "business" to the "art and science" of the practice of medicine.

During the last several years, various organizations have been created to address the business needs of medical service providers wishing to contract for managed care. Many of these organizations, however, lack physician leadership, physician commitment of medical service providers, or physician governance. Individual physicians and small physician groups do not have the administrative capacity, the risk management expertise or the capital to invest in sophisticated information systems necessary to manage these changing medical trends. Individual physicians have traditionally been at a disadvantage in accessing HMO enrollees and have been forced to choose between (a) independently contracting with the HMOs or (b) abandoning individual practice to join a larger entity such as a multi-specialty physician group, a staff model HMO, a hospital or other entity. These alternatives can limit the physician's access to the patient populations or reduce the physician's ability to remain independent.

The Company's strategy is to take advantage of these changes in the healthcare delivery system by: (i) creating a company that is physician controlled; (ii) collecting encounter data by using current managed care encounter information and disseminating utilization information back to physicians for the purpose of aiding in the reengineering of the healthcare delivery system; (iii) integrating physicians into healthcare delivery networks that provide a comprehensive range of healthcare services, thereby providing a single source of access to local networks; (v) effectively managing the cost of providing care; and (vi) allowing physicians greater access to managed care, while reducing for physicians some of the administrative responsibilities and economic risks of providing managed care services.