Larry G. Snodgrass and Mark Swinnea owned equal interests in two business entiti
ID: 355672 • Letter: L
Question
Larry G. Snodgrass and Mark Swinnea owned equal interests in two business entities, ERI Consulting Engineers, Inc. (ERI), and Malmeba Company, Ltd., which they operated together for approximately 10 years. ERI manages asbestos abatement projects for contractors. It leased office space from Malmeba, their partnership that owned the building. Snodgrass and ERI purchased Swinnea's interest in ERI in 2001. ERI paid Swinnea $497,500 to redeem Swinnea's ERI stock, and Snodgrass transferred his half-interest in Malmeba to Swinnea. ERI agreed to employ Swinnea for six years, and Swinnea agreed not to compete with ERI. At the same time, ERI agreed to continue leasing from Malmeba for six years. Unknown to Snodgrass, the wives of Swinnea and Chris Power, an ERI employee, had created a new company called Air Quality Associates a month before Swinnea and Snodgrass executed the buyout agreement. Air Quality Associates was created to perform mold abatement, but later engaged in asbestos abatement as a contractor even though neither wife had experience in the asbestos abatement field. Swinnea did not disclose the existence of Air Quality Associates to Snodgrass during the ERI buyout negotiations. Over a 33-month period Snodgrass suffered a total loss of profits of $178,000 for business lost to Swinnea. Was Swinnea free to outmaneuver Snodgrass in their buyout agreement as part of the competitive spirit of America? Do owners have a fiduciary duty to each other in negotiating a buyout agreement with a noncompete clause? Are Swinnea's action's so contrary to our public sense of justice and propriety to merit exemplary damages? Consulting Engineers, Inc.v. Swinnea, 318 S.W.3d 867 (Tex.); Swinnea v ERI Consulting Engineers,3Explanation / Answer
In this situation, health insurers could use a two-part reimbursement strategy: increase fees for processes known to be effective and base part of a provider's payment on the improvement in the risk-adjusted health of the provider's patients. The higher fee will encourage all providers to use evidence-based medicine, and the outcomes-based P4P component will create incentives for providers to use processes that they know or believe will, on average, improve health. This strategy may encourage physicians to address issues they have traditionally avoided, such as patients adhering to the recommended treatment and coping with cultural/ethnic disparities. Providers who know more about or invest more time in learning about the health production function will, on average, receive higher payments. Providers will also have incentives to invest in systems (e.g., electronic medical records, clinical decision support systems, computerized physician order entry systems, care pathways) and programs that improve outcomes (e.g., personnel to follow the chronic care model), and they will be rewarded for their innovation.
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