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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ---------------------

                                   FORM 10-K

<Table>
<C>        <S>
(Mark One)
   [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934.

             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004.


   [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934.

          FOR THE TRANSITION PERIOD FROM           TO
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                        COMMISSION FILE NUMBER 333-80337

                               TEAM HEALTH, INC.
            (Exact name of registrant as it appears in its charter)

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<S>                                            <C>
                  TENNESSEE                                      62-1562558
       (State or other jurisdiction of                    (IRS Employer ID Number)
        Incorporation or organization)

       1900 WINSTON ROAD, KNOXVILLE, TN                            37919
   (Address of principal executive offices)                      (Zip Code)
</Table>

                                 (865) 693-1000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE
                                (TITLE OF CLASS)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

     Indicate by check mark whether the Registrant is an accelerated filer (as
defined in the Exchange Act Rule 12b-2).  Yes [ ]     No [X]

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.

     Common Stock, par value $.01 per share -- 9,712,310 shares as of February
18, 2005. Because the Company is privately held and there is no public trading
market for the Company's equity securities, the Company is unable to calculate
the aggregate market value of the voting and non-voting common equity held by
non-affiliates.

     Documents Incorporated by Reference: Certain exhibits filed with the
Registrant's Registration Statements on Form S-4 (File No. 333-80337 as amended
and File No. 333-115824 as amended) is incorporated by reference into Part IV of
the Report on Form 10-K.
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                                     PART I

ITEM 1.  BUSINESS

OUR COMPANY

     Terms used herein such as "we", "us" and "our" are references to Team
Health, Inc. and its affiliates ("Team Health"), as the context requires.

     We are a national provider of outsourced physician staffing and
administrative services to hospitals and other healthcare providers in the
United States. Since our inception, we have focused primarily on providing
outsourced services to hospital emergency departments, which account for the
majority of our revenue. As a result of an acquisition on May 1, 2002, we are
also a provider of medical staffing to military treatment facilities. In
addition to providing physician staffing in various specialties within military
treatment facilities, we also provide to such facilities a broad array of
non-physician healthcare services, including specialty technical staffing,
para-professionals and nurse staffing on a permanent basis.

     While we are a national company, our services are delivered through a
regional structure of operating offices located in key healthcare markets. The
responsibility for managing the customer and physician relationships and
healthcare services provided resides in these regional offices. The intent of
this regional operating model is to provide a localized presence in the markets
in which we operate, while providing the benefits of scale in centralized
administrative and other back office functions that accrue to a larger, national
company. Our operating models include comprehensive programs for emergency
medicine, radiology, anesthesiology, inpatient care, pediatrics and other
healthcare services, principally within hospital departments and other
healthcare treatment facilities, including military treatment facilities. We
primarily provide permanent staffing that enables management of hospitals and
other healthcare facilities to outsource their recruiting, hiring, payroll and
benefits functions. We recruit and hire or subcontract with healthcare
professionals who then provide professional services within the healthcare
facilities with which we contract. Currently, we provide permanent staffing,
management and administrative services to approximately 441 hospitals, imaging
centers, surgery centers, clinics and military treatment facilities in 42
states.

     The range of physician and non-physician staffing and administrative
services that we provide includes the following:

     - recruiting, scheduling and credentials coordination for clinical and
       non-clinical medical professionals,

     - administrative support services, such as payroll, insurance coverage,
       continuing education services and management training, and

     - coding, billing and collection of fees for services provided by medical
       professionals.

     Our historical focus has primarily been on providing outsourced services to
emergency departments, which accounted for approximately 66% of our net revenue
less provision for uncollectibles in 2004. The emergency departments that we
staff are generally located in larger hospitals with emergency departments whose
patient volumes are more than 15,000 patient visits per year. In higher volume
emergency departments, we believe our experience and expertise in such a complex
environment enables our hospital clients to provide high quality and efficient
physician and administrative services. In this type of environment we can
generate profitable margins, establish stable long-term relationships, obtain
attractive payer mixes and recruit and retain high quality physicians and other
providers and staff.

     The provision of permanent healthcare staffing services to military
treatment facilities accounted for approximately 21% of our net revenue less
provision for uncollectibles in 2004. We significantly expanded our overall base
of business in 2002 by acquiring a provider of permanent healthcare staffing
services to military treatment facilities. This acquisition provided an entry
into a portion of the healthcare staffing market not previously served by us. At
the time of this acquisition in 2002, permanent staffing agreements existed on a
three-way basis to include a military hospital or clinic, a TRICARE (the U.S.
military healthcare payer system) Regional Managed Care Support Contractor
("MCSC"'), which functioned as the paying entity, and us. As discussed later,
the Tricare Program significantly changed in 2004 its contracting for healthcare
staffing that on an annual basis will have a material impact on our earnings and
cash flow. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Tricare Program."
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FEE-FOR-SERVICE BILLING SYSTEM

     The majority of our fee-for-service patient visits are for the provision of
emergency care in hospital settings. Due to federal government regulations
governing the providing of such care, we are obligated to provide emergency care
regardless of the patient's ability to pay or whether or not the patient has
insurance or other third-party coverage for the cost of the services rendered.
While we attempt to obtain all relevant billing information at the time
emergency care services are rendered, there are numerous patient encounters
where such information is not available at time of discharge. In such cases
where detailed billing information relative to insurance or other third-party
coverage is not available at discharge, we attempt to obtain such information
from the patient or client hospital billing record information subsequent to
discharge to facilitate the collections process. Collections at the time of
rendering such services (emergency room discharge) are not significant.

     Approximately 97% of our approximate six million fee-for-service patient
visits are billed on our automated IDX billing system. The entering of patient
data is principally manual in nature. We maintain within the IDX billing system
fee schedules that vary for the level of care rendered. In addition, within the
IDX billing system we maintain contractually agreed to in the case of commercial
and managed care insurance and reimbursement policy parameters in the case of
governmental payers to allow us to bill such payers at levels that are less than
the gross charges resulting from our fee schedules. Our IDX billing system
calculates the contractual allowances at the time of processing of third-party
payer remittances. The contractual allowance calculation within the IDX system
is used principally to determine the propriety of subsequent third-party payer
payments. The nature of emergency care services and the requirement to treat all
patients in need of such care and often times under circumstances where complete
and accurate billing information is not readily available at the time of
discharge, precludes the use of the IDX system to accurately determine
contractual allowances for financial reporting purposes. As a result, management
estimates its Net Revenue Less Provision, which is our revenue estimated to be
collected after considering our contractual allowance obligations and our
estimates of doubtful accounts, as further discussed in detail in the
Management's Discussion and Analysis section of this Form 10-K filing. The
determination of the difference between gross charges and estimated net
collections as to the allocation for financial reporting purposes between
contractual allowances and doubtful accounts is based on historical trended
factors such as actual adjudicated claims resulting in known contractual
allowances trends and actual uncollectible accounts receivable write-off
experience.

INDUSTRY OVERVIEW

     According to the Centers for Medicare and Medicaid Services ("CMS"),
national healthcare spending in 2003 increased 7.8%, compared to an increase of
9.3% in 2002. Healthcare spending grew 3% faster than the overall economy as
measured by the growth of domestic product ("GDP"). The healthcare share of the
GDP increased from 14.9% in 2002 to 15.3% in 2003. Growth in public-sector
healthcare spending increased by 6.6% in 2003, and private-sector healthcare
spending increased by 8.6% in 2003. Hospital services have historically
represented the single largest component on this spending, accounting for
approximately 30.7% of total healthcare spending in 2003, an increase of 8.5%
from 2002.

     In the increasingly complex healthcare regulatory, managed care and
reimbursement environment, healthcare facilities are under significant pressure
from the government and private payers to both improve the quality and reduce
the cost of care. In response, such healthcare facilities have increasingly
outsourced the staffing and management of multiple clinical areas to contract
management companies with specialized skills and a standardized model to improve
service, increase the overall quality of care and reduce administrative costs.
In addition, we believe the healthcare industry is continuing to experience an
increasing trend toward outpatient treatment rather than the traditional
inpatient treatment. Healthcare reform efforts in recent years have placed an
increasing emphasis on reducing the time patients spend in hospitals. As a
result, we believe the severity of illnesses and injuries treated in an
emergency department or other hospital setting is likely to continue to
increase.

     Emergency Medicine.  According to the American Hospital Association about
4,000 community hospitals in the United States operate emergency departments,
and approximately 83% of these hospitals outsource their physician staffing and
management for this department. In 2002, emergency department

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expenditures were approximately $75.0 billion, with emergency physician services
accounting for approximately $26.0 billion. In 2003, emergency departments
handled over 111 million patient visits an increase in emergency visits of 11.6%
in five years. According to the American College of Emergency Physicians, up to
50% of all hospital inpatient admissions originate in the emergency department.
In addition, the average number of patient visits per hospital emergency
department increased at a compounded annual growth rate of approximately 4%
between 1998 and 2002.

     The market for outsourced emergency department medical and administrative
services is highly fragmented. Approximately 64% of the market is served by a
large number of small, local and regional physician groups. These local
providers often lack the depth of services and administrative and systems
infrastructure necessary to compete with national providers in the increasingly
complex healthcare business and regulatory environment.

     Military Staffing.  Permanent civilian staffing is used extensively in
military treatment facilities today. Industry sources project the military
permanent medical staffing market to increase from $572 million to at least $765
million over the next five years, representing a 6% compounded annual growth
rate. Military hospitals have been innovators and early adopters of permanent
staffing. Faced with insufficient staffing levels and the inability to
effectively recruit and retain sufficient numbers of physicians and nurses,
military hospitals were losing patients to more costly civilian hospitals. By
increasing staffing levels, the military has been able to leverage excess
facility space and "recapture" medical services, providing them on base at a
lower cost to the federal government.

     The medical staffing market in governmental settings is expected to
experience continued growth due to the growth of military healthcare
expenditures coupled with the well-documented shortage of nurses and other
healthcare professionals. The key growth drivers of the governmental staffing
market are:

     - government "Optimization" plan implementation. The government is
       critically aware of the healthcare costs it bears when individuals
       entitled to military healthcare go off base for healthcare treatments. As
       such, it has implemented an "Optimization"' plan that seeks to recapture
       this spending primarily through increased staffing levels of healthcare
       providers on base. By recapturing medical services through augmented
       military staffing, we estimate that the government has spent
       approximately $500 million less in the community in 2003 and is targeting
       to increase its savings by at least 10% per year,

     - DOD Transformation has a renewed focus by the Secretary of Defense. As
       the active duty fighting forces are stretched globally with the global
       war on terrorism, the Secretary has made it a priority to offset an
       increase in the amount of frontline troops by a decrease in active duty
       and government employed staff in areas that do not require soldiers,
       sailors, and airmen to accomplish military missions. One of the areas
       targeted for reduction of such personnel is the medical staff directly
       hired by the Department of Defense which numbers approximately 131,000
       active duty and government employed staff. Over the next five years the
       Department of Defense is targeting about 10,000 of the active duty
       positions for conversion to civilian positions. The number of
       beneficiaries requiring care inside the military system will not be
       reduced and may increase as the optimization plans succeed, so the
       government will need to either contract for additional healthcare
       professionals or direct hire additional staff to help manage the overall
       healthcare cost of the program, and

     - The global war on terror presents additional healthcare professional
       staffing opportunities. As military healthcare professionals are deployed
       overseas in front line hospital units to support the fighting force, the
       opportunity to provide staff in the military hospitals on the "home
       front" creates the need for more contracted healthcare professionals. The
       deployments typically last nine to twelve months for the military
       healthcare professionals.

     Radiology.  Based on data from the American Medical Association and the
American College of Radiology, there are about 26,000 practicing radiologists,
and about 1,000 of them are retiring each year. Yet only about 700 residency and
fellowship grads finished training in 2003. The demand for radiologists is
estimated to be growing by approximately 5% a year due to an increasing
population and advancements in radiological procedures, while the supply of
radiologists is growing at a lower rate of 2-3% per year. The national shortage
of radiologists presents an advantage to a company like ours that has the
resources to

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effectively recruit in the current employment marketplace. The current market
for radiologists and their services has altered the traditional fee-for-service
compensation arrangement with a hospital. In today's market for radiology
services we more frequently are entering into cost-plus arrangements with
hospitals. These arrangements reduce our economic risk for such services in a
time of escalating professional compensation for radiologists in general. The
market for outsourced radiology services is highly fragmented and served by a
large number of small, local and, to a lesser extent, regional radiology groups.
Smaller radiology groups are often at a competitive disadvantage since they
often lack the capital, range of medical equipment, teleradiology night time
support and information systems required to meet the increasingly complex needs
of hospitals.

     Anesthesiology.  The American Society of Anesthesiologists estimates that
40 million anesthetics are administered each year in America and that 90%
involve an MD anesthesiologist ("MDA"). The net collected total revenue market
for anesthesiologist services is estimated to be $11.5 billion. This market is
served primarily by groups of physicians whose size ranges from 10-20 MDAs.
There are very few groups having in excess of 60 MDAs per group. The groups are
largely self-governed and many enjoy exclusive contracts with hospitals and
outpatient centers requiring anesthesia services. The majority of the groups
require various management services with most groups contracting out their
billing needs to third-party providers of such services. There is not a dominant
provider of management services to anesthesia groups. We believe that we are one
of the largest single providers of management services to anesthesia groups.

     Inpatient Services (Hospitalist).  According to the Society of Hospital
Medicine ("SHM"), a hospitalist is "a doctor whose primary professional focus is
the general medical care of hospitalized patients." A recent study by the SHM
indicates that hospitals employed 75% more hospitalists in 2003 than in 2002.
There are presently approximately 8,000 practicing hospitalists in the U.S., and
a recent analysis projects a hospitalist workforce of approximately 30,000 by
the end of the decade. According to a report published by Health Affairs in
2003, 46% of nationwide medical groups use hospitalists today to coordinate the
care of their hospital patients. An article in the January 2002 issue of the
Journal of the American Medical Association reported that the implementation of
hospitalist programs was associated with significant reductions in resource use,
usually measured as hospital costs (average decrease of 13.4%) or average length
of stay (average decrease of 16.6%). The December 2002 issue of the Annals of
Internal Medicine published a study that concluded that hospitalist-attended
patients have lower costs, shorter lengths of stay and better outcomes,
including higher survival rates.

     There are several factors that portend continued growth of the hospitalist
model, including cost pressures on hospitals, physician groups and managed care
organizations; the increased acuity of hospitalized patients and the accelerated
pace of their hospitalizations; and the time pressures of primary care
physicians in the office. We believe there is potential for significant growth
in this service line over the coming years.

COMPETITIVE STRENGTHS

     Leading Market Position.  We believe we are among the largest national
providers of outsourced emergency physician staffing and administrative services
in the United States and a significant provider of healthcare staffing on a
permanent basis to military treatment facilities under the U.S. government's
TRICARE Program. We believe our ability to spread the cost of our corporate
infrastructure over a broad national contract and revenue base generates
significant cost efficiencies that are generally not available to smaller
competitors. As a full-service provider with a comprehensive understanding of
changing healthcare regulations and policies and the management information
systems that provide support to manage these changes, we believe we are well
positioned to maintain and grow our market share from other service providers.

     The provision of healthcare staffing under the TRICARE Program changed
significantly in 2004. We believe our abilities and strengths in providing
outsourced permanent healthcare staffing to military treatment facilities were
significant factors in successfully competing for military staffing business
under the revised TRICARE Program.

     Regional Operating Models Supported by a National Infrastructure.  We
service our agreements from 14 regional management sites organized under eight
operating units, which allows us to deliver locally focused

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services with the resources and sophistication of a national provider. Our local
presence helps us foster community based relationships with healthcare
facilities, which we believe results in responsive service and high physician
retention rates. Our strong relationships in local markets enable us to
effectively market our services to both local hospital and military treatment
facility administrators, who generally are involved in making decisions
regarding contract awards and renewals. Our regional operating units are
supported by our national infrastructure, which includes integrated information
systems and standardized procedures that enable us to efficiently manage the
operations and billing and collections processes. We also provide each of our
regional management sites with centralized staffing support, purchasing
economies of scale, payroll administration, coordinated marketing efforts and
risk management. We believe our regional operating models supported by our
national infrastructure improve productivity and quality of care while reducing
the cost of care.

     Significant Investment in Information Systems and Procedures.  Our
proprietary information systems link our billing, collection, recruiting,
scheduling, credentials coordination and payroll functions among our regional
management sites, allowing our best practices and procedures to be delivered and
implemented nationally while retaining the familiarity and flexibility of a
regionally-based service provider. We have developed and maintain integrated,
advanced systems to facilitate the exchange of information among our operating
units and clients. These systems include our Lawson financial reporting system,
IDX Billing System and our TeamWorks(TM) physician database and software
package. As a result of these investments and the company-wide application of
best practices policies, we believe our average cost per patient billed and
average recruiting cost per physician and other healthcare professionals are
among the lowest in the industry. The strength of our information systems has
enhanced our ability to properly collect patient payments and reimbursements in
an orderly and timely fashion and has increased our billing and collections
productivity.

     Ability to Recruit and Retain High Quality Physicians.  A key to our
success has been our ability to recruit and retain high quality physicians to
service our contracts. While our local presence gives us the knowledge to
properly match physicians with hospitals and military treatment facilities, our
national presence and infrastructure enable us to provide physicians with a
variety of attractive client locations, advanced information and reimbursement
systems and standardized procedures. Furthermore, we offer physicians
substantial flexibility in terms of geographic location, type of facility,
scheduling of work hours, benefit packages and opportunities for relocation and
career development. This flexibility, combined with fewer administrative
burdens, improves physician retention rates and stabilizes our contract base. We
believe we have among the highest physician retention rates in the industry.

     Experienced Management Team with Significant Equity Ownership.  Our senior
management team has extensive experience in the outsourced physician staffing
and administrative services industry. Our Chief Executive Officer, H. Lynn
Massingale, M.D., has been with Team Health and its predecessor entity since its
founding in 1979. Our senior corporate and affiliate executives have an average
of over 20 years experience in the outsourced physician staffing and medical
services industries. Members of our management team have, with the inclusion of
performance-based options, an indirect fully diluted ownership interest of
approximately 18.4% of Team Health, Inc. As a result of its substantial equity
interest, we believe our management team has significant incentive to maintain
its existing client base through the continued provision of high quality
services to them and to continue to increase our revenue and profitability
through new growth.

BUSINESS STRATEGY

     Increase Revenue from Existing Customers.  We have a record of achieving
growth in revenue from our existing customer base. In 2004, net revenue less
provision for uncollectibles from same contracts, which consist of contracts
under management from the beginning of the period through the end of the
subsequent period, grew by approximately 4.2% on a year over year basis. We plan
to continue to grow revenue from existing customers by:

     - capitalizing on increasing patient volumes,

     - implementing enhanced point of service capture of demographic data to
       result in improved billing and collection for services rendered,

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     - continuing to improve documentation of care delivered, thereby capturing
       full reimbursement for services provided,

     - implementing fee schedule increases, where appropriate,

     - increasing the scope of services offered within contracted healthcare
       facilities,

     - capitalizing on our financial strength and resources with respect to
       potential clients looking for financial stability, and

     - increasing staffing levels and expanding services at current military
       sites of service to recapture patients who receive services off base as a
       result of military facilities outsourcing their staffing needs.

     Capitalize on Outsourcing Opportunities to Win New Contracts.  We believe
we are well positioned to capitalize on the growth of the overall healthcare
industry as well as the growth of the hospital outsourcing market and the
military permanent staffing market due to our:

     - demonstrated ability to improve productivity, patient satisfaction and
       quality of care while reducing overall cost to the healthcare facility,

     - successful record of recruiting and retaining high quality physicians and
       other healthcare professionals,

     - national presence,

     - sophisticated information systems and standardized procedures that enable
       us to efficiently manage our core staffing and administrative services as
       well as the complexities of the billing and collections process, and

     - financial strength and resources.

     Furthermore, we seek to obtain new contracts by:

     - replacing competitors at hospitals that currently outsource their
       services,

     - obtaining new contracts from healthcare facilities that do not currently
       outsource, and

     - expanding our present base of military treatment facility contracts by
       successfully competing for new staffing contracts.

     During the past three years, we have been awarded 73 new outsourced
contracts, excluding contracts to service areas within military treatment
facilities with outsourced healthcare staffing. During 2004, all of our
contracts to service military treatment facilities were re-contracted.

     Focus on Risk Management.  Through our risk management staff, quality
assurance staff and medical directors, we conduct an aggressive risk management
program for loss prevention and early intervention. We have a proactive role in
promoting early reporting, evaluation and resolution of serious incidents that
may evolve into claims or suits. The risk management function is designed to
prevent or minimize medical professional liability claims and includes:

     - incident reporting systems,

     - tracking/trending the cause of accidents and claims,

     - pre-hire risk evaluation and screening, semi-annual risk review for all
       providers,

     - risk management quality improvement programs,

     - physician education and service programs, including peer review and
       monitoring,

     - loss prevention information such as audio tapes and risk alert bulletins,
       and

     - early intervention of potential professional liability claims and
       pre-deposition review.

     Pursue Selective Acquisitions.  We intend to selectively explore small
strategic acquisitions in the fragmented outsourcing market. We have
successfully completed and integrated seven acquisitions (excluding the
acquisition of a military staffing company in 2002) in the past three years for
an aggregate purchase price of approximately $21.3 million. The acquisitions
that we may explore are limited by certain restrictions in our
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credit facilities. Under the credit facilities the cash consideration paid in
connection with acquisitions may not exceed $20 million per acquisition and $40
million for all acquisitions consummated in any fiscal year and we must
demonstrate pro forma compliance with our financial covenants after taking the
acquisitions into account.

CONTRACTUAL ARRANGEMENTS

     In 2004, approximately 60% of our net revenue less provision for
uncollectibles was generated under fee-for-service arrangements and 37% from
hourly rate contracts. On a contract by contract basis, neither form of contract
requires any significant financial outlay, investment obligation or equipment
purchase by us other than the professional expenses associated with obtaining
and staffing the contracts.

     Our contracts with hospitals generally have terms of three years. Our
present contracts with military treatment facilities are generally for one year.
Both types of contracts often include automatic renewal options under similar
terms and conditions unless either party gives notice of an intent not to renew.
While most contracts are terminable by either of the parties upon notice of as
little as 30 days, the average tenure of our existing hospital contracts is
approximately eight years. The military's TRICARE Program underwent significant
changes that began in June 2004. The principal change was that previously
existing healthcare staffing contracts under the TRICARE Program were
re-contracted during the period June 1, 2004 through November 1, 2004. The
re-contracting process was conducted by each military facility primarily through
a competitive bidding process resulting in a direct contracting relationship
between the military facility and the successful bidder.

     Hospitals.  We provide outsourced physician staffing and administrative
services to hospitals under fee-for-service contracts and flat-rate contracts.
Hospitals entering into fee-for-service contracts agree, in exchange for
granting exclusivity to us for such services, to authorize us to bill and
collect the professional component of the charges for such professional
services. Under the fee-for-service arrangements, we bill patients and third
party payers for services rendered. Depending on the underlying economics of the
services provided to the hospital, including its payer mix, we may also receive
supplemental revenue from the hospital. In a fee-for service arrangement, we
accept responsibility for billing and collection.

     Under flat-rate contracts, the hospital performs the billing and collection
services of the professional component and assumes the risk of collectibility.
In return for providing the physician staffing and administrative services, the
hospital pays a contractually negotiated fee.

     Military Treatment Facilities.  Our present contracts to provide staffing
solutions to military treatment facilities provide such staffing on an hourly or
fee basis.

     Physicians.  We contract with physicians as independent contractors or
employees to provide services to fulfill our contractual obligations to our
hospital clients. We typically either pay physicians: (1) an hourly rate for
each hour of coverage provided at rates comparable to the market in which they
work; (2) a relative value unit ("RVU") based payment, or (3) a combination of
both a fixed rate and a RVU-based component. The hourly rate varies depending on
whether the physician is independently contracted or an employee. Independently
contracted physicians are required to pay a self-employment tax, social
security, and workers' compensation insurance premiums. In contrast, we pay
these taxes and expenses for employed physicians.

     Our contracts with physicians generally have "evergreen" provisions and can
be terminated at any time under certain circumstances by either party without
cause, typically upon 180 days notice. In addition, we generally require the
physician to sign a non-compete and non-solicitation agreement. Although the
terms of our non-compete agreements vary from physician to physician, the
non-compete agreements generally have terms of two years after the termination
of the agreement. We also generally require our employed physicians to sign
similar non-compete agreements. Under these agreements, the physician is
restricted from divulging confidential information, soliciting or hiring our
employees and physicians, inducing termination of our agreements and competing
for and/or soliciting our clients. As of December 31, 2004, we had working
relationships with approximately 3,100 physicians, of which approximately 2,500
were independently contracted.

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     Other Healthcare Professionals.  We provide through contractual agreements,
para-professional providers, nurses, specialty technicians and administrative
support staff on a long-term contractual basis to military treatment facilities.
These healthcare professionals under our current military staffing contracts are
compensated for on an hourly fee basis. See "Risk factors -- Risks related to
our business -- We may not be able to successfully recruit and retain qualified
physicians to serve as our independent contractors or employees." As of December
31, 2004, we employed or contracted with approximately 3,100 other healthcare
professionals.

SERVICE LINES

     We provide a full range of outsourced physician staffing and administrative
services in emergency medicine, radiology, anesthesiology, inpatient services,
pediatrics, and other departments of a hospital. We also provide a full range of
healthcare management services to military treatment facilities for the
beneficiaries of U.S. military personnel through the TRICARE program. In
addition to physician related services within a military treatment facility
setting, we also provide non-physician staffing services to military treatment
facilities, including such services as para-professional providers, nursing,
specialty technicians and administrative staffing. As hospitals and other
healthcare providers continue to experience pressure from managed care companies
and other payers to reduce costs while maintaining or improving the quality of
service, we believe hospitals and other contracting parties will increasingly
turn to a single-source with an established track record of success for
outsourced physician staffing and administrative services. As the outsourcing
trend continues, we believe our delivery platform of regional site management
supported by a national infrastructure will result in higher customer
satisfaction and a more stable contract base than many of our larger
competitors.

     Emergency Department.  We believe we are one of the largest providers of
outsourced physician staffing and administrative services for hospital emergency
departments in the United States. Approximately 66% of our net revenue less
provision for uncollectibles in 2004 came from hospital emergency department
contracts. As of December 31, 2004, we independently contracted with or employed
approximately 2,200 hospital emergency department physicians. We contract with
the hospital to provide qualified emergency physicians and other healthcare
providers for the hospital emergency department. In addition to the core
services of contract management, recruiting, credentials coordination, staffing
and scheduling, we provide our client hospitals with enhanced services designed
to improve the efficiency and effectiveness of the emergency department.
Specific programs like WaitLoss(TM) apply proven process improvement
methodologies to departmental operations. Physician documentation templates
promote compliance with federal documentation guidelines, enhance patient care
and risk management and allow for more accurate patient billing. By providing
these enhanced services, we believe we increase the value of services we provide
to our clients and improve client relations. Additionally, we believe these
enhanced services also differentiate us in sales situations and improve the
chances of being selected in a contract bidding process.

     In the past three years, Team Health acquired 17 contracts as a result of
the acquisition of two hospital emergency department and physician groups. The
acquired hospital emergency department contracts were generally with hospitals
in large markets with an average patient volume exceeding 15,000 visits per
year. During this period we have also successfully negotiated 51 new outsourced
hospital emergency department contracts. These contracts have been obtained
either through direct selling or through a competitive bidding process initiated
by hospitals.

     Partially offsetting the growth in the number of hospital emergency
department contracts attributed to acquisitions and direct sales are contract
terminations. In the past three years, 74 hospital emergency department
contracts in total were terminated. Contract terminations can be attributed to a
number of factors. The termination of a contract is principally due to either an
award of the contract to another source of provider staffing as a result of a
competitive bidding process or termination of the contract by us due to a lack
of an acceptable profit margin on fee-for-service patient volumes coupled with
inadequate contract subsidies. Additionally, to a much lesser extent contracts
may be terminated due to such conditions as a hospital facility closing due to
facility mergers or a hospital attempting to insource the service being provided
by us. In 2004, we experienced a net loss of five emergency department
contracts. During 2003 and 2004, we terminated a number of contracts due to the
cost of professional liability insurance affecting the profitability of certain
contracts on a localized market basis.

                                        8
<PAGE>

     Radiology.  We provide outsourced radiology physician staffing and
administrative services in the United States both on a fee-for-service basis, as
well as on a cost-plus basis with hospitals. We contract directly with
radiologists to provide radiology physician staffing and administrative
services. A typical radiology management team consists of clinical
professionals, board certified radiologists that are trained in all modalities,
and non-clinical professionals and support staff that are responsible for the
scheduling, purchasing, billing and collections functions. A smaller component
of our radiology business is our teleradiology support services. The customers
for these services are typically radiologists or radiology groups. The business
provides nighttime support to our customers from a centralized reading location.
As of December 31, 2004, we independently contracted with or employed
approximately 90 radiologists. We have traditionally focused on the
hospital-based radiology market, although we also maintain contracts with
outpatient diagnostic imaging centers.

     Temporary Staffing.  We provide temporary staffing (locum tenens) of
physicians and paraprofessionals to hospitals and other healthcare provider
organizations through our subsidiary Daniel and Yeager, Inc. ("Daniel and
Yeager"). Specialties placed through Daniel and Yeager include anesthesiology,
radiology and primary care among others. Revenues from our services are
generally derived from a standard contract rate based upon the type of service
provided.

     Inpatient Services.  We also provide outsourced physician staffing and
administrative services for inpatient services, which include hospitalist
services and house coverage services. Our inpatient services contracts with
hospitals are generally on a cost-plus or flat rate basis. As of December 31,
2004, we independently contracted with or employed approximately 170 inpatient
physicians.

     Anesthesiology.  We provide a wide range of management services to
anesthesiology practices on a fee basis including strategic management,
management information systems, third-party payer contracting, financial and
accounting support, benefits administration and risk management, scheduling
support, operations management and quality improvement services using
proprietary anesthesia management practice software. We also arrange for the
provision of billing and other management services on a management fee basis to
anesthesiologist practices. Our anesthesiologist services are organized under an
anesthesiologist operating unit known as "THAMS" (Team Health Anesthesiology
Management Services). THAMS currently provides management and/or billing
services to 16 integrated anesthesia practices whose members number
approximately 600 providers. Overall, we are able to offer essential services to
anesthesiologist groups that enable them to focus on the clinical practice of
medicine while leaving the day-to-day business management issues related to
their groups to us.

     Pediatrics.  We also provide outsourced pediatrics physician staffing and
administrative services for general and pediatric hospitals. These services
include pediatric emergency medicine and radiology, neonatal intensive care,
pediatric intensive care, urgent care centers, primary care centers, observation
units and inpatient services. As of December 31, 2004, we independently
contracted with or employed approximately 210 pediatric physicians providing
pediatric services in such settings. We have experienced net revenue and
contract growth in our outsourced pediatric physician staffing and
administrative services business due primarily to new contract sales and
acquisitions, and to a lesser extent, rate increases on existing contracts. We
also operate six after-hours and weekend pediatric services locations. During
2004, we opened one after-hours and weekend pediatric services location.

     Primary Care Clinics and Occupational Medicine.  We provide primary care
staffing and administrative services in stand-alone primary clinics and in
clinics located within the work-site of industrial clients. While such clinics
are not a major focus of our business, they are complementary to our hospital
client's interests. We generally contract with hospitals or industrial employers
to provide cost-effective, high quality primary care physician staffing and
administrative services.

     Other Non-Physician Staffing Services.  Other non-physician staffing
services, including such services as nursing, specialty technician and
administrative staffing are provided primarily in military treatment facilities.
These services are currently provided on an hourly contract basis. Revenues less
provision derived from such non-physician staffing services were approximately
12% of our revenues in 2004.

                                        9
<PAGE>

SERVICES

     We provide a full range of outsourced physician and non-physician
healthcare professional staffing and administrative services for emergency
medicine, radiology, anesthesiology, inpatient services, pediatrics, and other
areas of healthcare facilities.

     Our outsourced staffing and administrative services include:

     - contract management,

     - staffing,

     - recruiting,

     - credentials coordination,

     - scheduling,

     - payroll administration and benefits,

     - information systems,

     - consulting services,

     - billing and collection,

     - risk management,

     - continuing education services, and

     - management training.

     Contract Management.  Our delivery of services for a clinical area of a
healthcare facility is led by an experienced contract management team of
clinical and other healthcare professionals. The team includes a regional
medical director, an on-site medical director and a client services manager. The
medical director is a physician with the primary responsibility of managing the
physician component of a clinical area of the facility. The medical director
works with the team, in conjunction with the nursing staff and private medical
staff, to improve clinical quality and operational effectiveness. Additionally,
the medical director works closely with the regional operating unit operations
staff to meet the clinical area's ongoing recruiting and staffing needs.

     Staffing.  We provide a full range of staffing services to meet the unique
needs of each healthcare facility. Our dedicated clinical teams include
qualified, career-oriented physicians and other healthcare professionals
responsible for the delivery of high quality, cost-effective care. These teams
also rely on managerial personnel, many of whom have clinical experience, who
oversee the administration and operations of the clinical area. As a result of
our staffing services, healthcare facilities can focus their efforts on
improving their core business of providing healthcare services for their
communities as opposed to recruiting and managing physicians. We also provide
temporary staffing services of physicians and other healthcare professionals to
healthcare facilities on a national basis.

     Recruiting.  Many healthcare facilities lack the resources necessary to
identify and attract specialized, career-oriented physicians. We have a staff of
approximately 52 professionals dedicated to the recruitment of qualified
physicians. These professionals are regionally located and are focused on
matching qualified, career-oriented physicians with healthcare facilities.
Common recruiting methods include the use of our proprietary national physician
database, attending trade shows, placing website and professional journal
advertisements and telemarketing.

     We have committed significant resources to the development of a proprietary
national physician database to be shared among our regional operating units.
This database is in operation at all operating units. The database uses the
American Medical Association master file, which we believe contains over
1,000,000 physicians as the initial data source on potential candidates.
Recruiters contact prospects through telemarketing, direct mail, conventions,
journal advertising and our internet site to confirm and update the information.
Prospects expressing interest in one of our practice opportunities provide more
extensive information on their

                                        10
<PAGE>

training, experience, and references, all of which is added to our database. Our
goal is to ensure that the practitioner is a good match with both the facility
and the community before proceeding with an interview.

     Credentials Coordination.  We gather primary source information regarding
physicians to facilitate the review and evaluation of physicians' credentials by
healthcare facility.

     Scheduling.  Our scheduling department assists medical directors in
scheduling physicians and other healthcare professionals within the clinical
area on a monthly basis.

     Payroll Administration and Benefits.  We provide payroll administration
services for the physicians and other healthcare professionals with whom we
contract to provide physician staffing and administrative services. Our clinical
employees benefit significantly by our ability to aggregate physicians and other
healthcare professionals to negotiate more favorable employee benefit packages
and to provide professional liability coverage at lower rates than many
hospitals or physicians could negotiate on a stand-alone basis. Additionally,
healthcare facilities benefit from the elimination of the overhead costs
associated with the administration of payroll and, where applicable, employee
benefits.

     Information Systems.  We have invested in advanced information systems and
proprietary software packages designed to assist hospitals in lowering
administrative costs while improving the efficiency and productivity of a
clinical area. These systems include TeamWorks(TM), a national physician
database and software package that facilitates the recruitment and retention of
physicians and supports our contract requisition, credentials coordination,
automated application generation, scheduling and payroll operations.

     Consulting Services.  We have a long history of providing outsourced
physician staffing and administrative services to healthcare facilities and, as
a result, have developed extensive knowledge in the operations of certain areas
of the facilities we service. As such, we provide consulting services to
healthcare facilities to improve the productivity, quality and cost of care
delivered by them. These services include:

     - Process Improvement.  We have developed a number of utilization review
       programs designed to track patient flow and identify operating
       inefficiencies. To rectify such inefficiencies, we have developed a Fast
       Track system to expedite patient care in the hospital emergency
       department and urgent care center by separating patients who can be
       treated in a short period of time from patients who have more serious or
       time-consuming problems. Fast Track patients, once identified through
       appropriate triage categorization, are examined and treated in a separate
       area of the hospital emergency department and urgent care center,
       controlled by its own staff and operational system. We have substantial
       experience in all phases of development and management of Fast Track
       programs, including planning, equipping, policy and procedure
       development, and staffing. In addition, we employ WaitLoss(TM), a
       proprietary process improvement system designed to assist the hospital in
       improving the efficiency and productivity of a department.

     - Quality Improvement.  We provide a quality improvement program designed
       to assist a healthcare facility in maintaining a consistent level of high
       quality care. It periodically measures the performance of the healthcare
       facility, based on a variety of benchmarks, including patient volume,
       quality indicators and patient satisfaction. This program is typically
       integrated into our process improvement program to ensure seamless
       delivery of high quality, cost-effective care.

     - Managed Care Contracting.  We have developed extensive knowledge of the
       treatment protocols and related documentation requirements of a variety
       of managed care payers. As a result, we often participate in the
       negotiation of managed care contracts to make those managed care
       relationships effective for patients, payers, physicians and hospitals.
       We provide managed care consulting services in the areas of contracting,
       negotiating, reimbursement analysis/projections, payer/hospital
       relations, communications and marketing. We have existing managed care
       agreements with health maintenance organizations, preferred provider
       organizations and integrated delivery systems for commercial, Medicaid
       and Medicare products. While the majority of our agreements with payers
       continue to be traditional fee-for-service contracts, we are experienced
       in providing managed, prepaid healthcare to enrollees of managed care
       plans.

     - Nursing Services.  We maintain highly regarded, experienced nurse
       consultants on our client support staff. These nurse consultants provide
       assistance to nurse managers and medical directors of the client

                                        11
<PAGE>

healthcare facility on a variety of issues, including risk management and total
quality management. In addition, the nurse consultants are available to make
site visits to client facilities on request to assess overall operations,
      utilization of personnel and patient flow.

     Billing and Collection.  Our billing and collection services are a critical
component of our business. Excluding the military staffing business which has
its own proprietary billing processes, our billing and collections operations
are concentrated in five core-billing facilities and operate on a uniform
billing system -- the IDX software system. The IDX system has proven to be a
powerful billing and accounts receivable software package with strong reporting
capabilities. We have interfaced a number of other software systems with the IDX
system to further improve productivity and efficiency. Foremost among these is
an electronic registration interface that has the capability of gathering
registration information directly from a hospital's management information
system. Additionally, we have invested in electronic submission of claims, as
well as electronic remittance posting. These programs have resulted in lower
labor and postage expenses. At the present time, approximately 97% of our
approximately six million fee-for-service annual patient visits are being
processed by one of the five billing facilities.

     We also operate an internal collection agency. Substantially all collection
placements generated from our billing facilities are sent to the agency.
Comparative analysis has shown that the internal collection agency is more cost
effective than the use of outside agencies and improved the collectibility of
existing placements. Our advanced comprehensive billing and collection systems
allow us to have full control of accounts receivable at each step of the
process.

     Risk Management.  Through our risk management staff, quality assurance
staff and our medical directors, we conduct an aggressive risk management
program for loss prevention and early intervention. We have a proactive role in
promoting early reporting, evaluation and resolution of serious incidents that
may evolve into claims or suits. Our risk management function is designed to
prevent or minimize medical professional liability claims and includes:

     - incident reporting systems,

     - tracking/trending the cause of accidents and claims,

     - pre-hire risk assessment and screening, semi-annual risk review for all
       providers,

     - risk management quality improvement programs,

     - physician education and service programs, including peer review and
       monitoring,

     - loss prevention information such as audio tapes and risk alert bulletins,
       and

     - early intervention of potential professional liability claims and
       pre-deposition review.

     Continuing Education Services.  Our internal continuing education services
are fully accredited by the Accreditation Council for Continuing Medical
Education. This allows us to grant our physicians and nurses continuing
education credits for both externally and internally developed educational
programs at a lower cost than if such credits were earned through external
programs. In addition to providing life support certification courses, we have
designed a series of client support seminars entitled Successful Customer
Relations for physicians, nurses and other personnel to learn specific
techniques for becoming effective communicators and delivering top-quality
customer service. These seminars help the clinical team sharpen its customer
service skills, further develop communication skills and provide techniques to
help deal with people in many critical situations.

SALES AND MARKETING

     Contracts for outsourced physician staffing and administrative services are
generally obtained either through direct selling efforts or requests for
proposals. We have a team of seven sales professionals located throughout the
country. Each sales professional is responsible for developing sales and
acquisition opportunities for the operating unit in their territory. In addition
to direct selling, the sales professionals are responsible for working in
concert with the regional operating unit president and corporate development
personnel to respond to a request for proposal or take other steps to develop
new business relationships.

                                        12
<PAGE>

     Although practices vary from healthcare facility to healthcare facility,
healthcare facilities generally issue a request for proposal with demographic
information of the facility department, a list of services to be performed, the
length of the contract, the minimum qualifications of bidders, the selection
criteria and the format to be followed in the bid. Supporting the sales
professionals is a fully integrated marketing campaign comprised of a
telemarketing program, internet website, journal advertising, and a direct mail
and lead referral program.

OPERATIONS

     We currently operate through eight operating units with management located
at fourteen regional sites. Our regional sites are listed in the table below.
The operating units are managed semi-autonomously, in most cases by senior
physician leaders, and are operated as profit centers with the responsibility
for pricing new contracts, recruiting and scheduling physicians and other
healthcare professionals, marketing locally and conducting day-to-day
operations. The management of corporate functions such as accounting, payroll,
billing and collection, capital spending, information systems and legal are
centralized.

<Table>
<Caption>
NAME                                                LOCATION          PRINCIPAL SERVICES
----                                         ----------------------   ------------------
<S>                                          <C>                      <C>
AHP........................................        Tampa, FL             Pediatrics
Daniel and Yeager..........................      Huntsville, AL         Locum Tenens
Emergency Coverage Corporation.............      Knoxville, TN               ED
Emergency Physician Associates.............       Woodbury, NJ               ED
Emergency Professional Services............  Middleburg Heights, OH          ED
Healthcare Financial Services..............      Plantation, FL            Billing
InPhyNet Medical Management................    Ft. Lauderdale, FL            ED
Northwest Emergency Physicians.............       Seattle, WA                ED
Spectrum Healthcare Resources..............      St. Louis, MO        Military Staffing
Southeastern Emergency Physicians..........      Knoxville, TN               ED
Team Anesthesia............................      Knoxville, TN         Anesthesiology
Team Health Southwest......................       Houston, TX                ED
Team Health West...........................      Pleasanton, CA              ED
Team Radiology.............................      Knoxville, TN            Radiology
</Table>

INSURANCE

     We require the physicians with whom we contract to obtain professional
liability insurance coverage. For both our independently contracted and employed
physicians, we typically arrange the provision of claims-made coverage with per
incident and annual aggregate per physician limits and per incident and annual
aggregate limits for all corporate entities. These limits are deemed appropriate
by management based upon historical claims, the nature and risks of the business
and standard industry practice.

     Beginning in 2003, we began providing for a significant portion of our
professional liability loss exposures through the use of a captive insurance
company and through greater utilization of self-insurance reserves. We base a
substantial portion of our provision for professional liability losses on
periodic actuarial estimates of such losses for periods subsequent to March 11,
2003. An independent actuary firm is responsible for preparation of the periodic
actuarial studies.

     We are usually obligated to arrange for the provision of "tail" coverage
for claims against our physicians for incidents that are incurred but not
reported during periods for which the related risk was covered by claims-made
insurance. With respect to those physicians for whom we are obligated to provide
tail coverage, we accrue professional insurance expenses based on estimates of
the cost of procuring tail coverage.

     We also maintain general liability, vicarious liability, automobile
liability, property and other customary coverages in amounts deemed appropriate
by management based upon historical claims and the nature and risks of the
business.

                                        13
<PAGE>

EMPLOYEES

     As of December 31, 2004, we had approximately 5,800 employees, of which
approximately 3,600 were physicians and other healthcare professionals with
remaining employees working in billing and collections, operations and
administrative support functions. Our employees are not covered by any labor
agreements nor affiliated with any unions.

REGULATORY MATTERS

     General.  As a participant in the healthcare industry, our operations and
relationships with healthcare providers, such as hospitals, are subject to
extensive and increasing regulations by numerous federal and state governmental
entities, as well as local governmental entities. The management and clinical
services provided by us under contracts with hospitals and other clients include
(collectively, "Management Services"):

     - the identification and recruitment of physicians and other healthcare
       professionals for the performance of emergency medicine, radiology and
       other services at hospitals, outpatient imaging facilities and other
       facilities,

     - utilization and review of services and administrative overhead,

     - scheduling of staff physicians and other healthcare professionals who
       provide clinical coverage in designated areas of healthcare facilities,
       and

     - administrative services such as billing and collection of fees for
       professional services.

     All of the above services are potentially subject to scrutiny and review by
federal, state and local governmental entities and are subject to the rules and
regulations promulgated by these governmental entities. Specifically, but
without limitation, the following laws and regulations may affect our operations
and contractual relationships:

     State Laws Regarding Prohibition of Corporate Practice of Medicine and Fee
Splitting Arrangements. We currently provide outsourced physician staffing and
administrative services to healthcare facilities in 42 states. The laws and
regulations relating to our operations vary from state to state. The laws of
many states, including California, prohibit general business corporations, such
as us, from practicing medicine, controlling physicians' medical decisions or
engaging in some practices such as splitting professional fees with physicians.
In 2004, we derived approximately 10% of our net revenue less provision for
uncollectibles from services rendered in the state of California. The laws of
other states, including Florida, do not prohibit non-physician entities from
practicing medicine, but may retain a ban on some types of fee splitting
arrangements. In 2004, we derived approximately 17% of our net revenues less
provision for uncollectibles from services rendered in the state of Florida.

     While we seek to comply substantially with existing applicable laws
relating to the corporate practice of medicine and fee splitting, we cannot
assure you that our existing contractual arrangements, including noncompetition
agreements with physicians, professional corporations and hospitals, will not be
successfully challenged in certain states as unenforceable or as constituting
the unlicensed practice of medicine or prohibited fee-splitting.

     Debt Collection Regulation.  Some of our operations are subject to
compliance with the federal Fair Debt Collection Practices Act and comparable
statutes in many states. Under the Fair Debt Collection Practices Act, a
third-party collection company is restricted in the methods it uses in
contacting consumer debtors and eliciting payments with respect to placed
accounts. Requirements under state collection agency statutes vary; however,
most require compliance similar to that required under the Fair Debt Collection
Practices Act. We believe that we are in substantial compliance with the Fair
Debt Collection Practices Act and comparable state statutes.

     Anti-Kickback Statutes.  We are subject to the federal healthcare fraud and
abuse laws including the federal anti-kickback statute. The federal
anti-kickback statute at section 1128B(b) of the Social Security Act ("SSA")
("Anti-Kickback Statute") prohibits the knowing and willful offering, payment,
solicitation or receipt of any bribe, kickback, rebate or other remuneration in
return for referring an individual to a person for the furnishing (or arranging
for the furnishing) of any item or service, or in return for the purchasing,
leasing,

                                        14
<PAGE>

ordering, or arranging for or recommending the purchasing, leasing, or ordering
of any good, facility, service, or item for which payment may be made, in whole
or in part, by a federal healthcare program. This fraud and abuse law defines
federal healthcare programs to include plans and programs that provide health
benefits, whether directly, through insurance, or otherwise, which are funded
directly by the United States government or any state healthcare program. These
programs include Medicare and Medicaid, and TRICARE (formerly the Civilian
Health and Medical Program of the Uniformed Services), among others. Violations
of the Anti-Kickback statute may result in civil and criminal penalties and
exclusion from participation in federal and state healthcare programs.

     As authorized by Congress, the United States Department of Health and Human
Services has issued "safe harbor" regulations which describe some of the conduct
and business relationships immune from prosecution under the Anti-Kickback
Statute. The fact that a given business arrangement does not fall within one of
these "safe harbor" provisions does not render the arrangement illegal, but
business arrangements of healthcare service providers that fail to satisfy the
applicable safe harbor criteria are reviewed based upon a facts and
circumstances analysis to determine whether a violation may have occurred. Some
of the financial arrangements that we may maintain may not meet all of the
requirements for safe harbor protection. The authorities that enforce the
Anti-Kickback Statute may in the future determine that one or more of these
financial arrangements violate the Anti- Kickback Statute or other federal or
state laws. A determination that a financial arrangement violates the
Anti-Kickback Statute could subject us to liability under the Social Security
Act, including criminal and civil penalties, as well as exclusion from
participation in government programs such as Medicare and Medicaid or other
federal healthcare programs.

     In addition, an increasing number of states in which we operate have laws
that prohibit some direct or indirect payments, similar to the Anti-Kickback
statute, if those payments are designed to induce or encourage the referral of
patients to a particular provider. Possible sanctions for violation of these
restrictions include exclusion from state funded healthcare programs, loss of
licensure, and civil and criminal penalties. Statutes vary from state to state,
are often vague, and have seldom been interpreted by courts or regulatory
agencies.

     In order to obtain additional clarification on the federal Anti-Kickback
statute, a provider can obtain written interpretative advisory opinions from the
Department of Health and Human Services ("HHS") regarding existing or
contemplated transactions. Advisory opinions are binding as to the Department of
Health and Human Services but only with respect to the requesting party or
parties. The advisory opinions are not binding as to other governmental
agencies, e.g., the Department of Justice, and certain matters (e.g., whether
certain payments made in conjunction with conduct seeking to meet certain safe
harbor protection are at fair market value) are not within the purview of an
advisory opinion.

     In 1998, the Office of Inspector General ("OIG") of HHS issued an advisory
opinion in which it concluded that a proposed management services contract
between a medical practice management company and a physician practice, which
provided that the management company would be reimbursed for the fair market
value of its operating services and its costs and paid a percentage of net
practice revenues, may constitute illegal remuneration under the federal
Anti-Kickback statute. The OIG's analysis focused on the marketing activities
conducted by the management company and concluded that the management services
arrangement described in the advisory opinion included financial incentives to
increase patient referrals, contained no safeguards against over utilization,
and included financial incentives that increased the risk of abusive billing
practices. We believe that our contractual relationships with hospitals and
physicians are distinguishable from the arrangement described in this advisory
opinion with regard to both the types of services provided and the risk factors
identified by the Inspector General. We provide outsourced physician staffing
and administrative services to hospitals and other healthcare providers through
contractual arrangements with physicians and hospitals. In some instances, we
may enter into a contractual arrangement that provides that, as compensation for
staffing a hospital department, we will receive a percentage of charges
generated by the physician services rendered to patients seeking treatment in
that department. However, the nature of our business distinguishes us from the
management company in the advisory opinion. We do not perform marketing or any
other management services for the hospital or the physicians by which we can
influence the number of patients who seek treatment at the hospital department
and thereby increase the compensation received by us from the hospital or paid
by us to physicians. Additionally, in any percentage compensation arrangement we
have with a hospital, the compensation paid to us by that hospital takes into
                                        15
<PAGE>

account only the professional services rendered by our physicians and does not
contain financial incentives to increase the referrals of patients by our
physicians to the hospital for hospital services. Nevertheless, we cannot assure
you that HHS will not be able to successfully challenge our arrangements under
the federal Anti-Kickback statute in the future.

     Physician Self-Referral Laws.  Our contractual arrangements with physicians
and hospitals may implicate the federal physician self-referral statute commonly
known as Stark II. In addition, a number of the states in which we operate have
similar prohibitions on physician self-referrals. In general, these state
prohibitions track Stark II's prohibitions and exceptions. Stark II prohibits
the referral of Medicare and (in certain contexts) Medicaid patients by a
physician to an entity for the provision of particular "designated health
services" if the physician or a member of such physician's immediate family has
a "financial relationship" with the entity.

     Stark II provides that the entity which renders the "designated health
services" may not present or cause to be presented a claim for "designated
health services" furnished pursuant to a prohibited referral. A person who
engages in a scheme to circumvent Stark II's prohibitions may be fined up to
$100,000 for each applicable arrangement or scheme. In addition, anyone who
presents or causes to be presented a claim in violation of Stark II is subject
to payment denials, mandatory refunds, monetary penalties of up to $15,000 per
service, an assessment of up to three times the amount claimed, and possible
exclusion from participation in federal healthcare programs.

     The term "designated health services" includes services commonly performed
or supplied by hospitals (including inpatient and outpatient hospital services)
or medical clinics to which we provide physician staffing. In addition, the term
"financial relationship" is broadly defined to include any direct or indirect
ownership or investment interest or compensation arrangement. There are a number
of exceptions to the self-referral prohibition, including exceptions for many of
the customary financial arrangements between physicians and providers, such as
employment contracts, leases, professional services agreements, non-cash gifts
having a value less than $300 and recruitment agreements. On January 4, 2001,
the Centers for Medicare & Medicaid Services ("CMS") issued a final rule,
subject to a comment period, intended to clarify parts of the Stark Law and some
of the exceptions to it. The majority of the regulations contained in this rule
became effective on or before January 4, 2002. On March 26, 2004, CMS issued an
interim final rule subject to a comment period intended to clarify the remaining
portions of the Stark Law. These rules, known as "phase two" of the Stark Law
rulemaking, became effective July 26, 2004. While these phase two rules help
clarify the requirements of the exceptions to the Stark Law, it is difficult to
determine fully their effect until the government begins enforcement of the
rules. Evolving interpretations of current laws and regulations, or the adoption
of new federal or state laws or regulations, could affect many of the
arrangements entered into by each of the hospitals with which we contract. In
addition, courts, Congress, and law enforcement authorities, including the OIG,
are increasing the scrutiny of arrangements between healthcare providers and
potential referral sources to ensure that the arrangements are not designed as a
mechanism to improperly pay for patient referrals and/or other business.

     Additionally, we are subject to state statutes and regulations that
prohibit, among other things, payments for referral of patients and referrals by
physicians to healthcare providers with whom the physicians have a financial
relationship. Violations of these state laws may result in prohibition of
payment for services rendered, loss of licenses, fines, and criminal penalties.
State statutes and regulations also may require physicians or other healthcare
professionals to disclose to patients any financial relationship the physicians
or healthcare professionals have with a healthcare provider that is recommended
to the patients. These laws and regulations vary significantly from state to
state, are often vague, and, in many cases, have not been interpreted by courts
or regulatory agencies. Exclusions and penalties, if applied to us, could result
in significant loss of reimbursement to us, thereby significantly affecting our
financial condition.

     Other Healthcare Fraud and Abuse Laws.  For example, section 1128B(a)(3) of
SSA imposes criminal liability on individuals who or entities which, having
knowledge of the occurrence of any event affecting their initial or continued
right to a benefit or payment under a Federal health program, or the initial or
continued right to any such benefit or payment of any other individual in whose
behalf they have applied for or are receiving such benefit or payment, conceal
or fail to disclose such event with an intent fraudulently to secure such
benefit or payment either in a greater amount or quantity than is due or when no
such benefit or payment

                                        16
<PAGE>

is authorized. A violation of this section by a healthcare provider is a felony,
and may result in fines up to $25,000 and exclusion from participation in
federal healthcare programs.

     The federal Civil False Claims Act imposes civil liability on individuals
and entities that submit or cause to be submitted false or fraudulent claims for
payment to the government. Violations of the Civil False Claims Act may include
treble damages and penalties of up to $11,000 per false or fraudulent claim.

     In addition to actions being brought under the Civil False Claims Act by
government officials, the False Claims Act also allows a private individual with
direct knowledge of fraud to bring a "whistleblower" or qui tam suit on behalf
of the government against a healthcare provider for violations of the Civil
False Claims Act. In that event, the whistleblower is responsible for initiating
a lawsuit that sets in motion a chain of events that may eventually lead to the
recovery of money by the government. After the whistleblower has initiated the
lawsuit, the government must decide whether to intervene in the lawsuit and to
become the primary prosecutor. In the event the government declines to join the
lawsuit, the whistleblower plaintiff may choose to pursue the case alone, in
which case the whistleblower will have primary control over the prosecution,
although the government must be kept apprised of the progress of the lawsuit and
will still receive at least 70% of any recovered amounts. In return for bringing
a whistleblower suit on the government's behalf, the whistleblower plaintiff
receives a statutory amount of up to 30% of the recovered amount from the
government's litigation proceeds if the litigation is successful. Recently, the
number of whistleblower suits brought against healthcare providers has increased
dramatically.

     In addition to the federal Civil False Claims Act, eleven states and the
District of Columbia have enacted false claims laws that allow these
jurisdictions to recover money which was fraudulently obtained by a healthcare
provider from the jurisdiction, such as Medicaid funds provided by the state.

     In addition to the Civil False Claims Act, under the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"), there are five additional
federal criminal statutes: "Healthcare fraud," "False statements relating to
healthcare matters," "Theft or embezzlement in connection with healthcare,"
"Obstruction of criminal investigations of healthcare offenses," and "Laundering
of monetary instruments." These HIPAA criminal statutes ostensibly encompass
fraud against private payers. Violations of these statutes constitute felonies
and may result in fines, imprisonment, and/or exclusion from
government-sponsored programs. The "healthcare fraud" provisions of HIPAA
prohibit knowingly and willfully executing a scheme or artifice to defraud any
healthcare benefit program, including private payers. The "false statements"
provisions of HIPAA prohibit knowingly and willfully falsifying, concealing or
covering up a material fact by any trick, scheme or device or making any
materially false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services.

     In addition to criminal and civil monetary penalties, healthcare providers
that are found to have defrauded the federal healthcare programs may be excluded
from participation in these programs. Providers that are excluded are not
entitled to receive payment under Medicare or other federal healthcare programs
for items or services provided to program beneficiaries. Exclusion for a minimum
of five years is mandatory for a conviction with respect to the delivery of a
healthcare item or service. The presence of aggravating circumstances in a case
can lead to a longer period of exclusion. The OIG also has the discretion to
exclude providers for certain conduct even absent a criminal conviction. Such
conduct includes participation in a fraud scheme, the payment or receipt of
kickbacks, and failing to provide services of a quality that meets
professionally recognized standards.

     The federal government has made a policy decision to significantly increase
the financial resources allocated to enforcing the general fraud and abuse laws.
In addition, private insurers and various state enforcement agencies have
increased their level of scrutiny of healthcare claims in an effort to identify
and prosecute fraudulent and abusive practices in the healthcare area. We are
subject to these increased enforcement activities and may be subject to specific
subpoenas and requests for information.

     Administrative Simplification.  HIPAA mandates the adoption of standards
for the exchange of electronic health information in an effort to encourage
overall administrative simplification and enhance the effectiveness and
efficiency of the healthcare industry. Ensuring privacy and security of patient
information was one of the key factors behind the legislation.

                                        17
<PAGE>

     In August 2000, HHS issued final regulations establishing electronic data
transmission standards that healthcare providers must use when submitting or
receiving certain healthcare data electronically. Most affected entities,
including us, were required to comply with these regulations by October 16, 2002
or request an extension to comply with these regulations by October 16, 2003
from CMS. We received confirmation from CMS of CMS's receipt of our request and
were therefore required to comply with these regulations by October 16, 2003. We
have completed the necessary actions to comply with these new standards and are
ready to convert electronic data into this new format as carriers notify us of
their ability to accept the format.

     In December 2000, HHS issued final regulations concerning the privacy of
healthcare information which were subsequently clarified in August 2002. These
regulations regulate the use and disclosure of individuals' healthcare
information, whether communicated electronically, on paper or verbally. Most
affected entities, including us, were required to comply with these regulations
by April 2003. The regulations also provide patients with significant new rights
related to understanding and controlling how their health information is used or
disclosed. We have entered into business associate agreements with our
affiliated providers, including physicians, hospitals and other covered
entities, and have entered into business associate agreements with our vendors
and believe we are in substantial compliance with the final regulations
concerning the privacy of healthcare information.

     In February 2003, CMS issued final regulations concerning the security of
electronic protected healthcare information and data. These regulations mandate
the use of certain administrative, physical and technical safeguards to protect
the confidentiality, integrity, and availability of electronic protected
healthcare information. Most affected entities, including us, are required to
comply with these regulations by April 21, 2005.

     In April 2003, CMS issued interim final regulations relating to the
enforcement and imposition of penalties on entities that violate the HIPAA
administrative simplification standards. These regulations are the first
installment of enforcement regulations which, when issued in complete form, will
set forth procedural and substantive requirements for the enforcement and
imposition of penalties under HIPPA. Sanctions under the statute include
criminal penalties and civil sanctions. We have established a plan and engaged
the resources necessary to comply with the administrative simplification
requirements of HIPAA. At this time, we believe our operations are currently
conducted in substantial compliance with these HIPAA requirements. Based on the
existing and proposed administrative simplification HIPAA regulations, we
believe that the cost of our compliance with HIPAA will not have a material
adverse effect on our business, financial condition, or results of operations.

     Related Laws and Guidelines.  Because we perform services at hospitals,
outpatient facilities and other types of healthcare facilities, we and our
affiliated physicians may be subject to laws which are applicable to those
entities. For example, our operations are impacted by the Emergency Medical
Treatment and Active Labor Act of 1986 which prohibits "patient dumping" by
requiring hospitals and hospital emergency department physicians or urgent care
center physicians to provide care to any patient presenting to the hospital's
emergency department or urgent care center in an emergent condition regardless
of the patient's ability to pay. Many states in which we operate have similar
state law provisions concerning patient dumping.

     In addition to the Emergency Medical Treatment and Active Labor Act of 1986
and its state law equivalents, significant aspects of our operations are subject
to state and federal statutes and regulations governing workplace health and
safety, dispensing of controlled substances and the disposal of medical waste.
Changes in ethical guidelines and operating standards of professional and trade
associations and private accreditation commissions such as the American Medical
Association and the Joint Commission on Accreditation of Healthcare
Organizations may also affect our operations. We believe our operations as
currently conducted are in substantial compliance with these laws and
guidelines.

BUSINESS RISKS

     We Derive a Substantial Portion of Our Net Revenue Less Provision for
Uncollectibles ($207.5 Million in 2004) from Services Provided to the Department
of Defense Under the TRICARE Program. This Program Underwent Significant Change
in 2004 That Will on an Annual Basis Have a Material Impact on Our Revenues and
Profits.  During 2004, the Company derived approximately $207.5 million of
revenue for all services rendered to military personnel and their dependents as
either a subcontractor under the TRICARE program administered by the Department
of Defense or through direct contracting with military treatment
                                        18
<PAGE>

facilities. The Company had historically provided its services principally
through subcontract arrangements with managed care organizations that contracted
directly with the TRICARE program. In 2004, the military subjected all of its
outsourced healthcare staffing to a re-bidding process with successful bidders
contracting directly with military treatment facilities.

     The Department of Defense and its various military branches began on June
1, 2004, awarding contracts for the civilian positions that it required going
forward. The process of awarding healthcare staffing contracts by the government
varied by branch of the military and by military base location within the
various branches of the military. The award process included soliciting requests
for proposals from organizations that provide civilian healthcare staffing,
including the use of restrictive government or military approved vendor lists,
some of which did not include the Company. In other instances, the military
re-bid its business on a basis that was inclusive of existing providers, such as
the Company, without the use of restricted vendor lists. Furthermore, the
awarding of certain bids was restricted to small business or minority qualified
businesses for which the Company was not eligible to even bid for the contracts.

     The annual revenue derived by the Company from the Tricare Program
contracts that was subject to re-bidding in 2004 was approximately $210.7
million. Based on the results of the military's re-bidding of all of its
healthcare staffing contracts in 2004, the Company was successful in either
retaining its previous staffing business or winning new staffing bids in the
approximate amount of $138.2 million, or 66% of its previous revenue. We
concluded that the results of such re-bidding would have a material adverse
impact on our revenues and cash flow in the future. In addition, due to the
reduced level of revenues and operating margins resulting from the re-bidding
process, the Company would experience a decline in its operating profit derived
from its military contracts.

     The Company recorded a goodwill impairment loss of $73.2 million in 2004 as
a result of the re-bidding process.

     We Could Be Subject to Professional Liability Lawsuits, Some of Which We
May Not Be Fully Insured Against or Reserved for.  In recent years, physicians,
hospitals and other participants in the healthcare industry have become subject
to an increasing number of lawsuits alleging medical malpractice and related
legal theories such as negligent hiring, supervision and credentialing, and
vicarious liability for acts of their employees or independent contractors. Many
of these lawsuits involve large claims and substantial defense costs. Although
we do not engage in the practice of medicine or provide medical services nor
control the practice of medicine by our affiliated physicians or physician
groups or the compliance with regulatory requirements applicable to the
physicians and physician groups with which we contract, we have been involved in
this type of litigation, and cannot assure you that we will not become so
involved in the future. In addition, through our management of hospital
departments and provision of non-physician healthcare personnel, patients who
receive care from physicians or other healthcare providers affiliated with
medical organizations and physician groups with whom we have a contractual
relationship could sue us.

     Prior to March 12, 2003, we had obtained professional liability insurance
from insurance companies to cover our professional liability loss exposures. Our
principal insurance policy in effect for such potential claims ended March 11,
2003. The insurance market for professional liability insurance coverage had
changed significantly since our last policy renewal. Several significant
insurance providers of such coverage have ceased to provide such coverage and
others announced substantial rate increases for such coverage. Because of our
significant volumes of patient visits, the number of insurance carriers in the
marketplace with the ability to provide such level of coverage for us became
increasingly more limited and, as a result, more costly. Effective March 12,
2003, we began insuring our professional liability risks principally through a
program of self-insurance reserves and a captive insurance company arrangement.
Under this program, we provide professional liability insurance to affiliated
physicians and other healthcare practitioners and establish reserves, using
actuarial estimates, for losses in respect of such insurance, as well as the
professional liability losses of Team Health and other corporate entities. These
losses are funded by our captive insurance company and, to the extent these
losses exceed the assets of our captive insurance company, may be funded by us.
The captive insurance company is subject to insurance regulatory laws and
regulations, including actuarially determined premiums and loss reserve
requirements. Under our current professional liability insurance program, our
exposure for claim losses under professional liability insurance policies
provided to affiliated physicians and other healthcare practitioners is limited
to the amounts of individual policy coverage limits but there is no

                                        19
<PAGE>

limit for aggregate claim losses incurred under all insurance provided to
affiliated physicians and other healthcare practitioners or for individual or
aggregate professional liability losses incurred by Team Health or other
corporate entities. While our provisions for professional liability claims and
expenses are determined through actuarial estimates, there can be no assurance
that such actuarial estimates will not be exceeded by actual losses and related
expenses in the future.

     We could be liable for claims against our affiliated physicians for
incidents incurred but not reported during periods for which claims-made
insurance covered the related risk. Under generally accepted accounting
principles, the cost of professional liability claims, which includes costs
associated with litigating or settling claims, is accrued when the incidents
that give rise to the claims occur. The accrual includes an estimate of the
losses that will result from incidents, which occurred during the claims-made
period, but were not reported during that period. These claims are referred to
as incurred-but-not-reported claims ("IBNR"). With respect to those physicians
for whom we provide tail coverage, for periods prior to March 12, 2003, we have
acquired from a commercial insurance company tail coverage for IBNR claims. We
cannot assure you that claim losses for periods prior to March 12, 2003, will
not exceed the limits of available insurance coverage or reserves established by
us for any losses in excess of such insurance coverage limits.

     Furthermore, for those portions of our professional liability losses that
are insured through commercial insurance companies, we are subject to the
"credit risk" of those insurance companies. While we believe our commercial
insurance company providers are currently creditworthy, there can be no
assurance that such insurance companies will remain so in the future.

     The Reserves That We Have Established in Respect of Our Professional
Liability Losses Are Subject to Inherent Uncertainties and if a Deficiency is
Determined This May Lead to a Reduction in Our Net Earnings. We have established
reserves for losses and related expenses, which represent estimates involving
actuarial and statistical projections, at a given point in time, of our
expectations of the ultimate resolution and administration of costs of losses
incurred in respect of professional liability risks for the period on and after
March 12, 2003. We have also established a reserve for potential losses in
excess of commercial insurance aggregate coverage limits for the period prior to
March 12, 2003. Insurance reserves are inherently subject to uncertainty. Our
reserves are based on historical claims, demographic factors, industry trends,
severity and exposure factors and other actuarial assumptions calculated by an
independent actuary firm. In a study completed in April 2004, based on
information as of January 31, 2004, the independent actuary firm projected that
ultimate cumulative losses for the March 12, 2003 to December 31, 2004 period,
undiscounted, will be in the range of $94.3 million to $136.0 million. The
independent actuary firm will perform studies of projected ultimate losses at
least annually. We use the actuarial estimates to establish reserves. Our
reserves could be significantly affected should current and future occurrences
differ from historical claim trends and expectations. While claims are monitored
closely when estimating reserves, the complexity of the claims and wide range of
potential outcomes often hampers timely adjustments to the assumptions used in
these estimates. Actual losses and related expenses may deviate, perhaps
substantially, from the reserve estimates reflected in our financial statements.
If our estimated reserves are determined to be inadequate, we will be required
to increase reserves at the time of such determination, which would result in a
corresponding reduction in our net earnings in the period in which such
deficiency is determined. See "Management's discussion and analysis of financial
condition and results of operations -- Critical accounting policies and
estimates -- Insurance reserves" and Note 12 of the notes to our consolidated
financial statements.

     We May Incur Substantial Costs Defending Our Interpretations of Government
Regulations and if We Lose, the Government Could Force Us to Restructure and
Subject Us to Fines, Monetary Penalties and Exclusion from Participation in
Government Sponsored Programs Such as Medicare and Medicaid.  Our operations and
arrangements with healthcare providers are subject to extensive government
regulation, including numerous laws directed at preventing fraud and abuse, laws
prohibiting general business corporations, such as us, from practicing medicine,
controlling physicians' medical decisions or engaging in some practices such as
splitting fees with physicians, and laws regulating billing and collection of
reimbursement from governmental programs, such as the Medicare and Medicaid
programs. Of particular importance are:

     - provisions of the Omnibus Budget Reconciliation Act of 1993, commonly
       referred to as Stark II, that, subject to limited exceptions, prohibit
       physicians from referring Medicare patients to an entity for the
       provision of certain "designated health services" if the physician or a
       member of such physician's

                                        20
<PAGE>

       immediate family has a direct or indirect financial relationship
       (including a compensation arrangement) with the entity,

     - provisions of the Social Security Act, commonly referred to as the
       "anti-kickback statute," that prohibit the knowing and willful offering,
       payment, solicitation or receipt of any bribe, kickback, rebate or other
       remuneration in return for the referral or recommendation of patients for
       items and services covered, in whole or in part, by federal healthcare
       programs, such as Medicare and Medicaid,

     - provisions of the Health Insurance Portability and Accountability Act of
       1996 that prohibit knowingly and willfully executing a scheme or artifice
       to defraud any healthcare benefit program or falsifying, concealing or
       covering up a material fact or making any material false, fictitious or
       fraudulent statement in connection with the delivery of or payment for
       healthcare benefits, items, or services,

     - the federal False Claims Act that imposes civil and criminal liability on
       individuals or entities that submit false or fraudulent claims for
       payment to the government,

     - reassignment of payment rules that prohibit certain types of billing and
       collection practices in connection with claims payable by the Medicare
       programs,

     - similar state law provisions pertaining to anti-kickback, self-referral
       and false claims issues,

     - state laws that prohibit general business corporations, such as us, from
       practicing medicine, controlling physicians' medical decisions or
       engaging in some practices such as splitting fees with physicians,

     - laws that regulate debt collection practices as applied to our internal
       collection agency and debt collection practices,

     - federal laws such as the Emergency Medical Treatment and Active Labor Act
       of 1986 that require the hospital and emergency department or urgent care
       center physicians to provide care to any patient presenting to the
       emergency department or urgent care center in an emergent condition
       regardless of the patient's ability to pay, and similar state laws, and

     - state and federal statutes and regulations that govern workplace health
       and safety.

     Each of the above may have related rules and regulations which are subject
to interpretation and may not provide definitive guidance as to the application
of those laws, rules or regulations to our operations, including our
arrangements with hospitals, physicians and professional corporations.

     We have structured our operations and arrangements with third parties in an
attempt to comply with these laws, rules and regulations based upon what we
believe are reasonable and defensible interpretations of these laws, rules and
regulations. However, we cannot assure you that the government will not
successfully challenge our interpretation as to the applicability of these laws,
rules and regulations as they relate to our operations and arrangements with
third parties.

     In the ordinary course of business and like others in the healthcare
industry, we receive requests for information from government agencies in
connection with their regulatory or investigational authority. We review such
requests and notices and take appropriate action. We have been subject to
certain requests for information in the past and could be subject to such
requests for information in the future, which could result in significant
penalties, as well as adverse publicity. The results of any current or future
investigation or action could have a material adverse effect.

     With respect to state laws that relate to the practice of medicine by
general business corporations and to fee splitting, while we seek to comply
substantially with existing applicable laws, we cannot assure you that state
officials who administer these laws will not successfully challenge our existing
organization and our contractual arrangements, including noncompetition
agreements with physicians, professional corporations and hospitals as
unenforceable or as constituting the unlicensed practice of medicine or
prohibited fee-splitting.

     If federal or state government officials challenge our operations or
arrangements with third parties which we have structured based upon our
interpretation of these laws, rules and regulations, the challenge could
potentially disrupt our business operations and we may incur substantial defense
costs, even if we successfully defend our interpretation of these laws, rules
and regulations.
                                        21
<PAGE>

     In the event regulatory action limited or prohibited us from carrying on
our business as we presently conduct it or from expanding our operations to
certain jurisdictions, we may need to make structural and organizational
modifications of our company and/or our contractual arrangements with
physicians, professional corporations and hospitals. Our operating costs could
increase significantly as a result. We could also lose contracts or our revenues
could decrease under existing contracts as a result of a restructuring.
Moreover, our financing agreements may also prohibit modifications to our
current structure and consequently require us to obtain the consent of the
holders of this indebtedness or require the refinancing of this indebtedness.
Any restructuring would also negatively impact our operations because our
management's time and attention would be diverted from running our business in
the ordinary course.

     Although management is not aware of any inquiry, investigation, or notice
from any governmental entity indicating that we are in violation of any federal
or state laws, such laws are broadly worded and may be interpreted or applied by
prosecutorial, regulatory or judicial authorities in ways that we cannot
predict. Accordingly, we cannot assure you that our arrangements and business
practices will not be the subject of government scrutiny or be found to violate
applicable laws. We did receive in March 2004 a subpoena from the Department of
Health and Human Services Office of Inspector General ("OIG") located in
Concord, California requesting certain information for the period 1999 to
present relating to our billing practices. We have responded with information
pertaining to the request and are awaiting further response to such information
from the OIG.

     If Governmental Authorities Determine That We Violate Medicare
Reimbursement Regulations, Our Revenues May Decrease and We May Have to
Restructure Our Method of Billing and Collecting Medicare Payments.  The
Medicare Prescription Drug Improvement and Modernization Act of 2003 amended the
Medicare reassignment statute as of December 8, 2003 to permit our independent
contractor physicians to reassign their Medicare receivables to us. We have
begun to restructure our method of billing and collecting Medicare payments in
light of this new statutory reassignment exception. Under the new reassignment
arrangement, many of our independent contractor physicians now reassign their
Medicare receivables to us, so that Medicare carriers send payments for those
physicians' services directly to us.

     In cases where we have not yet converted to the new reassignment
arrangement, we still use a "lockbox"' model which we implemented shortly after
notifying Medicare carriers of the details of our lockbox billing arrangements
in December 1997. For the lockbox arrangements still in effect, Medicare
carriers send payments for the physician services to a lockbox bank account
under the control of the physician. The physician, fulfilling his contractual
obligations to us, then directs the bank to transfer the funds in that bank
account into a company bank account. In return, we pay the physician an agreed
amount for professional services provided and provide management and
administrative services to or on behalf of the physician or physician group.

     With respect to Medicare services that physicians employed by
physician-controlled professional corporations render, Medicare carriers send
payments for physician services to a group account under our control.

     While we seek to comply substantially with applicable Medicare
reimbursement regulations, we cannot assure you that government authorities
would find that we comply in all respects with these regulations. Management is
not aware of any inquiry, investigation, or notice from any governmental entity
indicating that we are in violation of any of the Medicare laws regarding
Medicare Program payments. However, such laws are broadly worded and may be
interpreted or applied by prosecutorial, regulatory or judicial authorities in
ways that we cannot predict. Accordingly, we cannot assure you that our
arrangements and business practices will not be the subject of government
scrutiny or be found to violate applicable laws.

     If Future Regulation Forces Us to Restructure Our Operations, Including Our
Arrangements with Physicians, Professional Corporations, Hospitals and Other
Facilities, We May Incur Additional Costs, Lose Contracts and Suffer a Reduction
in Revenue Under Existing Contracts and We May Need to Refinance Our Debt or
Obtain Debt Holder Consent.  Legislators have introduced and may introduce in
the future numerous proposals into the United States Congress and state
legislatures relating to healthcare reform in response to various healthcare
issues. We cannot assure you as to the ultimate content, timing or effect of any
healthcare reform legislation, nor is it possible at this time to estimate the
impact of potential legislation. Further, although we exercise care in
structuring our arrangements with physicians, professional corporations,
hospitals
                                        22
<PAGE>

and other facilities to comply in all significant respects with applicable law,
we cannot assure you that: (1) government officials charged with responsibility
for enforcing those laws will not assert that we, or transactions into which we
have entered, violate those laws or (2) governmental entities or courts will
ultimately interpret those laws in a manner consistent with our interpretation.

     The continual flux of healthcare rules and regulations at the federal,
state and local level could revise the future of our relationships with the
hospitals and physicians with whom we contract. In addition to the regulations
referred to above, aspects of our operations are also subject to state and
federal statutes and regulations governing workplace health and safety and, to a
small extent, the disposal of medical waste. Changes in ethical guidelines and
operating standards of professional and trade associations and private
accreditation commissions such as the American Medical Association and the Joint
Commission on Accreditation of Healthcare Organizations may also affect our
operations.

     Accordingly, changes in existing laws and regulations, adverse judicial or
administrative interpretations of these laws and regulations or enactment of new
legislation could force us to restructure our relationships with physicians,
professional corporations, hospitals and other facilities. This could cause our
operating costs to increase significantly. A restructuring could also result in
a loss of contracts or a reduction in revenues under existing contracts.
Moreover, if these laws require us to modify our structure and organization to
comply with these laws, our financing agreements may prohibit such modifications
and require us to obtain the consent of the holders of such indebtedness or
require the refinancing of such indebtedness.

     Laws and Regulations That Regulate Payments for Medical Services by
Government Sponsored Healthcare Programs Could Cause Our Revenues to
Decrease.  Our affiliated physician groups derive a significant portion of their
net revenue less provision for uncollectibles from payments made by government
sponsored healthcare programs such as Medicare and state reimbursed programs.
There are increasing public and private sector pressures to restrain healthcare
costs and to restrict reimbursement rates for medical services. Any change in
reimbursement policies, practices, interpretations, regulations or legislation
that places limitations on reimbursement amounts or practices could
significantly affect hospitals, and consequently affect our operations unless we
are able to renegotiate satisfactory contractual arrangements with our hospital
clients and contracted physicians.

     We believe that regulatory trends in cost containment will continue. We
cannot assure you that we will be able to offset reduced operating margins
through cost reductions, increased volume, the introduction of additional
procedures or otherwise. In addition, we cannot assure you that the federal
government will not impose reductions in the Medicare physician fee schedule in
the future. Any such reductions could reduce our revenues.

     On November 2, 2004, Centers for Medicare and Medicaid Services ("CMS")
issued its updates to the physician fee schedule payment rates for 2005. The
2005 physician fee schedule payment rate updates mandated by the Medicare
Modernization Act, provide that the update to the conversion factor for
physicians' services for 2005 will increase by approximately 1.5%. As a result
of the legislative change, we estimate that we will realize an increase in such
revenues in 2005 from Medicare and other related revenue sources of
approximately $2.0 million.

     In addition to the 1.5% increase provided as a result of the Medicare
Modernization Act, an additional 5% payment is provided starting in 2005 when a
hospital in located within a Physician Scarcity Are ("PSA"). This is estimated
to increase revenues in 2005 by $1.0 million.

     The Outcome of an Ongoing Investigation of the Department of Health and
Human Services Office of Inspector General in Which We Are Involved Could Have a
Material Adverse Impact on Our Business and Financial Condition.  On March 30,
2004, we received a subpoena from the Department of HHS Office of Inspector
General ("OIG"), located in Concord, California, requesting certain information
for the period 1999 to present relating to our billing practices. To date, we
have produced and delivered to the OIG certain requested information, and the
OIG has stayed further requests. We have learned in conversations with
representatives of the OIG and the United States Attorney for the Northern
District of California, the basis for the issuance of the subpoena is a
complaint filed in the United States District Court for the Northern District of
California ("Court") by an individual on behalf of the government. The identity
of the qui tam relator and portions of the qui tam complaint remain sealed by
the Court pending the government's

                                        23
<PAGE>

investigation. The portions of the complaint not under seal allege that the
Company engaged in certain billing practices that resulted in the Company's
receipt of duplicate payments for the same medical service and that the Company
misled certain providers about the entities that were performing their billing
services. Additionally, the portions of the complaint not under seal allege that
the Company terminated the employment of the individual who filed the complaint
in retaliation for that individual's bringing of these allegations to the
attention of the Company. The Company denies these allegations and does not
believe that any of its current or prior billing practices would form the basis
for a violation of federal law.

     We are fully cooperating with the OIG in its request described herein and
have been producing and delivering to the OIG the requested documents. However,
due to lack of more specific information available to us at this time, we are
unable to ascertain the full scope of the government's inquiry or the qui tam
relator's complaint. We cannot predict the outcome of this investigation or suit
or their respective durations. If this investigation results in current or prior
billing practices being identified as violative of applicable laws or
regulations, results in penalties being imposed upon us, or results in an
adverse determination in the qui tam relator's complaint against us, the impact
could have a material adverse effect on our business and financial condition.

     We Could Experience a Loss of Contracts With Our Physicians or Be Required
to Sever Relationships With Our Affiliated Professional Corporations in Order to
Comply With Antitrust Laws.  Our contracts with physicians include contracts
with physicians organized as separate legal professional entities (e.g.
professional medical corporations) and as individuals. As such, the antitrust
laws deem each such physician/practice to be separate, both from Team Health and
from each other and, accordingly, each such physician/practice is subject to a
wide range of laws that prohibit anti-competitive conduct among separate legal
entities or individuals. A review or action by regulatory authorities or the
courts, which is negative in nature as to the relationship between us and the
physicians/practices we contract with, could force us to terminate our
contractual relationships with physicians and affiliated professional
corporations. Since we derive a significant portion of our revenues from these
relationships, our revenues could substantially decrease. Moreover, if any
review or action by regulatory authorities required us to modify our structure
and organization to comply with such action or review, the indenture and/or the
new credit facilities may not permit such modifications, thereby requiring us to
obtain the consent of the holders of such indebtedness or requiring the
refinancing of such indebtedness.

     A Reclassification of Our Independent Contractor Physicians By Tax
Authorities Could Require Us to Pay Retroactive Taxes and Penalties.  As of
December 31, 2004, we contracted with approximately 2,500 affiliated physicians
as independent contractors to fulfill our contractual obligations to clients.
Because we consider many of the physicians with whom we contract to be
independent contractors, as opposed to employees, we do not withhold federal or
state income or other employment related taxes, make federal or state
unemployment tax or Federal Insurance Contributions Act payments, except as
described below, or provide workers' compensation insurance with respect to such
affiliated physicians. Our contracts with our independent contractor physicians
obligate these physicians to pay these taxes. The classification of physicians
as independent contractors depends upon the facts and circumstances of the
relationship. In the event of a determination by federal or state taxing
authorities that the physicians engaged as independent contractors are
employees, we may be adversely affected and subject to retroactive taxes and
penalties. Under current federal tax law, a "safe harbor" from reclassification,
and consequently retroactive taxes and penalties, is available if our current
treatment is consistent with a long-standing practice of a significant segment
of our industry and if we meet certain other requirements. If challenged, we may
not prevail in demonstrating the applicability of the safe harbor to our
operations. Further, interested persons have proposed in the recent past to
eliminate the safe harbor and may do so again in the future.

     Our practices with respect to the classification of our independent
contractors has periodically been reviewed by the Internal Revenue Service with
no adjustments or changes to our practices required as a result of such review.
The most recent review was completed by the Internal Revenue Service in
conjunction with the audit of our federal tax returns for 2000 and 2001.

     We Are Subject to the Financial Risks Associated With Our Fee-for-Service
Contracts Which Could Decrease Our Revenue, Including Changes in Patient Volume,
Mix of Insured and Uninsured Patients and Patients Covered by Government
Sponsored Healthcare Programs and Third Party Reimbursement Rates.

                                        24
<PAGE>

We derive our revenue through two primary types of arrangements. If we have a
flat fee contract with a hospital, the hospital bills and collects fees for
physician services and remits a negotiated amount to us monthly. If we have a
fee-for-service contract with a hospital, either we or our affiliated physicians
collect the fees for physician services. Consequently, under fee-for-service
contracts, we assume the financial risks related to changes in mix of insured
and uninsured patients and patients covered by government sponsored healthcare
programs, third party reimbursement rates and changes in patient volume. We are
subject to these risks because under our fee-for-service contracts, our fees
decrease if a smaller number of patients receive physician services or if the
patients who do receive services do not pay their bills for services rendered or
we are not fully reimbursed for services rendered. Our fee-for-service
contractual arrangements also involve a credit risk related to services provided
to uninsured individuals. This risk is exacerbated in the hospital emergency
department physician-staffing context because federal law requires hospital
emergency departments to evaluate all patients regardless of the severity of
illness or injury. We believe that uninsured patients are more likely to seek
care at hospital emergency departments because they frequently do not have a
primary care physician with whom to consult. We also collect a relatively
smaller portion of our fees for services rendered to uninsured patients than for
services rendered to insured patients. In addition, fee-for-service contracts
also have less favorable cash flow characteristics in the startup phase than
traditional flat-rate contracts due to longer collection periods.

     Our Revenue Could Be Adversely Affected by a Net Loss of Contracts.  A
significant portion of our growth has historically resulted from increases in
the number of patient visits and fees for services provided under existing
contracts and the addition and acquisition of new contracts. Our contracts with
hospitals generally have terms of three years. Our contracts with military
treatment facilities are generally for one year and currently are in the form of
a direct contract with a military treatment facility. Hospital contracts often
include automatic renewal options under similar terms and conditions, unless
either party gives notice of an intent not to renew. While most contracts are
terminable by either of the parties upon notice of as little as 30 days, the
average tenure of our existing hospital contracts is approximately eight years.
These contracts may not be renewed or, if renewed, may contain terms that are
not as favorable to us as our current contracts. The termination of a contract
is principally due to either an award of the contract to another source of
provider staffing as a result of a competitive bidding process or termination of
the contract by us due to a lack of an acceptable profit margin on
fee-for-service patient volumes coupled with inadequate contract subsidies.
Additionally, to a much lesser extent contracts may be terminated due to such
conditions as a hospital facility closing due to facility mergers or a hospital
attempting to insource the service being provided by us. Our current military
contracts generally have terms of one year and in many cases have renewal
options on the part of the military. Such renewal options typically are for one
to four years. We cannot assure you that we will not experience a net loss of
contracts in the future and that any such net loss would not have a material
adverse effect on our operating results and financial condition.

     We May Not Be Able to Find Suitable Acquisition Candidates or Successfully
Integrate Completed Acquisitions into Our Current Operations in Order to
Profitably Operate Our Consolidated Company.  When we obtain new contracts with
hospitals and managed care companies, which increasingly involves a competitive
bidding process, we must accurately assess the costs we will incur in providing
services in order to realize adequate profit margins or otherwise meet our
objectives. Increasing pressures from healthcare payers to restrict or reduce
reimbursement rates at a time when the costs of providing medical services
continue to increase make the integration of new contracts, as well as
maintenance of existing contracts, more difficult. A portion of our growth in
net revenue has resulted from, and is expected to continue to result from, the
acquisition of healthcare businesses. Our acquisition strategy could present
some challenges. Some of the difficulties we could encounter include, problems
identifying all service and contractual commitments of the acquired entity,
evaluating the stability of the acquired entity's hospital contracts,
integrating financial and operational software, and accurately projecting
physician and employee costs. Our acquisition strategy is also subject to the
risk that we may not be able to identify suitable acquisition candidates in the
future, we may not be able to obtain acceptable financing or we may not be able
to consummate any future acquisitions, any of which could inhibit our growth. In
addition, in connection with acquisitions, we may need to obtain the consent of
third parties who have contracts with the entity to be acquired, such as managed
care companies or hospitals contracting with the entity. We may be unable to
obtain these consents. If we fail to integrate acquired operations, fail to
manage the cost of providing our services or fail to price our services
appropriately, our operating results may decline. Furthermore, the diversion of
management's attention and any delays or
                                        25
<PAGE>

difficulties encountered in connection with the integration of businesses we
acquire could negatively impact our business and results of operations. Finally,
as a result of our acquisitions of other healthcare businesses, we may be
subject to the risk of unanticipated business uncertainties or legal liabilities
relating to such acquired businesses for which we may not be indemnified by the
sellers of the acquired businesses.

     Our Success Depends on our Ability to Manage Growth Effectively.  Even if
we are successful in obtaining new business, failure to manage the growth could
adversely affect our condition. We may experience extended periods of very rapid
growth. If we are not able to manage our growth effectively, our business and
financial condition will materially suffer. Our growth may significantly strain
our managerial, operational and financial resources and systems. To manage our
growth effectively, we will have to continue to implement and improve our
operational, financial and management controls, reporting systems and
procedures. In addition, we must effectively expand, train and manage our
employees. We will be unable to manage our businesses effectively if we are
unable to alleviate the strain on resources caused by growth in a timely and
successful manner. There can be no assurance that we will be able to manage our
growth and a failure to do so could have a material adverse effect on our
business.

     We May Not Be Able to Successfully Recruit and Retain Qualified Physicians
to Serve as Our Independent Contractors or Employees.  Our affiliated medical
groups provide facility-based services in virtually all types of settings. These
include urban and suburban hospitals as well as rural and remote facilities. Our
ability to recruit and retain affiliated physicians and qualified personnel for
such settings can significantly affect our performance at such facilities.
Certain of these locations present difficulties in recruiting providers due to
limits on compensation, facility and equipment availability, reduced back-up by
other specialists and personal/family lifestyle preferences. In addition, a
number of our client hospitals increasingly demand a greater degree of
specialized skills, training and experience in the physicians who staff their
contracts. This decreases the number of physicians who are qualified to staff
potential and existing contracts.

     Our core competencies include recruiting physicians and other providers to
all types of settings. Our staff includes approximately 52 recruiters who work
solely for us to fill the vacancies that occur via attrition and new contract
sales. We utilize a proprietary IT application, populated with data purchased
from various provider professional societies, to contact, recruit and employ or
contract with providers as they are needed.

     In general, recruiting physicians to staff contracts in regions of the
country for economically disadvantaged hospitals may be challenging.
Occasionally, the recruiting of providers may not occur quickly enough to fill
all openings with permanent staff. In these situations, clinical shifts are
often filled temporarily by existing employees or independent contractors from
other areas of our company, including our regional management. If such
assistance is not available for any reason, we utilize staffing from our
internal locums tenens company to fill the staffing need until a permanent
candidate is identified. Finally, if the aforementioned alternatives are
unsuccessful, we contract with one of the many third-party locums tenens
companies that exist to provide these services to healthcare facilities or
companies such as ours.

     A number of resource options are available to us along with a large
full-time staff of recruiters that use sophisticated IT tools allows us to
recruit staffing for almost any situation. As a result, the inability to recruit
skilled permanent provider staffing is seldom a reason for the termination of a
contract.

     We compete with other entities to recruit and retain qualified physicians
and other healthcare professionals to deliver clinical services. Our future
success depends on our continued ability to recruit and retain competent
physicians to serve as our employees or independent contractors. We may not be
able to continue to attract and retain sufficient numbers of competent
physicians and other healthcare professionals to continue to expand our
operations. In recent years there has been a shortage of radiologists. The
impact of this shortage has increased staffing opportunities for such
physicians. We have responded to such shortage in ways other than our
traditional fee-for-service contracting arrangements. We first have experienced
increased staffing opportunities for radiologists through our locums tenens
business. Additionally, we have changed in the past two years from a
fee-for-service model to increasingly more often a cost-plus arrangement with
healthcare facilities.

     There can be no assurance that our non-competition contractual arrangements
with affiliated physicians and professional corporations will not be
successfully challenged in certain states as unenforceable. We have contracts
with physicians in many states. State law governing non-compete agreements
varies from state to

                                        26
<PAGE>

state. Some states are reluctant to strictly enforce non-compete agreements with
physicians. In such event, we would be unable to prevent former affiliated
physicians and professional corporations from competing with us, potentially
resulting in the loss of some of our hospital contracts and other business.

     The High Level of Competition in Our Industry Could Adversely Affect Our
Contract and Revenue Base. The provision of outsourced physician staffing and
administrative services to hospitals and clinics is characterized by a high
degree of competition. Competition for outsourced physician and other healthcare
staffing and administrative service contracts is based primarily on:

     - the ability to improve department productivity and patient satisfaction
       while reducing overall costs,

     - the breadth of staffing and management services offered,

     - the ability to recruit and retain qualified physicians, technicians and
       nursing staffing,

     - billing and reimbursement expertise,

     - a reputation for compliance with state and federal regulations, and

     - financial stability, demonstrating an ability to pay providers in a
       timely manner and provide professional liability insurance.

     Such competition could adversely affect our ability to obtain new
contracts, retain existing contracts and increase our profit margins. We compete
with both national and regional enterprises. In addition, some of these firms
may have greater access than us to physicians and potential clients. All of
these competitors provide healthcare services similar in scope to us. We do not
believe our services to have any disadvantages with respect to such competitors.
While companies such as ours and those noted above operate on a national or
regional basis, the majority of the targeted hospital community for our services
engages local physician provider practice groups to provide services similar to
ours. We therefore also compete against local physician groups and self-operated
hospital emergency departments for satisfying staffing and scheduling needs.
Such local groups will often times outsource many of their back office
functions, including billing and collection functions, risk management and
others. While we believe our Company has certain competitive advantages over
these local groups relative to the economics of certain back office functions,
stability of operations to hospitals and greater resources overall to provide
flexibility in providing services to our clients, local groups may compete more
effectively in the short-term in terms of the cost of their services. Such cost
advantages in a competitive bidding process may reflect a willingness of a local
group to provide their services for below market reimbursement rates for their
physician services or to assume greater personal professional liability risk
exposure than is deemed prudent by other providers of such staffing for contract
pricing purposes.

     The military has changed its approach under its Tricare Program toward
providing most of its outsourced healthcare staffing needs through direct
provider contracting on a competitive bid basis. As a result, competition for
such outsourced military staffing contracts may be affected by such factors as:

     - the lowest bid price;

     - an ability to meet technical government bid specifications;

     - the ability to recruit and retain qualified healthcare providers; and

     - restrictions on the ability to competitively bid based on restrictive
       government bid lists or bid specifications designed to award government
       contracts to targeted business ownership forms, such as those determined
       to meet small business qualifications, minority-owned, etc.

     While we believe our significant experience and demonstrated ability to
recruit high quality healthcare professionals to meet the military's needs
provides certain attractive advantages to the use of our services, such services
and quality screening considerations may not result in the lowest competitive
bid price and thus a failure to win contracts where the decision is based
strictly on pricing considerations.

     We Depend on Reimbursements By Third-Party Payers, as Well as Payments by
Individuals, Which Could Lead to Delays and Uncertainties in the Reimbursement
Process.  We receive a substantial portion of

                                        27
<PAGE>

our payments for healthcare services from third-party payers, including
Medicare, Medicaid, private insurers, managed care organizations and hospitals.
We received approximately 56% of our net revenue less provision for
uncollectibles from such third-party payers during fiscal 2004, including
approximately 23% from Medicare and Medicaid.

     The reimbursement process is complex and can involve lengthy delays.
Third-party payers continue their efforts to control expenditures for
healthcare, including proposals to revise reimbursement policies. We recognize
revenue when we provide healthcare services; however, there can be delays before
we receive payment. In addition, third-party payers may disallow, in whole or in
part, requests for reimbursement based on determinations that certain amounts
are not reimbursable under plan coverage, they were for services provided that
were not medically necessary or additional supporting documentation is
necessary. Retroactive adjustments may change amounts realized from third-party
payers. We are subject to governmental audits of our Medicare and Medicaid
reimbursement claims and may be required to repay these agencies if a finding is
made that we were incorrectly reimbursed. Delays and uncertainties in the
reimbursement process may adversely affect accounts receivable, increase the
overall costs of collection and cause us to incur additional borrowing costs.

     We also may not be paid in those instances where we provide healthcare
services to uninsured individuals. Amounts not covered by third-party payers are
the obligations of individual patients. We may not receive whole or partial
payments from these uninsured individuals. As a result of government laws and
regulations requiring us to treat patients meeting the definition of requiring
emergency care regardless of their ability to pay, a substantial increase in
self-pay patients could result in increased costs associated with physician
services for which sufficient revenues less uncollectibles are not realized to
offset such additional physician service costs. In such an event, our earnings
and cash flow would be adversely affected potentially affecting our ability to
maintain our restrictive debt covenant ratios and meeting our financial
obligations.

     In summary, the risks associated with third-party payers and uninsured
individuals and the inability to monitor and manage accounts receivable
successfully could have a material adverse effect on our business, financial
condition and results of operations. Furthermore, our collection policies or our
provisions for allowances for Medicare, Medicaid and contractual discounts and
doubtful accounts receivable may not be adequate.

     Failure to Timely or Accurately Bill for Our Services Could Have a Negative
Impact on Our Net Revenues, Bad Debt Expense and Cash Flow.  Billing for
emergency department visits in a hospital setting and other physician-related
services is complex. The practice of providing medical services in advance of
payment or, in many cases, prior to assessment of ability to pay for such
services, may have significant negative impact on our net revenues, bad debt
expense, and cash flow. We bill numerous and varied payers, such as self-pay
patients, various forms of commercial insurance companies and the Medicare and
Medicaid programs. These different payers typically have differing forms of
billing requirements that must be met prior to receiving payment for services
rendered. Reimbursement to us is typically conditioned on our providing the
proper medical necessity and diagnosis codes. Incorrect or incomplete
documentation and billing information could result in non payment for services
rendered.

     Additional factors that complicate our billing include:

     - disputes between payers as to which party is responsible for payment,

     - variation in coverage for similar services among various payers,

     - the difficulty of adherence to specific compliance requirements,
       diagnosis coding and various other procedures mandated by responsible
       parties, and

     - failure to obtain proper physician credentialing and documentation in
       order to bill various commercial and governmental payers.

     To the extent that the complexity associated with billing for our services
causes delays in our cash collections, we assume the financial risk of increased
carrying costs associated with the aging of our accounts receivable as well as
increased potential for bad debts.

                                        28
<PAGE>

     In addition, the majority of the patient visits for which we bill payers
are processed in one of five regional billing centers. A disruption of services
at any one of these locations could result in a delay in billing and thus cash
flows to us, as well as potential additional costs to process billings in
alternative settings or locations. Our billing centers process approximately 97%
of our non-military patient visit billings using a common automated billing
system. While we employ what we believe are adequate back-up alternatives in the
event of a main computer site disaster, failure to execute successfully or
timely with respect to such back-up plan may cause a significant disruption to
our cash flows and increase temporarily our billing costs.

     Loss of Key Personnel and/or Failure to Attract and Retain Highly Qualified
Personnel Could Make it More Difficult for Us to Generate Cash Flow from
Operations and Service Our Debt.  Our success depends to a significant extent on
the continued services of our core senior management team of H. Lynn Massingale,
M.D., Chief Executive Officer and Director; Greg Roth, President and Chief
Operating Officer; Robert J. Abramowski, Executive Vice President, Finance and
Administration; Robert C. Joyner, Executive Vice President, General Counsel;
Stephen Sherlin, Chief Compliance Officer; and Joseph Carmen, President, Billing
Operations as well as the leaders of major components of our Company. If one or
more of these individuals were unable or unwilling to continue in his present
position, our business would be disrupted and we might not be able to find
replacements on a timely basis or with the same level of skill and experience.
Finding and hiring any such replacements could be costly and might require us to
grant significant incentive compensation, which could adversely impact our
financial results. We have not had problems retaining key personnel in the past
and do not have reason to believe that key personnel will be leaving in the near
future.

     We are Subject to the Risk That the Former Shareholders of Spectrum
Healthcare Resources ("SHR") Will Be Unable to Indemnify Us for Any Potential
Claims Relating to Certain Tax Matters as Agreed to Under a Sale Agreement.  In
connection with the acquisition of SHR on May 1, 2002, a company that
specializes in providing medical staff providers to military treatment
facilities subject to certain limitations, the previous shareholders of such
company and its related entities have indemnified us up to a limit of $10.0
million relating to any potential claims asserted against the acquired company
during the three years subsequent to the date of its acquisition related to tax
matters whose origin was attributable to tax periods prior to May 1, 2002. If
the shareholders of SHR are unable to indemnify us in the event of any potential
claims, we may be required to pay potential taxes, penalties and interest from
these prior tax periods.

     The Interests of our Controlling Equityholders May Be in Conflict With the
Interests of Our Debt Holders. Madison Dearborn Partners, Inc., Cornerstone
Equity Investors, LLC and Beecken Petty O'Keefe and Company own the majority of
our equity shares. Circumstances may occur in which the interests of these
equity holders could be in conflict with the interests of our debt holders. In
addition, these equity holders may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to debt
holders. See "Management," "Security ownership of certain beneficial owners" and
"Certain relationships and related transactions."'

ITEM 2.  PROPERTIES

     We lease approximately 39,000 square feet at 1900 Winston Road, Knoxville,
Tennessee for our corporate headquarters. We also lease or sublease other
facilities for our corporate functions as well as for the operations of our
clinics, billing centers and certain regional operations. We believe our present
facilities are substantially adequate to meet our current and projected needs.
The leases and subleases have various terms primarily ranging from one to seven
years and monthly rents ranging from approximately $1,000 to $56,000. Our annual
lease payments total approximately $8.7 million. We expect to be able to renew
each of our leases or to lease comparable facilities on terms commercially
acceptable to us.

ITEM 3.  LEGAL PROCEEDINGS

     We are party to various pending legal actions arising in the ordinary
operation of our business such as contractual disputes, employment disputes and
general business actions as well as malpractice actions. We believe that any
payment of damages resulting from these types of lawsuits would be covered by
insurance, exclusive of deductibles, would not be in excess of the reserves and
such liabilities, if incurred, should not have a significant negative effect on
our operating results and financial condition.

                                        29
<PAGE>

     On March 30, 2004, we received a subpoena from the Department of HHS Office
of Inspector General ("OIG"), located in Concord, California, requesting certain
information for the period 1999 to present relating to our billing practices. To
date, we have produced and delivered to the OIG certain requested information,
and the OIG has stayed further requests. We have learned in conversations with
representatives of the OIG and the United States Attorney for the Northern
District of California, the basis for the issuance of the subpoena is a
complaint filed in the United States District Court for the Northern District of
California ("Court") by an individual on behalf of the government. The identity
of the qui tam relator and portions of the qui tam complaint remain sealed by
the Court pending the government's investigation. The portions of the complaint
not under seal allege that the Company engaged in certain billing practices that
resulted in the Company's receipt of duplicate payments for the same medical
service and that the Company misled certain providers about the entities that
were performing their billing services. Additionally, the portions of the
complaint not under seal allege that the Company terminated the employment of
the individual who filed the complaint in retaliation for that individual's
bringing of these allegations to the attention of the Company. The Company
denies these allegations and does not believe that any of its current or prior
billing practices would form the basis for a violation of federal law.

     We are fully cooperating with the OIG in its request described herein and
have been producing and delivering to the OIG the requested documents. However,
due to lack of more specific information available to us at this time, we are
unable to ascertain the full scope of the government's inquiry or the qui tam
relator's complaint. We cannot predict the outcome of this investigation or suit
or their respective durations. If this investigation results in current or prior
billing practices being identified as violative of applicable laws or
regulations, results in penalties being imposed upon us, or results in an
adverse determination in the qui tam relator's complaint against us, the impact
could have a material adverse effect on our business and financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during the
year ended December 31, 2004.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

     There is no public market for the equity securities of the Company. There
were two principal holders of record of the Company's equity securities as of
December 31, 2004. During 2004, the Company declared and paid a cash dividend of
$2.82 per share which totaled $27.6 million in the aggregate. The Company did
not declare any dividends on shares of its common stock during 2003. The Company
repurchased 12,200 shares of its common stock in 2004 for an aggregate purchase
price of $0.2 million. In addition, the Company repurchased 258,820 and 80,828
common units of Team Health Holdings, L.L.C. ("Holdings"), which owns 92.3% of
the Company's common stock. The aggregate purchase price of such common units of
Holdings was $4.3 million and $0.9 million in 2004 and 2003, respectively.
Holdings has no assets other than its investment in the Company.

ITEM 6.  SELECTED HISTORICAL FINANCIAL AND OTHER DATA

     The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
included elsewhere in this report. The selected statement of operations data
presented below for the three-year period ended December 31, 2004 and the
balance sheet data at December 31, 2004 and 2003 are derived from our audited
consolidated financial statements that are included elsewhere in this report.
The selected statement of operations data presented below for the two-year
period ended December 31, 2001 and the balance sheet data at December 31, 2002,
2001 and 2000 are derived from audited consolidated financial statements that
are not included in this report.

                                        30
<PAGE>

     Team Health acquired the operating assets of several medical staffing and
related companies in the periods presented below. The results of the selected
historical financial data reflect these acquisitions since their respective
dates of acquisition.

<Table>
<Caption>
                                                       YEAR ENDED DECEMBER 31,
                                      ----------------------------------------------------------
                                         2004         2003         2002        2001       2000
                                      ----------   ----------   ----------   --------   --------
                                                            (IN THOUSANDS)
<S>                                   <C>          <C>          <C>          <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.........................  $1,572,174   $1,479,013   $1,230,703   $965,285   $918,974
Provision for uncollectibles........     563,483      479,267      396,605    336,218    329,291
                                      ----------   ----------   ----------   --------   --------
Net revenue less provision for
  uncollectibles....................   1,008,691      999,746      834,098    629,067    589,683
Cost of services rendered
  Professional service expenses.....     754,222      746,409      635,573    493,380    444,320
  Professional liability costs......      59,839      115,970       36,992     29,774     24,276
                                      ----------   ----------   ----------   --------   --------
Gross profit........................     194,630      137,367      161,533    105,913    121,087
General and administrative
  expenses..........................     100,473       95,554       81,744     63,998     57,794
Terminated transaction expense......          --           --           --         --      2,000
Management fee and other expenses...       1,387          505          527        649        591
Impairment of intangibles...........      73,177          168        2,322      4,137         --
Depreciation and amortization.......      13,689       22,018       20,015     14,978     12,638
Interest expense, net...............      28,949       23,343       23,906     22,739     25,467
Refinancing costs...................      14,731           --        3,389         --         --
                                      ----------   ----------   ----------   --------   --------
Earnings (loss) before income taxes
  and cumulative effect of change in
  accounting principle..............     (37,776)      (4,221)      29,630       (588)    22,597
Provision (benefit) for income
  taxes.............................      11,436       (1,410)      13,198        871      9,317
                                      ----------   ----------   ----------   --------   --------
Earnings (loss) before cumulative
  effect of change in accounting
  principle.........................     (49,212)      (2,811)      16,432     (1,459)    13,280
Cumulative effect of change in
  accounting principle, net of
  income tax benefit................          --           --         (294)        --         --
Dividends on preferred stock........       3,602       14,440       13,129     11,889     10,783
                                      ----------   ----------   ----------   --------   --------
Net earnings (loss) attributable to
  common stockholders...............  $  (52,814)  $  (17,251)  $    3,009   $(13,348)  $  2,497
                                      ==========   ==========   ==========   ========   ========
NET CASH PROVIDED BY (USED FOR):
Operating Activities................  $   64,585   $  101,741   $   52,480   $ 49,737   $ 52,130
Investing Activities................     (75,795)     (26,279)    (174,762)   (22,826)   (12,900)
Financing Activities................     (71,823)     (22,287)      99,888    (12,132)   (13,646)
Capital Expenditures................      (6,713)      (8,972)      (9,796)    (5,955)    (7,359)
BALANCE SHEET DATA (AT END OF
  PERIOD):
Cash, cash equivalents and
  short-term investments............  $   82,582   $  100,964   $   47,789   $ 70,183   $ 55,404
Working capital.....................      99,372       86,729       70,163    104,039    124,105
Total assets........................     610,391      731,049      674,240    500,198    502,098
Total debt..........................     428,125      299,415      320,500    217,300    229,201
Mandatory redeemable preferred
  stock.............................          --      158,846      144,405    130,779    118,890
Total stockholders' equity
  (deficit).........................    (198,880)    (115,203)     (97,432)   (99,690)   (86,123)
</Table>

                                        31
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this annual
report are "forward-looking statements" intended to qualify for the safe harbors
from liability established by the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified as such
because the context of the statement will include words such as the Company
"believes," "anticipates," "expects" or words of similar import. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which may cause actual results to differ materially from those
currently anticipated. The forward-looking statements made herein are made only
as of the date of this report and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.

COMPANY OVERVIEW

     We are a national provider of outsourced physician staffing and
administrative services to hospitals and other healthcare providers in the
United States and one of the largest providers of outsourced physician staffing
and administrative services to military treatment facilities. In addition to
providing physician staffing, we also provide a broad array of non-physician
healthcare services, including specialty technical staffing, para-professionals
and nurse staffing on a permanent basis to the military.

     Our regional operating models include comprehensive programs for emergency
medicine, radiology, anesthesiology, inpatient care, pediatrics and other
healthcare services, principally within hospital departments and other
healthcare facilities, including military treatment facilities.

     Acquisitions.  During the past three years, we have successfully acquired
and integrated the contracts of two hospital-based physician groups and related
companies in addition to the acquisition in 2002 of a leading provider of
military staffing to the military. In addition, during the past three years we
have also acquired two businesses engaged in providing such services as billing
and collection, physician management services and non-hospital-based physician
services.

     Acquisitions, with the exception of the military staffing business, have
been financed through a combination of cash and future contingent payments. All
of our acquisitions during the past three years were accounted for using the
purchase method of accounting. As such, operating results of those acquired
businesses are included in our consolidated financial statements since their
respective dates of acquisition. Subsequent to each acquisition, the acquired
operations have either been converted to all or at least our key financial and
operating systems.

     Strategic acquisitions continue to be a component of our growth strategy.
The market for outsourced medical services is highly fragmented and served
primarily by small local and regional physician groups, which represent over 64%
of the market and generally lack the resources and depth of services necessary
to compete with national providers. Our acquisition strategy is to target those
companies with strong clinical reputations and quality contracts with larger
hospitals.

     Contracts.  A significant portion of our growth has historically resulted
from increases in the number of patient visits and fees for services provided
under existing contracts and the addition and acquisition of new contracts. Our
contracts with traditional hospitals typically have terms of three years and are
generally automatically renewable under the same terms and conditions unless
either party to the contract gives notice of their intent not to renew the
contract. Our average contract tenure for hospital contracts is approximately
eight years. Our current military contracts are all the result of a re-bidding
of such contracts by the military. Such military staffing contracts are
typically for one year and in many cases include option years available to the
military.

     Approximately 60% of our net revenue less provision for uncollectibles is
generated under fee-for-service arrangements through which we bill and collect
the professional fees for the services provided. Conversely, under our flat-rate
contracts, hospitals or military treatment facilities pay us a fee based on the
hours of physician coverage provided, but the hospital or military treatment
facility is responsible for its own billing and collection. In states where
physician employees service our contracts directly because there is no
prohibition
                                        32
<PAGE>

against such arrangements, Medicare payments for such services are made directly
to us. In states where the physicians providing services are our independent
contractors, Medicare payments for those services are paid into a lockbox
account in the name of the independent contractor physician and subsequently
directed into a Company account.

TRICARE PROGRAM

     During 2004, the Company derived approximately $207.5 million of revenue
for services rendered to military personnel and their dependents as either a
subcontractor under the TRICARE program administered by the Department of
Defense or by direct contracting with military treatment facilities. The Company
had historically provided its services principally through subcontract
arrangements with managed care organizations that contracted directly with the
TRICARE program. In 2004, the military subjected all of its outsourced
healthcare staffing to a re-bidding process with successful bidders contracting
directly with military treatment facilities.

     During the second quarter of 2004, the Department of Defense announced that
it would seek proposals to obtain its outsourced healthcare staffing positions
in a manner different than previously used to acquire such positions. The most
significant announcement was that the military was no longer going to obtain
such staffing through managed care organizations with whom the Company had
previously secured a preferred subcontractor status position. Instead, the
military announced that it was going to secure such positions through a
competitive bidding process regardless of past incumbency in staffing such
positions. The introduction of a new form of competition posed an immediate
threat to the existing revenues and operating margins being experienced by the
Company. Furthermore, because responsibility for such contracting within the
military was turned over to government procurement officers, the aspect of
pricing versus existing relationships and service levels was going to prevail in
terms of vendor selection by the military. In addition, the various branches of
the military established certain restrictive criteria for purposes of
eligibility to bid on certain of their staffing requests for certain proposals,
some of which precluded our Company from bidding for new staffing contracts.

     The Department of Defense and its various military branches began on June
1, 2004, awarding contracts for the civilian positions that it required going
forward. The process of awarding healthcare staffing contracts by the government
varied by branch of the military and by military base location within the
various branches of the military. The award process included soliciting requests
for proposals from organizations that provide civilian healthcare staffing,
including the use of restrictive government or military approved vendor lists,
some of which did not include the Company. In other instances, the military
re-bid its business on a basis that is inclusive of existing providers, such as
the Company, without the use of restricted vendor lists. Furthermore, the
awarding of certain bids was restricted to small business or minority qualified
businesses for which the Company was not eligible to even bid for the contracts.
The new military staffing contracts resulting from the re-bidding process vary
as to form and duration on an individual staffing position basis. The duration
of such contracts typically ranges from one year with no renewal options to
renewal options on the part of the military with such option periods ranging
from one to five years. The above noted facts and circumstances were concluded
by management to be a "triggering event" under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Tangible
Assets".

     The following is a summary of the Company's military staffing revenues that
were subject to re-bidding under the new TRICARE program contracting process (in
thousands):

<Table>
<S>                                                           <C>
Annual revenue derived from contracts subject to
  re-bidding................................................  $210,700
Annual revenue value of bids won (including new business of
  $20.1 million)............................................  $138,200
Percentage of revenue retained or new business won to total
  of annual revenue re-bid..................................        66%
</Table>

     Management, during 2004, concluded that the Company's previous revenues and
operating margins were materially adversely affected as a result of the
re-bidding process. The Company prior to the recognition of any impairment loss
had $127.9 million of goodwill related to its military staffing business The
Company recorded an impairment loss of $73.2 million relating to its military
business goodwill in 2004.

                                        33
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the U.S.
The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. We
believe the following critical accounting policies, among others, affect our
more significant judgments and estimates used in the preparation of our
consolidated financial statements.

     Revenue Recognition

     Net Revenue.  Net revenues consist of fee-for-service revenue, contract
revenue and other revenue. Net revenues are recorded in the period services are
rendered.

     Our net revenues are principally derived from the provision of healthcare
staffing services to patients within healthcare facilities. The form of billing
and related risk of collection for such services may vary by customer. The
following is a summary of the principal forms of our billing arrangements and
how net revenue is recognized for each. A significant portion (74% of our net
revenue in 2004) resulted from fee-for-service patient visits. Fee-for-service
revenue represents revenue earned under contracts in which the Company bills and
collects the professional component of charges for medical services rendered by
the Company's contracted and employed physicians. Under the fee-for-service
arrangements, the Company bills patients for services provided and receives
payment from patients or their third-party payers. Fee-for-service revenue is
reported net of contractual allowances and policy discounts. All services
provided are expected to result in cash flows and are therefore reflected as net
revenues in the financial statements. Fee-for-service revenue is recognized in
the period that the services are rendered to specific patients and reduced
immediately for the estimated impact of contractual allowances in the case of
those patients having third-party payer coverage. The recognition of net revenue
(gross charges less contractual allowances) from such visits is dependent on
such factors as proper completion of medical charts following a patient visit,
the forwarding of such charts to one of our billing centers for medical coding
and entering into our billing systems and the verification of each patient's
submission or representation at the time services are rendered as to the
payer(s) responsible for payment of such services. Net revenues are recorded
based on the information known at the time of entering of such information into
our billing systems as well as an estimate of the net revenues associated with
medical charts for a given service period that have not been processed yet into
our billing systems. The above factors and estimates are subject to change. For
example, patient payer information may change following an initial attempt to
bill for services due to a change in payer status. Such changes in payer status
have an impact on recorded net revenue due to differing payers being subject to
different contractual allowance amounts. Such changes in net revenue are
recognized in the period that such changes in payer become known. Similarly, the
actual volume of medical charts not processed into our billing systems may be
different from the amounts estimated. Such differences in net revenue are
adjusted in the following month based on actual chart volumes processed.

     Contract revenue represents revenue generated under contracts in which the
Company provides physician and other healthcare staffing and administrative
services in return for a contractually negotiated fee. Contract revenue consists
primarily of billings based on hours of healthcare staffing provided at agreed
to hourly rates. Revenue in such cases is recognized as the hours are worked by
our staff. Additionally, contract revenue also includes supplemental revenue
from hospitals where we may have a fee-for-service contract arrangement.
Contract revenue for the supplemental billing in such cases is recognized based
on the terms of each individual contract. Such contract terms generally either
provide for a fixed monthly dollar amount or a variable amount based upon
measurable monthly activity, such as hours staffed, patient visits or
collections per visit compared to a minimum activity threshold. Such
supplemental revenues based on variable arrangements are usually contractually
fixed on a monthly, quarterly or annual calculation basis considering the
variable factors negotiated in each such arrangement. Such supplemental revenues
are recognized as revenue in the period when such amounts are determined to be
fixed and therefore contractually obligated as payable by the customer under the
terms of the respective agreement.

                                        34
<PAGE>

     Other revenue consists primarily of revenue from management and billing
services provided to outside parties. Revenue is recognized for such services
pursuant to the terms of the contracts with customers. Generally, such contracts
consist of fixed monthly amounts with revenue recognized in the month services
are rendered or as hourly consulting fees recognized as revenue as hours are
worked in accordance with such arrangements. Additionally, we derive a small
percentage of our revenues from providing administrative and billing services
that are contingent upon the collection of third-party physician billings,
either by us on their behalf or other third-party billing companies. Such
revenues are not considered earned and therefore not recognized as revenue until
actual cash collections are achieved in accordance with the contractual
arrangements for such services.

     Net Revenue Less Provision for Uncollectibles.  Net revenue less provision
for uncollectibles reflects management's estimate of billed amounts to
ultimately be collected. Management, in estimating the amounts to be collected
resulting from its over six million annual fee-for-service patient visits and
procedures, considers such factors as prior contract collection experience,
current period changes in payer mix and patient acuity indicators, reimbursement
rate trends in governmental and private sector insurance programs, resolution of
credit balances, the estimated impact of billing system effectiveness
improvement initiatives and trends in collections from self-pay patients. Such
estimates are substantially formulaic in nature and are calculated at the
individual contract level. The estimates are continuously updated and adjusted
if subsequent actual collection experience indicates a change in estimate is
necessary. Such provisions and any subsequent changes in estimates may result in
adjustments to our operating results with a corresponding adjustment to our
accounts receivable allowance for uncollectibles on our balance sheet.

     Accounts Receivable.  As described above and below, we determine the
estimated value of our accounts receivable based on estimated cash collection
run rates of estimated future collections by contract for patient visits under
our fee-for-service contract revenue. Accordingly, we are unable to report the
payer mix composition on a dollar basis of our outstanding net accounts
receivable. Our days revenue outstanding at December 31, 2004, was 63.3 days and
at December 31, 2003, was 61.4 days. The number of days outstanding will
fluctuate over time due to a number of factors. The increase in the average days
revenue outstanding of approximately 1.9 days includes an increase of 4.5 days
resulting from a decrease in average revenue per day between periods offset by a
decrease of 2.8 days due to an increase in collections relating to contract
accounts receivable and fee-for-service patient visits. Our allowance for
doubtful accounts totaled $126.4 million as of December 31, 2004. Approximately
98% of our allowance for doubtful accounts is related to gross fees for fee-
for-service patient visits. Our principal exposure for uncollectible
fee-for-service visits is centered in self pay patients and, to a lesser extent,
for co-payments and deductibles from patients with insurance. While we do not
specifically allocate the allowance for doubtful accounts to individual accounts
or specific payer classifications, the portion of the allowance associated with
fee-for-service charges as of December 31, 2004, was approximately 91% of
self-pay accounts outstanding as fee-for-service patient visits at December 31,
2004. Primary responsibility for collection of fee-for-service accounts
receivable resides within our internal billing operations. Once a claim has been
submitted to a payer or an individual patient, employees within our billing
operations have responsibility for the follow up collection efforts. The
protocol for follow up differs by payer classification. For self pay patients,
our billing system will automatically send a series of dunning letters on a
prescribed time frame requesting payment or the provision of information
reflecting that the balance due is covered by another payer, such as Medicare or
a third-party insurance plan. Generally, the dunning cycle on a self pay account
will run from 90 to 120 days. At the end of this period, if no collections or
additional information is obtained from the patient, the account is no longer
considered an active account and is transferred to a collection agency. Upon
transfer to a collection agency, the patient account is written-off as a bad
debt. Any subsequent cash receipts on accounts previously written off are
recorded as a recovery. For non-self pay accounts, billing personnel will follow
up and respond to any communication from payers such as requests for additional
information or denials until collection of the account is obtained or other
resolution has occurred. For contract accounts receivable, invoices for services
are prepared in the various operating areas of the Company and mailed to our
customers, generally on a monthly basis. Contract terms under such arrangements
generally require payment within thirty days of receipt of the invoice.
Outstanding invoices are periodically reviewed and operations personnel with
responsibility for the customer relationship will contact the customer to follow
up on any delinquent invoices. Contract accounts receivable will be considered
as bad debt and written-off based upon the individual circumstances of the
customer situation after all collection

                                        35
<PAGE>

efforts have been exhausted, including legal action if warranted, and it is the
judgment of management that the account is not expected to be collected.

     Methodology for Computing Allowance for Doubtful Accounts.  The Company
employs several methodologies for determining its allowance for doubtful
accounts depending on the nature of the net revenue recognized. The Company
initially determines gross revenue for its fee-for-service patient visits based
upon established fee schedule prices. Such gross revenue is reduced for
estimated contractual allowances for those patient visits covered by contractual
insurance arrangements to result in net revenue. Net revenue is then reduced for
the Company's estimate of uncollectible amounts. Fee-for-service net revenue
less provision for uncollectibles represents the Company's estimated cash to be
collected from such patient visits and is net of the Company's estimate of
account balances estimated to be uncollectible. The provision for uncollectible
fee-for-service patient visits is based on historical experience resulting from
the over six million annual patient visits. The significant volume of annual
patient visits and the terms of thousands of commercial and managed care
contracts and the various reimbursement policies relating to governmental
healthcare programs do not make it feasible to evaluate fee-for-service accounts
receivable on a specific account basis. Fee-for-service accounts receivable
collection estimates are reviewed on a quarterly basis for each of the Company's
fee-for-service contracts by period of accounts receivable origination. Such
reviews include the use of historical cash collection percentages by contract
adjusted for the lapse of time since the date of the patient visit. In addition,
when actual collection percentages differ from expected results, on a contract
by contract basis supplemental detailed reviews of the outstanding accounts
receivable balances may be performed by our billing operations to determine
whether there are facts and circumstances existing that may cause a different
conclusion as to the estimate of the collectibility of that contract's accounts
receivable from the estimate resulting from using the historical collection
experience. Facts and circumstances that may result in an adjustment to the
formulaic result are generally few and are usually related to third-party payer
processing problems that are temporary in nature. Contract related net revenues
are billed based on the terms of the contract at amounts expected to be
collected. Such billings are typically submitted on a monthly basis and aged
trial balances prepared. Allowances for estimated uncollectible amounts related
to such contract billings are made based upon specific accounts and invoice
periodic reviews once it is concluded that such amounts are not likely to be
collected. The methodologies employed to compute allowances for doubtful
accounts were unchanged between 2004 and 2003.

     Insurance Reserves.  The nature of our business is such that it is subject
to professional liability lawsuits. Historically, to mitigate a portion of this
risk, we have maintained insurance for individual professional liability claims
with per incident and annual aggregate limits per physician for all incidents.
Prior to March 12, 2003, we obtained such insurance coverage from a commercial
insurance provider. Professional liability lawsuits are routinely reviewed by
our insurance carrier and management for purposes of establishing ultimate loss
estimates. Provisions for estimated losses in excess of insurance limits have
been provided at the time such determinations are made. In addition, where as a
condition of a professional liability insurance policy the policy includes a
self-insured risk retention layer of coverage, we have recorded a provision for
estimated losses likely to be incurred during such periods and within such
limits based on our past loss experience following consultation with our outside
insurance experts and claims managers.

     Subsequent to March 11, 2003, we have provided for a significant portion of
our professional liability loss exposures through the use of a captive insurance
company and through greater utilization of self-insurance reserves. Accordingly,
beginning on March 12, 2003, a substantial portion of our provision for
professional liability losses is based on periodic actuarial estimates of such
losses for periods subsequent to March 11, 2003. An independent actuary firm is
responsible for preparation of the periodic actuarial studies. Management's
estimate of our professional liability costs resulting from such actuarial
studies is significantly influenced by assumptions, which are limited by the
uncertainty of predicting future events, and assessments regarding expectations
of several factors. These factors include, but are not limited to: the frequency
and severity of claims, which can differ significantly by jurisdiction; coverage
limits of third-party insurance; the effectiveness of our claims management
process; and the outcome of litigation.

     Our commercial insurance policy for professional liability losses for the
period March 12, 1999 through March 11, 2003, included insured limits applicable
to such coverage in the period. In March 2003 we had an actuarial projection
made of our potential exposure for losses under the provisions of our commercial
insurance policy that ended March 11, 2003. The results of that actuarial study
indicated that we would incur
                                        36
<PAGE>

a loss for claim losses and expenses in excess of the $130.0 million aggregate
limit. Accordingly, we recorded a loss estimate, discounted at 4%, of $50.8
million in our statement of operations for the three months ended March 31,
2003.

     The payment of any losses realized by us under the aggregate loss provision
discussed above will only be after our previous commercial insurance carrier has
paid such losses and expenses up to $130.0 million for the applicable prior
periods. The pattern of payment for professional liability losses for any
incurrence year typically is as long as six years. Accordingly, our portion of
our loss exposure under the aggregate policy feature, if realized, is not
expected to result in an outflow of cash until 2006.

     Since March 12, 2003, our professional liability costs consist of annual
projected costs resulting from an actuarial study along with the cost of certain
professional liability commercial insurance premiums and programs available to
us that remain in effect. The provisions for professional liability costs will
fluctuate as a result of several factors, including hours of exposure as
measured by hours of physician and related professional staff services as well
as actual loss development trends.

     Our provisions for losses under the aggregate loss limits of our policy in
effect prior to March 12, 2003, and under our captive insurance and
self-insurance programs since March 12, 2003, are subject to periodic actuarial
reevaluation. The results of such periodic actuarial studies may result in
either upward or downward adjustment to our previous loss estimates.

     The accounts of the captive insurance company are fully consolidated with
those of the other operations of the Company in the accompanying financial
statements.

     Impairment of Intangible Assets.  In assessing the recoverability of our
intangibles we must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. If these
estimates or their related assumptions change in the future, we may be required
to record impairment charges for these assets. During 2004, 2003 and 2002, we
recorded losses due to impairments of intangibles of $73.2 million, $0.2 million
and $2.3 million, respectively. Effective January 1, 2002, we adopted SFAS No.
142, Goodwill and Other Intangible Assets, which required us to analyze our
goodwill for impairment issues during the first three months of 2002, and
thereafter on an annual basis. As a result of the initial impairment review, we
recorded as a cumulative change of accounting principle in 2002 a loss of $0.3
million net of related tax benefit.

OVERVIEW OF STATEMENTS OF OPERATIONS

     Net Revenues and Provision for Uncollectibles.  Net revenue consists of
three components: fee-for-service revenue, contract revenue, and other revenue.
Fee-for-service revenue represents revenue earned under contracts for which we
bill and collect the professional component of the charges for medical services
rendered by our contracted and employed physicians. Under the fee-for-service
arrangements, we bill patients for services provided and receive payments from
patients or their third party payers. Contract revenue represents revenue
generated under contracts in which we provide physician and administrative
services in return for a contractually negotiated fee. Contract revenue also
includes supplemental revenue from hospitals where we may have a fee-for-service
contract arrangement. Other revenue consists primarily of revenue from
management and billing services provided to outside parties.

     Revenues are recorded in the period the services are rendered as determined
by the respective contracts with healthcare providers. As is standard in the
healthcare industry, revenue is reported net of third party contractual
adjustments. As a result, gross charges and net revenue differ considerably.
Revenue in our financial statements is reported at net realizable amounts from
patients, third-party payers and other payers. We also record a provision for
uncollectibles, which represents our estimate of losses based on the experience
of each individual contract. All services provided are expected to result in
cash flows and are therefore reflected as revenues in the financial statements.

     Management, in estimating the amounts to be collected resulting from its
over six million annual fee-for-service patient visits and procedures, considers
several factors, including but not limited to, prior contract collection
experience, current period changes in payer mix and patient acuity indicators,
reimbursement rate trends in governmental and private sector insurance programs
and trends in collections from self-pay patients. Historically, management has
taken this information regarding net collections and allocated the reductions
                                        37
<PAGE>

from gross billings and estimated net collections between contractual allowances
(a reduction from gross revenues to arrive at net revenue) and provision for
uncollectibles based on trended historical data, particularly with respect to
such factors as payer mix and its collection experience with self-pay accounts.

     The complexity of the estimation process associated with our
fee-for-service volumes and diverse payer mix, along with the difficulty of
assessing such factors as changes in the economy impacting the number of
healthcare insured versus uninsured patients and other socio-economic trends
that can have an impact on collection rates, could result in subsequent
adjustments to previously reported revenues.

     Net revenue less the provision for uncollectibles is an estimate of cash
collections and, as such, is a key measurement by which management evaluates the
performance of individual contracts as well as the company as a whole.

     Approximately 41% of our revenue less provision for uncollectibles in 2004
was derived from payments made by government sponsored healthcare programs,
principally Medicare, Medicaid and TRICARE. These programs are subject to
substantial regulation by federal and state governments. Funds received under
Medicare and Medicaid are subject to audit and, accordingly, retroactive
adjustments of these revenues may occur. We, however, have never had any
substantial retroactive adjustment due to a Medicare or Medicaid audit.
Additionally, funds previously received from a managed care support contractor
as a result of participation in the TRICARE program are subject to audit and
subsequent retroactive adjustment. Reimbursable fee payments for Medicare and
Medicaid patients for some services are defined and limited by the Centers for
Medicare and Medicaid Services ("CMS") and some state laws and regulations.
During 2004, the Medicare program announced that its physician reimbursement
rates would increase in 2005 by approximately 1.5%. We estimate that we will
realize an increase in such revenues in 2005 from Medicare and other related
revenue sources of approximately $2.0 million based on 2004 volumes of such
covered patients. In addition to the 1.5% increase provided as a result of the
Medicare Modernization Act, an additional 5% payment is provided starting in
2005 when a hospital is located within a Physician Scarcity Area ("PSA"). This
is estimated to increase revenues in 2005 by $0.9 million.

     Cost of Services Rendered.  Cost of services rendered consists of
professional services expenses and professional liability costs. Professional
expenses primarily consist of fees paid to physicians and other providers under
contract with us, outside collection fees relating to independent billing
contracts, operating expenses of our internal billing centers and other direct
contract service costs. Approximately 80% of our physicians are independently
contracted physicians who are not employed by us and the remainder are our
employees. We typically pay emergency department and urgent care center
physicians a flat hourly rate for each hour of coverage provided or,
increasingly more often, based on relative value units for services provided. A
relative value unit is a standard healthcare industry measurement intended to
measure the relative amount of effort involved in the provision of different
healthcare procedures. We typically pay radiologists and primary care physicians
an annual salary. The hourly rate varies depending on whether the physician is
independently contracted or an employee. Independently contracted physicians are
required to pay a self-employment tax, social security and expenses that we pay
for employed physicians.

     Professional liability costs represent the cost of covering our physician
and related professional staff that are under contract with us. The cost of
professional liability claims, which includes costs associated with litigating
or settling claims, is accrued when the incidents that give rise to the claims
occur. Estimated losses from asserted and unasserted claims are accrued either
individually or on a group basis, based on the best estimates of the ultimate
costs of the claims and the relationship of past reported incidents to eventual
claim payments. The accrual includes an estimate of the losses that will result
from incidents that occurred during the reporting period, but were not reported
that period. These claims are referred to as incurred-but-not-reported claims.
Our historical statements of operations include a professional liability cost
that is comprised of three components including insurance premiums,
incurred-but-not-reported claims estimates and self-insurance costs.

                                        38
<PAGE>

RESULTS OF OPERATIONS

     The following discussion provides an analysis of our results of operations
and should be read in conjunction with our consolidated financial statements.
The operating results of the periods presented were not significantly affected
by general inflation.

     Net revenue less the provision for uncollectibles is an estimate of future
cash collections and as such it is a key measurement by which management
evaluates performance of individual contracts as well as the Company as a whole.
The following table sets forth the components of net earnings as a percentage of
net revenue less provision for uncollectibles for the periods indicated:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               2004     2003     2002
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Fee-for-service revenue.....................................  115.8%   104.1%   108.8%
Contract revenue............................................   37.1     40.8     35.1
Other revenue...............................................    3.0      3.0      3.6
Net revenue.................................................  155.9    147.9    147.5
Provision for uncollectibles................................   55.9     47.9     47.5
Net revenue less provision for uncollectibles...............  100.0    100.0    100.0
                                                              =====    =====    =====
Professional service expenses...............................   74.8     74.7     76.2
Professional liability costs................................    5.9     11.6      4.4
Gross profit................................................   19.3     13.7     19.4
General and administrative expenses.........................   10.0      9.6      9.8
Management fee and other expenses...........................    0.1      0.1      0.1
Impairment of intangibles...................................    7.3       --      0.3
Depreciation and amortization...............................    1.4      2.1      2.4
Interest expense, net.......................................    2.9      2.3      2.8
Refinancing costs...........................................    1.5       --      0.4
Earnings (loss) before income taxes and cumulative effect of
  change in accounting principle............................   (3.7)    (0.4)     3.6
Provision (benefit) for income taxes........................    1.1     (0.1)     1.6
Net earnings (loss).........................................   (4.9)    (0.3)     2.0
Dividends on preferred stock................................    0.4      1.4      1.6
Net earnings (loss) attributable to common stockholders.....   (5.2)    (1.7)     0.4
</Table>

YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

     Net Revenues.  Net revenues in 2004 increased $93.2 million or 6.3%, to
$1,572.2 million from $1,479.0 million in 2003. The increase in net revenues of
$93.2 million included an increase of $127.1 million in fee-for-service revenue
and $0.3 million in other revenue, partially offset by a decrease in contract
revenue of $34.2 million. In 2004, fee-for-service revenue was 74.3% of net
revenue compared to 70.4% in 2003, contract revenue was 23.8% of net revenue
compared to 27.6% in 2003 and other revenue was 1.9% of net revenue compared to
2.0% in 2003.

     Provision for Uncollectibles.  The provision for uncollectibles was $563.5
million in 2004 compared to $479.3 million in 2003, an increase of $84.2 million
or 17.6%. The provision for uncollectibles as a percentage of net revenue was
35.8% in 2004 compared to 32.4% in 2003. The provision for uncollectibles is
primarily related to revenue generated under fee-for-service contracts that is
not expected to be fully collected. The increase in the provision for
uncollectibles as a percentage of net revenues resulted from fee schedule and
average acuity pricing increases in excess of increased average collection rates
for self-pay patients. In addition, the increase in the provision for
uncollectibles as a percentage of revenue was affected by an estimated 1.0%
payer mix shift toward more self-insured patient encounters in 2004 and a
reduction in contract revenues between years.

                                        39
<PAGE>

     Net Revenue Less Provision for Uncollectibles.  Net revenue less provision
for uncollectibles in 2004 increased $8.9 million, or 0.9%, to $1,008.7 million
from $999.7 million in 2003. Same contract revenue less provision for
uncollectibles, which consists of contracts under management in both periods,
increased $28.4 million, or 4.2%, to $710.6 million in 2004 from $682.2 million
in 2003. The increase in same contract revenue of 4.2% is principally due to
increased net revenue per billing unit offset by a decrease in overall patient
dollar volumes between periods. Same contract revenue increased approximately
6.6% between periods due to higher estimated net revenue per billing unit.
Billing volume for same contract fee-for-service decreased 0.6% between periods
while contract revenues declined due to lower billable hours in the Company's
locum tenens and radiology staffing contracts based services, principally as a
result of terminating certain operating services and contracts in these staffing
areas. Acquisitions contributed $7.6 million between periods. The aforementioned
increases were partially offset by a net $27.1 million of revenue derived from
contracts that terminated during the periods less revenue obtained through new
sales.

     Professional Service Expenses.  Professional service expenses, which
includes physician costs, billing and collection expenses and other professional
expenses, totaled $754.2 million in 2004 compared to $746.4 million in 2003, an
increase of $7.8 million or 1.0%. The increase of $7.8 million in professional
service expenses included an increase of approximately $15.0 million which
resulted principally from increases in average rates paid per hour of provider
service on a same contract basis. Acquisitions contributed $6.2 million of the
increase. These increases were partially offset by a net decrease of
approximately $13.4 million due to terminated contracts.

     Professional Liability Costs.  Professional liability costs were $59.8
million in 2004 compared with $116.0 million in 2003 for a decrease of $56.1
million. The decrease in professional liability expenses is due primarily to a
provision for losses in excess of an aggregate insured limit for periods prior
to March 12, 2003 of $50.8 million in 2003. Excluding the $50.8 million
provision, professional liability expenses decreased $5.3 million or 8.1%
between periods. The decrease of $5.3 million includes a reduction of $2.0
million in 2004 in self-insured retention reserves for excess limits provided
for certain physicians in prior years as a result of a review of remaining
outstanding claims pertaining to such coverage periods and approximately $1.6
million in 2004 resulting from favorable actuarial results related to 2003
initial self-insured loss year reserves. Also contributing to the decrease is a
reduction in exposure associated with the termination of staffing contracts in
higher risk territories or specialties.

     Gross Profit.  Gross profit was $194.6 million in 2004, compared to $137.4
million in 2003 for an increase of $57.2 million. The increase in gross profit
is attributable to the effect of the aggregate provision for professional
liability insurance losses of $50.8 million in 2003 and increased contribution
from steady state operations, partially offset by the net effect of terminated
contracts between periods. Gross profit as a percentage of revenue less
provision for uncollectibles in 2004 was 19.3% compared to 18.8% before the
provision for excess professional liability losses in 2003.

     General and Administrative Expenses.  General and administrative expenses
increased $4.9 million in 2004 to $100.5 million from $95.6 million in 2003.
General and administrative expenses as a percentage of net revenue less
provision for uncollectibles were 10.0% in 2004 compared to 9.6% in 2003.
Included in general and administrative expenses in 2004 is approximately $1.7
million related to a bonus to stock option holders in connection with a
refinancing of the Company's debt structure. Excluding the effect of the stock
option bonus expense, general and administrative expenses increased
approximately $3.2 million, or 3.3%. The remaining increase in general and
administrative expenses between years was principally due to increases in
salaries and benefits of approximately $1.0 million, net of a decrease in cost
of approximately $1.0 million under our management incentive plan, an increase
in professional consulting expenses between years of $1.7 million (including in
2004 approximately $2.4 million related to improving our billing and collection
processes), with the remainder of the increase due to an increase in travel
related and lease costs, respectively, of approximately $0.5 million each.

     Management Fee and Other Operating Expenses.  Management fee and other
operating expenses were $1.4 million in 2004 and $0.5 million for the
corresponding period in 2003. Other operating expenses in 2004 included a loss
on asset disposals totaling $0.9 million.

     Impairment Loss.  During 2004, an impairment loss in the amount of $73.2
million was recorded related to goodwill associated with our military staffing
business. The results of a re-bidding of our healthcare staffing
                                        40
<PAGE>

contracts under the military's Tricare Program indicated a net loss of contract
revenues and margin related to such staffing services. Based on the results of
the re-bidding, an impairment analysis using expected future cash flows and
estimated fair values relating to the underlying business to which the goodwill
applies indicated that the goodwill previously recorded in the amount of $127.9
million was impaired.

     Depreciation and Amortization.  Depreciation and amortization was $13.7
million in 2004 and $22.0 million in 2003. Amortization expense decreased by
$7.7 million between periods due to certain of the Company's intangibles
becoming fully amortized in 2003.

     Net Interest Expense.  Net interest expense increased $5.6 million to $28.9
million in 2004, compared to $23.3 million in 2003. The increase in net interest
expense includes approximately $7.8 million due to an increased level of net
outstanding debt between periods and a realized hedge instrument loss of
approximately $1.0 million in 2004 partially offset by lower interest rates and
non-cash amortization of loan costs between periods.

     Refinancing Costs.  The Company expensed $14.7 million of deferred
financing costs and bond repayment premiums related to its previously
outstanding bank and bond borrowings that were refinanced in 2004.

     Loss before Income Taxes.  Loss before income taxes in 2004 was $37.8
million compared to $4.2 million in 2003.

     Provision (Benefit) for Income Taxes.  Provision for income taxes in 2004
was $11.4 million compared to a benefit of $1.4 million in 2003.

     Net Loss.  Net loss for 2004 was $49.2 million compared to a net loss of
$2.8 million in 2003.

     Dividends on Preferred Stock.  The Company recognized $3.6 million of
dividends in 2004 and $14.4 million in 2003, on its Class A mandatory redeemable
preferred stock.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002

     Net Revenue.  Net revenue in 2003 increased $248.3 million, or 20.2%, to
$1,479.0 million from $1,230.7 million in 2002. The increase in net revenue of
$248.3 million included an increase of $133.4 million in fee-for-service
revenue, $115.4 million in contract revenue offset by a decrease of $0.5 million
in other revenue. Fee-for-service revenue was 70.4% of net revenue in 2003
compared to 73.7% in 2002, contract revenue was 27.6% of net revenue in 2003
compared to 23.8% in 2002 and other revenue was 2.0% of net revenue in 2003
compared to 2.5% in 2002. The change in the mix of revenues is principally due
to an acquisition in 2002. The acquired operation derives a higher percentage of
its revenues from hourly contract billings than fee-for-service contracts.

     Provision for Uncollectibles.  The provision for uncollectibles was $479.3
million in 2003 compared to $396.6 million in 2002, an increase of $82.7 million
or 20.9%. As a percentage of net revenue, the provision for uncollectibles was
32.4% in 2003 compared to 32.2% in 2002. The provision for uncollectibles is
primarily related to revenue generated under fee-for-service contracts which is
not expected to be fully collected. The increase in the provision for
uncollectibles percentage resulted from increased patient visits, fee schedule
increases and a continued payer mix shift toward more self-insured patients.

     Net Revenue Less Provision for Uncollectibles.  Net revenue less provision
for uncollectibles in 2003 increased $165.6 million, or 19.9% to $999.7 million
from $834.1 million in 2002. Same contract revenue less provision for
uncollectibles, which consists of contracts under management from the beginning
of the prior period through the end of the subsequent period, increased $61.9
million or 8.9%, to $757.7 million in 2003 from $695.8 million in 2002. The
increase in same contract revenue of 8.9% includes the effects of both increased
billing volume and higher estimated net revenue per billing unit between
periods. Overall, same contract revenue increased approximately 4.0% between
periods due to an increase in billing volume and physician mix. Acquisitions
contributed $55.1 million and new contracts obtained through internal sales
contributed $105.5 million of the remaining increase. The increases noted above
were partially offset by $56.9 million of revenue derived from contracts that
terminated during the periods.

                                        41
<PAGE>

     Professional Service Expenses.  Professional service expense which includes
physician costs, billing and collection expenses and other professional
expenses, totaled $746.4 million in 2003 compared to $635.6 million in 2002 for
an increase of $110.8 million or 17.4%. The increase of $110.8 million included
$43.5 million resulting from acquisitions between periods. The remaining
increase in professional service expenses was principally due to increases in
provider hours as the result of new contract sales, principally for staffing
within military treatment facilities, including increases resulting from troop
deployments in 2003, as well as increases in average rates paid per hour of
provider service.

     Professional Liability Costs.  Professional liability costs were $116.0
million in 2003, including a provision for losses in excess of an aggregate
insured limit for periods prior to March 12, 2003 of $50.8 million. The total
professional liability cost of $116.0 million in 2003 compared with $37.0
million in 2002 increased $79.0 million (76.2% excluding the effect of the $50.8
million provision for excess insurance losses). The increase in professional
liability costs, in addition to increases resulting from the provision for
excess losses ($50.8 million) and from acquisitions ($1.3 million) is due to an
increase between periods in the Company's commercial insurance program premium
through its expiration date of March 11, 2003, plus an increased level of cost
resulting from an estimate of the Company's losses on a self-insured basis
subsequent to March 11, 2003.

     Gross Profit.  Gross profit decreased to $137.4 million in 2003 from $161.5
million in 2002. The decrease in gross profit is attributable to the effect of
the provision for excess losses of $50.8 million partially offset by the effect
of acquisitions, net new contract growth and increased profitability of steady
state operations between periods. Gross profit as a percentage of revenue less
provision for uncollectibles was 18.8% before the provision for excess losses
for prior periods compared to 19.4% for 2002. The decrease was principally due
to increases in professional liability costs increasing faster than growth in
revenues.

     General and Administrative Expenses.  General and administrative expenses
in 2003 increased to $95.6 million from $81.7 million in 2002, for an increase
of $13.8 million, or 16.9% between years. General and administrative expenses as
a percentage of net revenue less provision for uncollectibles were 9.6% in 2003
compared to 9.8% in 2002. The increase in general and administrative expenses
between years included expenses associated with acquired operations of $4.9
million accounting for 6.0% of the 16.9% increase between periods. The remaining
net increase of 10.9% or $8.9 million was principally due to increases in
salaries and benefits of approximately $7.8 million. Included in the increase in
salaries and benefits between periods was an increase of approximately $3.3
million related to the Company's management incentive plan. Non salary related
general and administrative expenses increased $1.1 million between years
principally due to costs related to a disputed contract settlement of
approximately $0.6 million and a net increase in outside consulting and services
fees of approximately $0.6 million. Other general and administrative expenses
remained approximately unchanged between years.

     Management Fee and Other Expenses.  Management fee and other expenses were
$0.5 million in 2003 and 2002.

     Impairment of Intangibles.  Impairment of intangibles was $0.2 million and
$2.3 million in 2003 and 2002, respectively. During 2003 an ED contract with a
noncompete intangible terminated and two of the Company's contracts were
determined to be impaired during 2002.

     Depreciation and Amortization.  Depreciation and amortization expense was
$22.0 million in 2003 compared to $20.0 million in 2002. Depreciation expense
decreased by $0.4 million between years while amortization expense increased
$2.4 million between years. The increase in amortization expense is principally
due to acquisitions between periods.

     Net Interest Expense.  Net interest expense decreased $0.6 million to $23.3
million in 2003 compared to $23.9 million in 2002. The decrease in net interest
expense is due to lower interest rates on outstanding debt and increased
investment income in 2003 offset by an increase in debt outstanding resulting
from acquisitions in 2002.

     Refinancing Costs.  The Company expensed in 2002 $3.4 million of deferred
financing costs related to its previously outstanding bank debt which was
refinanced in 2002.

                                        42
<PAGE>

     Earnings (Loss) before Income Taxes and Cumulative Effect of Change in
Accounting Principle. Earnings (loss) before income taxes and cumulative effect
of change in accounting principle was a loss of $4.2 million in 2003 compared
with earnings of $29.6 million in 2002.

     Provision (Benefit) for Income Taxes.  Provision for income taxes in 2003
was a benefit of $1.4 million compared to a provision of $13.2 million in 2002.
The decrease in the provision for income taxes in 2003 from 2002 was due to the
decreased level of earnings before income taxes in 2003.

     Earnings (Loss) before Cumulative Effect of Change in Accounting
Principle.  Earnings (loss) before cumulative effect of change in accounting
principle in 2003 was a loss of $2.8 million compared with earnings of $16.4
million in 2002.

     Cumulative Effect of Change in Accounting Principle.  In connection with
implementing SFAS No. 142, Goodwill and Other Intangible Assets, as of January
1, 2002, the Company completed a transitional impairment test of existing
goodwill and concluded that a portion of its goodwill was impaired. Accordingly,
an impairment loss of $0.5 million ($0.3 million net of taxes) was recorded as
the cumulative effect of a change in accounting principle in 2002.

     Net Earnings (Loss).  Net loss in 2003 was $2.8 million compared to net
earnings of $16.1 million in 2002.

     Dividends on Preferred Stock.  The Company accrued $14.4 million and $13.1
million of dividends in 2003 and 2002, respectively, on its outstanding Class A
mandatory redeemable preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

     Our principal ongoing uses of cash are to meet working capital
requirements, fund debt obligations and to finance our capital expenditures and
acquisitions. Funds generated from operations during the past two years have
been sufficient to meet the aforementioned cash requirements.

     During 2004, we restructured our capital structure. The restructuring
resulted in the following transactions occurring:

     - Our Board of Directors authorized the redemption of our 10% Cumulative
       Preferred Stock in the amount of approximately $162.4 million, including
       accrued dividends.

     - We completed a tender offer for our outstanding 12% Senior Subordinated
       Notes resulting in $100.0 million of such bonds being repaid, plus
       payment of a call premium of $8.2 million.

     - We issued new 9% Senior Subordinated Notes in the amount of $180.0
       million.

     - We retired our existing bank debt in the amount of $199.4 million and
       entered into a new senior bank credit facility, including a $250.0
       million senior secured term loan and an $80.0 million revolving credit
       facility.

     - We incurred and paid approximately $8.2 million in costs (in addition to
       an $8.2 million call premium on our previously outstanding 12% Senior
       Subordinated Bonds) to complete the above transactions.

     In addition, the Board of Directors declared and paid to our shareholders a
cash dividend of approximately $27.6 million on March 23, 2004. The Board of
Directors also authorized a cash payment to holders of stock options in the form
of a compensatory bonus in the approximate amount of $1.3 million.

     As a result of the above transactions, we have total debt outstanding of
$428.1 million as of December 31, 2004, compared to $299.4 million as of
December 31, 2003.

     Cash provided from operating activities in 2004 was $64.6 million compared
to cash provided by operating activities in 2003 of $101.7 million. The $37.1
million decrease in cash provided by operating activities was principally due to
an increase in interest and tax payments between periods and operating cash
flows used in the refinancing transaction. Cash used in investing activities in
2004, was $75.8 million compared to a use of cash in 2003 of $26.3 million. The
$49.5 million change in cash used in investing activities was principally due to
the purchase of short-term investments offset by the redemption of assets held
in a deferred compensation plan which were liquidated as part of the refinancing
as well as reduced levels of capital

                                        43
<PAGE>

expenditures in 2004. Cash used in financing activities in 2004 and 2003 was
$71.8 million and $22.3 million, respectively. The $49.5 million decrease in
cash resulting from financing activities was due to the debt restructuring and
dividend paid in 2004.

     We spent $6.7 million in 2004 and $9.0 million in 2003 for capital
expenditures. These expenditures were primarily for information technology
investments and related development projects.

     We have historically been an acquirer of other physician staffing
businesses and interests. Such acquisitions in recent years have been completed
for cash. Cash payments made in connection with acquisitions, including
contingent payments, were $3.2 million in 2004 and $2.5 million in 2003. Future
contingent payment obligations are approximately $8.8 million as of December 31,
2004.

     We made scheduled debt maturity payments of $1.9 million in 2004 in
accordance with its applicable term loan facilities in effect at the time.

     We began providing effective March 12, 2003, for professional liability
risks in part through a captive insurance company. Prior to such date we insured
such risks principally through the commercial insurance market. The change in
the professional liability insurance program has resulted in increased cash flow
due to the retention of cash formerly paid out in the form of insurance premiums
to a commercial insurance company coupled with a long period (typically 2-4
years or longer on average) before cash payout of such losses occurs. A portion
of such cash retained will be retained within our captive insurance company and
therefore not immediately available for general corporate purposes. As of
December 31, 2004, cash or cash equivalents and related investments held within
the captive insurance company totaled approximately $24.4 million. Based on the
results of our most recent actuarial report and renewal of our fronting carrier
program effective June 1, 2004, anticipated cash outflow to the captive
insurance company and to its third-party fronting carrier during the period
January 1, 2005 through May 31, 2005, is estimated at $6.7 million.

     Our senior credit facility at December 31, 2004 provides for up to $80.0
million of borrowings under a senior revolving credit facility and $250.0
million of term loans. Borrowings outstanding under the senior credit facility
mature in various years with a final maturity date of March 31, 2011. The senior
credit facility agreement contains both affirmative and negative covenants,
including limitations on our ability to incur additional indebtedness, sell
material assets, retire, redeem or otherwise reacquire our capital stock,
acquire the capital stock or assets of another business, pay dividends, and
requires us to meet or exceed certain coverage, leverage and indebtedness
ratios. The senior credit agreement also includes a provision for the prepayment
of a portion of the outstanding term loan amounts at any year-end if we generate
"excess cash flow," as defined in the agreement. The Company has estimated that
it will be required to make an excess cash flow payment of approximately $15.0
million for fiscal 2004 by April 30, 2005. The estimated excess cash flow
payment has been included within current maturities of long-term debt in the
accompanying consolidated balance sheet at December 31, 2004.

     Approximately $210.7 million of annual revenue resulting from providing
staffing services to the military was subjected to a re-bidding process with
awards effective at various dates between June 1 and November 1, 2004. Based on
the results of the re-bidding process in 2004, we have been successful in
winning existing or new business contracts of approximately $138.2 million in
annual revenues or approximately 66% of our annual revenue that had been re-bid.
In addition, the operating margins expected to be realized from such awards are
lower than existing margins. Based on the results of the re-bidding awards, we
expect a decline in annual earnings and cash flow from our military staffing
business. We do not expect the decline in earnings and cash flow from our
military staffing business, based on our estimates of such earnings and cash
flow, to result in any violations of debt covenant financial ratio requirements
under our senior credit agreement.

     We had as of December 31, 2004, total cash, cash equivalents and short-term
investments of approximately $82.6 million and a revolving credit facility
borrowing availability of $76.2 million. Our ongoing cash needs in 2004 were met
from internally generated operating sources and there were no borrowings under
our revolving credit facility. We believe that our cash needs, other than for
significant acquisitions, will continue to be met through the use of its
remaining existing available cash, cash flows derived from future operating
results and cash generated from borrowings under our senior revolving credit
facility. From time to time we may repurchase our subordinated bonds subject to
the approval of the bank group comprising our senior credit facility.

                                        44
<PAGE>

     The following tables reflect a summary of obligations, commitments
outstanding and estimated uses of nonrestricted cash to meet estimated
professional liability insurance obligations as of December 31, 2004, after
giving effect to the refinancing transactions (in thousands):

<Table>
<Caption>
                                                    PAYMENTS DUE BY PERIOD
                                  -----------------------------------------------------------
                                  LESS THAN                               AFTER 5
                                   1 YEAR     1 - 3 YEARS   4 - 5 YEARS    YEARS      TOTAL
                                  ---------   -----------   -----------   --------   --------
<S>                               <C>         <C>           <C>           <C>        <C>
Contractual cash obligations:
Long-term debt..................  $ 15,000     $  4,746       $ 4,746     $403,633   $428,125
Operating leases................     8,716       13,925         6,431        1,554     30,626
Interest payments...............    30,746       60,812        59,977       53,354    204,889
                                  --------     --------       -------     --------   --------
  Subtotal......................    54,462       79,483        71,154      458,541    663,640
                                  --------     --------       -------     --------   --------
</Table>

<Table>
<Caption>
                                          AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                  -----------------------------------------------------------
                                  LESS THAN                               AFTER 5
                                   1 YEAR     1 - 3 YEARS   4 - 5 YEARS    YEARS      TOTAL
                                  ---------   -----------   -----------   --------   --------
<S>                               <C>         <C>           <C>           <C>        <C>
Other commitments:
Standby letters of credit.......  $  3,831     $     --       $    --     $     --   $  3,831
Contingent acquisition
  payments......................     7,076        1,697            --           --      8,773
                                  --------     --------       -------     --------   --------
                                    10,907        1,697            --           --     12,604
                                  --------     --------       -------     --------   --------
</Table>

<Table>
<Caption>
                                          AMOUNT OF ACTUARILY ESTIMATED PAYMENTS FOR
                                               PROFESSIONAL LIABILITY LOSSES(1)
                                  -----------------------------------------------------------
                                  LESS THAN                               AFTER 5
                                   1 YEAR     1 - 3 YEARS   4 - 5 YEARS    YEARS      TOTAL
                                  ---------   -----------   -----------   --------   --------
<S>                               <C>         <C>           <C>           <C>        <C>
Excess of aggregate under
  insured plan ended March 11,
  2003..........................  $     --     $ 29,720       $22,639     $  7,714   $ 60,073
Captive insurance subsidiary
  funding.......................    48,657       35,832         1,782           --     86,271
                                  --------     --------       -------     --------   --------
Total estimated payments........    48,657       65,552        24,421        7,714    146,344
                                  --------     --------       -------     --------   --------
Total obligations, commitments
  and estimated use of
  nonrestricted cash to fund
  professional liability
  losses........................  $114,026     $146,732       $95,575     $466,255   $822,588
                                  ========     ========       =======     ========   ========
</Table>

---------------

(1) Amounts represent estimated use of unrestricted cash to pay claims in excess
    of an insured $130 million aggregate plan limit in existence prior to March
    11, 2003, and amounts estimated to be funded into the Company's captive
    insurance subsidiary for self-insured claims subsequent to March 11, 2003.
    The amounts represent estimated payments for loss reporting periods prior to
    January 1, 2005.

INFLATION

     We do not believe that general inflation in the U.S. economy has had a
material impact on our financial position or results of operations during the
past three years.

SEASONALITY

     Historically, because of the significance of our revenues derived from
patient visits to emergency departments, which are generally open on a 365 day
basis, our revenues and operating results have reflected minimal seasonal
variation and also due to our geographic diversification. Revenue from our
non-emergency department staffing lines is dependent on a healthcare facility
being open during selected time periods. Revenue in such instances will
fluctuate depending upon such factors as the number of holidays in the period.
Accordingly, revenues derived from hourly contract business is generally lower
in the fourth quarter of the year due to the number of holidays therein.

                                        45
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

     On December 31, 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting
for Stock-Based Compensation -- Transition and Disclosure. SFAS No. 148 amends
SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition to the fair value method of accounting for stock-based
employee compensation under SFAS No. 123. SFAS No. 148 also amends the
disclosure provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial
Reporting, to require disclosure in the summary of significant accounting
policies of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported earnings in annual and interim
financial statements. While the Statement does not amend SFAS No. 123 to require
companies to account for employee stock options using the fair value method, the
disclosure provisions of SFAS No. 148 are applicable to all companies with
stock-based employee compensation, regardless of whether the accounting for that
compensation is using the fair value method of SFAS No. 123 or the intrinsic
value method of Opinion 25.

     As more fully discussed in Note 15, we adopted the disclosure requirements
of SFAS No. 148 and the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, prospectively to all new awards granted
to employees after January 1, 2003.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity-type instruments, must now be accounted for as
liabilities. The financial instruments affected include mandatory redeemable
stock, certain financial instruments that require or may require the issuer to
buy back some of its shares in exchange for cash or other assets and certain
obligations that can be settled with shares of stock. The provisions of SFAS No.
150 are applicable to our financial statements beginning in 2005. We do not
expect the adoption of SFAS No. 150 to have a material effect on our results of
operations or financial condition.

     In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities. FIN 46 provides guidance on how to
identify a variable interest entity ("VIE"') and determine when the assets,
liabilities, non-controlling interests, and results of operations of a VIE are
to be included in an entity's consolidated financial statements. A VIE exists
when either the total equity investment at risk is not sufficient to permit the
entity to finance its activities by itself, or the equity investors lack one of
three characteristics associated with owning a controlling financial interest.
Those characteristics include the direct or indirect ability to make decisions
about an entity's activities through voting rights or similar rights, the
obligation to absorb the expected losses of an entity if they occur, and the
right to receive the expected residual returns of the entity if they occur.

     FIN 46 was effective immediately for new entities created or acquired after
February 1, 2003. We have no interest in any entities created nor did we acquire
any entities after February 1, 2003. In December 2003, the FASB published a
revision to FIN 46 ( "FIN 46R") to clarify some of the provisions of the
interpretation and defer the effective date of implementation for certain
entities. Under the guidance of FIN 46R, entities that do not have interests in
structures that are commonly referred to as special purpose entities are
required to apply the provisions of the interpretation in financial statements
for periods ending after March 14, 2004. Management believes that FIN 46R does
not have a material impact to us.

     On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment, which is a revision of SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of
Cash Flows. Generally, the approach in SFAS No. 123(R) is similar to the
approach described in SFAS No. 123. However, SFAS No. 123(R) requires all
shared-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative.

     Under the definition provided in SFAS No. 123(R) the Company is considered
a nonpublic entity therefore the provisions of SFAS No. 123(R) are effective for
the Company beginning January 1, 2006. Early adoption is permitted in periods in
which financial statements have not been issued. The Company expects to adopt
SFAS No. 123(R) beginning January 1, 2006.

                                        46
<PAGE>

     As previously discussed the Company adopted the fair-value-based method of
accounting for share-based payments effective January 1, 2003 using the
prospective method described in SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. Currently, the Company uses the
minimum value method to estimate the value of stock options granted to
employees. In accordance with the transition provisions of SFAS No. 123(R) the
Company will continue to account for nonvested awards outstanding at the date of
adoption of SFAS No. 123(R) in the same manner as they had been accounted for
prior to adoption for financial statement recognition purposes. For those
options that are granted after the adoption SFAS No. 123(R) the Company will no
longer be permitted to use the minimum-value method and instead will be required
to use an acceptable option-pricing model. The Company has not yet determined
which specific option-pricing model it will use.

     SFAS No. 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. While the Company cannot estimate what those
amounts will be in the future (because they depend on, among other things, when
employees exercise stock options), there were no amounts of operating cash flows
recognized in prior periods for such excess tax deductions in 2004, 2003 or
2002.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk related to changes in interest rates. We do
not use derivative financial instruments for speculative or trading purposes.

     Our earnings are affected by changes in short-term interest rates as a
result of borrowings under our senior credit facilities. Interest rate swap
agreements are used to manage a portion of our interest rate exposure.

     We were obligated under the terms of our senior credit facility agreement
to obtain within 90 days of the date of entering into the agreement interest
rate hedge agreements at amounts such that 50% of our funded debt, as defined,
was at fixed rates of interest. Such hedge agreements are required to be
maintained for at least the first three years of the senior credit facility
agreement. On April 28, 2004, we entered into an interest rate swap agreement
that effectively converted $35.0 million of our variable rate Term Loan B to a
fixed rate of 3.2% through March 31, 2007. The agreement is a contract to
exchange, on a quarterly basis, floating interest rate payments based on the
Eurodollar rate, for fixed interest rate payments over the life of the
agreement. This agreement exposes us to credit losses in the event of
non-performance by the counterparty to the financial instrument. The
counterparty to our interest rate swaps agreement is a creditworthy financial
institution and we believe the counterparty will be able to fully satisfy its
obligations under the contracts.

     We had previously entered into a forward interest rate swap agreement
effective November 7, 2002, to effectively convert $62.5 million of
floating-rate borrowings to 3.86% fixed-rate borrowings. As a result of the
payment of the underlying borrowings in 2004, we realized a loss of
approximately $1.7 million related to this interest rate hedge agreement to
reflect its value on a mark to market basis.

     At December 31, 2004, the fair value of our total debt, which has a
carrying value of $428.1 million, was approximately $424.1 million. We had
$248.1 million of variable debt outstanding at December 31, 2004. If the market
interest rates for our variable rate borrowings averaged 1% more during the
twelve months subsequent to December 31, 2004, our interest expense would
increase, and earnings before income taxes would decrease, by approximately $2.4
million. This analysis does not consider the effects of the reduced level of
overall economic activity that could exist in such an environment. Further, in
the event of a change of such magnitude, management could take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no changes in our financial structure.

                                        47
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements and schedules are listed in Part IV Item 15 of
this Form 10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

ITEM 9A.  CONTROLS AND PROCEDURES

     As of the end of the period covered by this Annual Report on Form 10-K, the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934)
was evaluated by our management, with the participation of our Chief Executive
Officer, H. Lynn Massingale, M.D. (principal executive officer), and our
Executive Vice President Finance and Administration, Robert J. Abramowski
(principal financial officer). Dr. Massingale and Mr. Abramowski have concluded
that our disclosure controls and procedures are effective, as of the end of the
period covered by this Report.

     There were no changes in our internal control over financial reporting that
occurred during our last fiscal quarter (the quarter ended December 31, 2004)
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

                                        48
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers are as follows:

<Table>
<Caption>
NAME                                    AGE*                  POSITION
----                                    ----   --------------------------------------
<S>                                     <C>    <C>
Lynn Massingale, M.D. ................   52    President, Chief Executive Officer and
                                               Director
Greg Roth.............................   47    President and Chief Operating Officer
Robert J. Abramowski..................   54    Executive Vice President, Finance and
                                               Administration
Robert C. Joyner......................   57    Executive Vice President, General
                                               Counsel
Stephen Sherlin.......................   59    Chief Compliance Officer
David P. Jones........................   37    Chief Financial Officer
Nicholas W. Alexos....................   41    Director
Glenn A. Davenport....................   51    Director
Earl P. Holland.......................   59    Director
Dana J. O'Brien.......................   49    Director
Kenneth W. O'Keefe....................   38    Director
Timothy P. Sullivan...................   46    Director
</Table>

---------------

* As of February 28, 2005

     LYNN MASSINGALE, M.D. has been President, Chief Executive Officer and
Director of Team Health since its founding in 1994. Prior to that, Dr.
Massingale served as President and Chief Executive Officer of Southeastern
Emergency Physicians, a provider of emergency physician services to hospitals in
the Southeast and the predecessor of Team Health, which Dr. Massingale
co-founded in 1979. Dr. Massingale served as the director of Emergency Services
for the state of Tennessee from 1989 to 1993. Dr. Massingale is a graduate of
the University of Tennessee Medical Center for Health Services.

     GREG ROTH joined Team Health in October 2004 as President and Chief
Operating Officer of Team Health. Mr. Roth joins the Company after being
employed with HCA -- The Healthcare Company since January 1995. Beginning in
July 1998, Mr. Roth served as President of HCA's Ambulatory Surgery Division.
Prior to his appointment as President, Mr. Roth served in the capacity of Senior
Vice President of Operations, Western Region from May 1997 to July 1998 and the
Western Region's Chief Financial Officer from January 1995 to May 1997. Prior to
joining HCA, Mr. Roth held various financial positions at Ornda HealthCorp from
July 1994 to January 1995 and at EPIC Healthcare Group from April 1988 to July
1994. Prior to these positions, Mr. Roth held various positions in the
healthcare industry.

     ROBERT J. ABRAMOWSKI, CPA, joined Team Health in October 2000 as its
Executive Vice President, Finance and Administration. Prior to joining Team
Health, Mr. Abramowski was Senior Vice President of Finance and Chief Financial
Officer of ProVantage Health Services, Inc., a publicly-traded pharmacy benefits
management company, from October 1999 until its sale to Merck & Co., Inc. in
June 2000. Mr. Abramowski served as Vice President and Controller with
Extendicare Health Services, Inc. from October 1983 to December 1989, and as
Vice President of Finance and Chief Financial Officer from January 1990 to March
1998. Following his tenure with Extendicare, Mr. Abramowski served as Chief
Financial Advisor to Americor Management Services, L.L.C. Mr. Abramowski also
spent 11 years with Arthur Andersen & Co. Mr. Abramowski is a graduate of the
University of Wisconsin-Milwaukee.

     ROBERT C. JOYNER joined Team Health in August 1999 as Executive Vice
President and General Counsel. Prior to joining Team Health, Mr. Joyner had a
private practice of law from September 1998 to July 1999, and

                                        49
<PAGE>

from May 1997 to September 1998 he served as the Senior Vice President and
General Counsel for American Medical Providers, a regional physician practice
management company. From May 1986 to May 1997, Mr. Joyner served as the Senior
Vice President and General Counsel for Paracelsus Healthcare Corporation, a
privately held hospital ownership and management company which became public in
1996. Mr. Joyner graduated with a BSBA degree in 1969 and a JD in 1972, both
from the University of Florida.

     STEPHEN SHERLIN was named Chief Compliance Officer effective July 1, 2004.
Mr. Sherlin previously served as Executive Vice President, Healthcare Financial
Services since February 2000. Mr. Sherlin joined Team Health in January 1997 as
Senior Vice President, Finance and Administration, and was promoted to Executive
Vice President, Finance and Administration in July 1998. From 1993 until 1996
Mr. Sherlin served as Vice President and Chief Financial Officer of the
Tennessee Division of Columbia/HCA. Mr. Sherlin has also served as Chief
Financial Officer for the Athens Community Hospital in Athens, Tennessee; Park
West Medical Center in Knoxville, Tennessee; and Doctors Hospital in Little
Rock, Arkansas. Mr. Sherlin is a graduate of Indiana University.

     DAVID P. JONES, CPA has been our Chief Financial Officer since May 1996.
From 1994 to 1996, Mr. Jones was our Controller. Prior to that, Mr. Jones worked
at Pershing, Yoakley and Associates, a regional healthcare audit and consulting
firm, as a Supervisor. Before joining Pershing, Yoakley and Associates, Mr.
Jones worked at KPMG Peat Marwick as an Audit Senior. Mr. Jones received a B.S.
in Business Administration from the University of Tennessee.

     NICHOLAS W. ALEXOS became a director in 1999. Prior to co-founding Madison
Dearborn Partners, Inc., Mr. Alexos was with First Chicago Venture Capital for
four years. Previously, he was with The First National Bank of Chicago. Mr.
Alexos concentrates on investments in the healthcare and food manufacturing
industries and currently serves on the Boards of Directors of Milnot Holding
Company, National Mentor, Inc. and Valitas Healthcare Services, Inc. Mr. Alexos
received a B.B.A. from Loyola University and an M.B.A. from the University of
Chicago Graduate School of Business.

     GLENN A. DAVENPORT became a director in 2001. Mr. Davenport serves as
President and Chief Executive Officer of Morrison Management Specialists, which
was acquired by Compass Group in April 2001. Mr. Davenport has served in this
role since Morrison Management Specialists was spun off from Morrison
Restaurants, Inc. in 1996. Prior thereto, he served in various management
capacities with Morrison Restaurants, Inc. since 1973. Mr. Davenport also serves
on the board of directors of several other organizations associated with the
food service business.

     EARL P. HOLLAND became a director of the Company in 2001. Mr. Holland has
over 32 years of experience working in the healthcare industry. Prior to his
retirement in January, 2001, Mr. Holland held several positions with Health
Management Associates, including the positions of Vice Chairman and Chief
Operating Officer at the time of his retirement. Mr. Holland also serves on the
board of directors of several other companies engaged in the business of
providing healthcare services as well as other business services. Mr. Holland
graduated from Southeast Missouri State University with a B.S. degree in
business administration.

     DANA J. O'BRIEN became a director in 1999. Mr. O'Brien co-founded
Prudential Equity Investors, Inc. in 1984. Mr. O'Brien and the other principals
of Prudential Equity Investors, Inc. co-founded Cornerstone Equity Investors,
LLC in 1996. Mr. O'Brien currently serves on the Boards of Directors of a number
of private companies. Mr. O'Brien received a B.A. from Hobart College and an
M.B.A. from the Wharton School of the University of Pennsylvania.

     KENNETH W. O'KEEFE became a director in 1999. Mr. O'Keefe is a founding
member of Beecken Petty O'Keefe & Company, LLC, a private equity investment firm
focused in the healthcare industry. Mr. O'Keefe currently serves on the Boards
of Directors of Valitas Healthcare Services, Inc., Seacoast Technologies, Inc.,
PerfectServe, Inc. and Jazz Pharmaceuticals, Inc. Mr. O'Keefe received a B.A.
from Northwestern University and an M.B.A. from the University of Chicago
Graduate School of Business

     TIMOTHY P. SULLIVAN became a director in 1999. Prior to co-founding Madison
Dearborn Partners, Inc. Mr. Sullivan was with First Chicago Venture Capital. Mr.
Sullivan concentrates on investments in the healthcare industry and, in addition
to Team Health, currently serves on the Boards of Directors of Milnot
                                        50
<PAGE>

Holding Corporation, National Mentor, Inc. and Valitas Healthcare Services, Inc.
In addition, Mr. Sullivan serves as a member of the Board of Trustee's for
Cristo Rey Jesuit High School and Northlight Theatre, and is a member of the
WAVE committee for Northwestern University. Mr. Sullivan received a B.S. from
the United States Naval Academy, an M.S. from the University of Southern
California and an M.B.A. from Stanford University Graduate School of Business.

CODE OF ETHICS

     Information regarding our code of ethics (Team Health, Inc. Code of Ethics)
applicable to our principal executive officer, our principal financial officer,
our controller and other senior financial officers is attached as exhibit 14 to
this Annual Report on Form 10-K or is available to any person upon request by
calling (865) 293-5205.

ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to us for 2004 of those
persons who served as

          (1) the chief executive officer during 2004 and

          (2) our other five most highly compensated executive officers for 2004
     (collectively, the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                           LONG-TERM
                                                          COMPENSATION
                                                             AWARDS
                                                          ------------
                                ANNUAL COMPENSATION        SECURITIES
                             --------------------------    UNDERLYING    SPECIAL     ALL OTHER        TOTAL
NAME AND PRINCIPAL POSITION  YEAR    SALARY     BONUS      OPTIONS(1)    BONUS(2)   COMPENSATION   COMPENSATION
---------------------------  ----   --------   --------   ------------   --------   ------------   ------------
<S>                          <C>    <C>        <C>        <C>            <C>        <C>            <C>
Lynn Massingale, M.D. ....   2004   $532,693   $487,500          --      $50,791     $82,209(3)     $1,153,193
  President and Chief        2003    516,566    164,497          --           --      77,550(3)        758,613
  Executive Officer          2002    418,022    206,813      45,000       75,000      78,922(3)        778,757

Robert J. Abramowski......   2004    362,030    239,913          --       86,203      18,189(4)        706,335
  Executive Vice President,  2003    289,913     64,998          --           --      15,247(4)        370,158
  Finance and
     Administration          2002    288,325     95,597          --       50,000       9,295(4)        443,217

Robert C. Joyner..........   2004    255,693    180,000          --       41,009      20,914(4)        497,616
  Executive Vice President,  2003    235,732     50,546          --           --      19,290(4)        305,568
  General Counsel            2002    224,766     63,363       7,000       37,500      18,059(4)        343,688

David P. Jones............   2004    216,700    142,950          --       50,414      25,793(4)        435,857
  Chief Financial Officer    2003    188,850     41,284          --           --      23,703(4)        253,837
                             2002    183,104     54,334       7,000       37,500      29,386(4)        304,324

Stephen Sherlin...........   2004    206,068    184,789          --       41,009      18,948(4)        450,814
  Chief Compliance Officer   2003    236,385     70,679          --           --      15,836(4)        322,900
                             2002    235,137     93,066       7,000       12,500      13,106(4)        353,809

Michael L. Hatcher*.......   2004    477,115    307,125          --       25,395      28,479(4)        838,114
                             2003    324,236     84,204          --           --      27,530(4)        435,970
                             2002    270,652    106,509      22,500       25,000      25,666(4)        427,827
</Table>

---------------

 *  Mr. Hatcher's employment with us ended effective February, 2004. Mr. Hatcher
    had served with us in the position of Chief Operating Officer -- Specialty
    Services.

                                        51
<PAGE>

(1) Represents options granted under the Team Health Option Plan (as defined
    below).

(2) The 2004 Special Bonus represents cash payments authorized and approved by
    the Company's Board of Directors to holders of stock options as a
    compensatory bonus in conjunction with dividend declared on the Company's
    common stock. The 2002 Special Bonus represents bonuses authorized and
    approved by the Company's Board of Directors in conjunction with a
    successful acquisition.

(3) All other compensation for Dr. Massingale includes the following:

<Table>
<Caption>
                                                   2004      2003      2002
                                                  -------   -------   -------
<S>                                               <C>       <C>       <C>
Life insurance..................................  $51,600   $51,660   $46,210
Other...........................................   30,609    25,890    32,712
</Table>

    Life insurance represents premiums paid by the Company on behalf of Dr.
    Massingale. Such premiums are secured by a collateral interest in the policy
    and are repayable to the Company at the time any benefits under the policy
    are realized.

(4) All other compensation for Mr. Abramowski, Mr. Joyner. Mr. Jones, Mr.
    Sherlin and Mr. Hatcher is less than 10% of their annual compensation each
    year.

     Additionally, Dr. Massingale provides professional medical services to
client hospitals under independent contractor agreements with subsidiaries of
the Company. During 2004, 2003, and 2002, Dr. Massingale was paid $0, $1,500 and
$834, respectively.

     During 2004, the following named Executive Officers received a distribution
in the following amounts from the Team Health Equity Deferred Compensation Plan
in conjunction with a refinancing that occurred during the year:

<Table>
<S>                                                           <C>
Lynn Massingale, M.D. ......................................  $1,515,546
Stephen Sherlin.............................................  $  341,593
David Jones.................................................  $  273,274
Michael L. Hatcher..........................................  $  519,992
</Table>

     Such amounts represent the payment of compensation originally deferred
during 1999 in conjunction with a recapitalization of the Company. The deferred
amounts had been invested in preferred stock of Team Health Holdings, LLC.

STOCK OPTION PLANS

     In March 1999, the Company adopted the Team Health Inc. Stock Option Plan
(the "Team Health Option Plan"). See "Team Health Inc. Stock Option Plan."
Information for the Team Health Option Plan is presented below.

OPTION GRANTS IN LAST FISCAL YEAR

     No options were granted to the Named Executive Officers under the Team
Health Option Plan during 2004.

                                        52
<PAGE>

     Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values.  The following table sets forth the number of shares underlying
unexercised options held by each of the Named Executive Officers and the value
of such options at the end of 2004.

<Table>
<Caption>
                                                               SECURITIES
                                                               UNDERLYING
                                                               UNEXERCISED      VALUE OF UNEXERCISED
                                                            OPTIONS AT FISCAL   IN-THE-MONEY OPTIONS
                                                                YEAR END         AT FISCAL YEAR END
                         SHARES ACQUIRED                     (#)EXERCISABLE/      ($) EXERCISABLE/
NAME                       ON EXERCISE     VALUE REALIZED     UNEXERCISABLE       UNEXERCISABLE(1)
----                     ---------------   --------------   -----------------   --------------------
<S>                      <C>               <C>              <C>                 <C>
Lynn Massingale,
  M.D. ................          --           $     --        18,000/27,000       222,300/333,450
Robert J. Abramowski...          --           $     --        30,550/16,450       377,293/203,158
Robert C. Joyner.......          --           $     --        14,534/12,466       165,487/115,463
David P. Jones.........          --           $     --         17,867/9,133        254,655/86,295
Stephen Sherlin........          --           $     --        14,534/12,466       165,487/115,463
Michael L. Hatcher.....       9,000           $136,710           --/--                --/--
</Table>

---------------

(1) Value of unexercised options at fiscal year-end represents the difference
    between the exercise price of any outstanding-in-the-money options and the
    fair market value of such options on December 31, 2004. The fair market
    value of options under the Team Health, Inc. Stock Option Plan, as
    determined by the Company's Board of Directors, was $16.85 per share.

PENSION PLANS

     Substantially all of the salaried employees, including our executive
officers, participate in our 401(k) savings plan. Employees are permitted to
defer a portion of their income under our 401(k) plan. At the discretion of the
Company's Board of Directors, the Company may make a matching contribution up to
50% of the first 6% of employees' contributions under the Plan. The Company's
Board of Directors authorized the maximum discretionary amount as a match on
employees' 401(k) Plan contributions for 2004, including the Named Executive
Officers.

     In addition, the Named Executive Officers are eligible to participate in
the Team Health, Inc. non-qualified Supplemental Executive Retirement plan
(SERP). Eligible employees are permitted to defer a portion of their income
under the SERP. At the discretion of the Company's Board of Directors, the
Company may make a contribution to participants in the SERP.

EMPLOYMENT AGREEMENTS

     We entered into employment and non-compete agreements with certain members
of our senior management, including the Named Executive Officers.

     The employment agreements for the Named Executive Officers include
five-year terms beginning March 11, 1999 for Dr. Massingale, Mr. Jones, and Mr.
Sherlin, and beginning August 1, 1999 for Mr. Joyner and beginning October 2,
2001 for Mr. Abramowski. The employment agreements include provision for the
payment of an annual base salary, subject to annual review and adjustment, as
well as the payment of a bonus based upon the achievement of certain financial
performance criteria. The base bonus pool is established as a percentage of the
employee's base salary. Adjustments to the base bonus pool can occur based upon
over or under performance against established financial targets. The maximum
performance against the target is 105%, which can result in an upward adjustment
to the base bonus pool to 150%. The minimum performance against the target is
95%, which can result in a downward adjustment to the base bonus pool of 50%.
Financial performance between the maximum and minimum targets results in a
linear adjustment to the base bonus

                                        53
<PAGE>

pool. The annual base salaries as of December 31, 2004 and the base bonus that
can be earned by each of the named Executive officers is as follows:

<Table>
<Caption>
                                                                ANNUAL       BASE
                                                              BASE SALARY   BONUS %
                                                              -----------   -------
<S>                                                           <C>           <C>
Lynn Massingale, M.D. ......................................   $517,500       65%
Robert J. Abramowski........................................    331,080       50%
Robert C. Joyner............................................    248,400       50%
David P. Jones..............................................    215,000       50%
Stephen Sherlin.............................................    125,000       50%
</Table>

     The terms of the employment agreements include that, if the executive is
terminated by us without cause, or under certain conditions, such as death or
disability, by the executive, the executive will receive a multiple of his base
salary and may receive a portion of his bonus for the year of termination. The
multiple of base salary in the case of Dr. Massingale is two years and in the
case of Mr. Sherlin, Mr. Jones, Mr. Joyner and Mr. Abramowski is one year.

     The executive, as a result of the non-compete agreements entered into by us
with each of the Named Executive Officers, has agreed not to disclose our
confidential information, solicit our employees or contractors, or compete with
us or interfere with our business for two years after his employment with us has
been terminated. Dr. Massingale's agreement, however, allows Dr. Massingale to
practice medicine at any hospital that we do not staff.

TEAM HEALTH, INC. STOCK OPTION PLAN

     Our board of directors has adopted a stock option plan, which provides for
the grant to some of our key employees and/or directors of stock options that
are non-qualified options for federal income tax purposes. The compensation
committee of our board of directors administers the stock option plan. The
compensation committee has broad powers under the stock option plan, including
exclusive authority (except as otherwise provided in the stock option plan) to
determine:

     (1) who will receive awards,

     (2) the type, size and terms of awards,

     (3) the time when awards will be granted, and

     (4) vesting criteria, if any, of the awards.

     Options awarded under the plan are exercisable into shares of our common
stock. The total number of shares of common stock as to which options may be
granted may not exceed 1,245,926 shares of common stock. Options may be granted
to any of our employees, directors or consultants.

     If we undergo a reorganization, recapitalization, stock dividend or stock
split or other change in shares of our common stock, the compensation committee
may make adjustments to the plan in order to prevent dilution of outstanding
options. The compensation committee may also cause options awarded under the
plan to become immediately exercisable if we undergo specific types of changes
in the control of our Company.

COMPENSATION OF DIRECTORS

     We reimburse directors for any out-of-pocket expenses incurred by them in
connection with services provided in such capacity. Two of our directors, Mr.
Davenport and Mr. Holland, are compensated for services they provide in their
capacities as directors. The compensation for Mr. Davenport and Mr. Holland
includes an annual stipend of $12,000 as well as $3,000 for each meeting
attended. Additionally, during 2004, Mr. Davenport utilized the Company's
airplane for non-Company related travel in the amount of $2,111.

                                        54
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The compensation committee of our board of directors is comprised of Dana
J. O'Brien, Timothy P. Sullivan and Earl P. Holland, none of which are officers
of Team Health. Mr. O'Brien and Mr. Sullivan are directors of Team Health and
principals of Cornerstone Equity Investors, LLC and Madison Dearborn Partners,
Inc., respectively. Cornerstone and Madison Dearborn are two of our equity
sponsors.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Team Health Holdings owns 92.3% of our outstanding common stock and voting
interests. Pacific Physician Services, Inc., a subsidiary of Caremark, Rx, Inc.
owns 7.6% of our outstanding common stock and voting interests. Pacific
Physician Services, Inc. can be reached in care of Caremark Rx, Inc. at 2111
Commerce Street, Suite 800, Nashville, Tennessee 37201. The following table sets
forth certain information regarding the actual beneficial ownership of Team
Health Holdings' ownership units by:

          (1) each person, other than the directors and executive officers of
     Team Health Holdings, known to Team Health Holdings to own more than 5% of
     the outstanding membership units of Team Health Holdings and

          (2) certain executive officers and members of the board of directors
     of Team Health Holdings.

     Except as otherwise indicated below, each of the following individuals can
be reached in care of Team Health, Inc. at 1900 Winston Road, Suite 300,
Knoxville, Tennessee 37919.

<Table>
<Caption>
                                                              PERCENTAGE OF
                                                               OUTSTANDING
                                                                 COMMON       PERCENTAGE OF
BENEFICIAL OWNER                                                  UNITS       VOTING UNITS
----------------                                              -------------   -------------
<S>                                                           <C>             <C>
Cornerstone Equity Investors IV, L.P. ......................      39.4%           39.4%
  c/o Cornerstone Equity Investors, LLC
  717 Fifth Avenue, Suite 1100
  New York, New York 10022
  Attention: Dana J. O'Brien

Madison Dearborn Capital Partners II, L.P. .................      39.4%           39.4%
  c/o Madison Dearborn Partners
  Three First National Plaza, Suite 3800
  Chicago, Illinois 60602
  Attention: Timothy P. Sullivan

Healthcare Equity Partners, L.P. and
  Healthcare Equity Q.P. Partners, L.P......................       8.8%            8.8%
  c/o Beecken Petty O'Keefe & Company, L.L.C.
  200 W. Madison St., Suite 1910
  Chicago, IL 60606
  Attention: Kenneth W. O'Keefe

Certain members of management and other directors...........      12.4%           12.4%
</Table>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RECAPITALIZATION AGREEMENT

     Under a recapitalization agreement, on March 12, 1999 the Company was
acquired by the equity sponsors and members of its management team from Pacific
Physician Services, Inc., a wholly owned subsidiary of Caremark Rx, Inc.
formerly known as MedPartners, Inc. ("Medpartners"). The recapitalization

                                        55
<PAGE>

agreement contains customary provisions for such agreements, including the
execution of a registration rights agreement and a stockholders agreement.

ACQUISITION

     On May 1, 2002, the Company acquired all of the operations of Spectrum
Health Resources ("SHR"), a provider of physician and other professional medical
staffing to military treatment facilities for a purchase price of approximately
$145.7 million. The Company's three equity sponsors control a majority of the
Company's voting common stock. Those three equity sponsors were also controlling
equity investors in SHR prior to and at the time of entering into the definitive
purchase agreement. Prior to negotiating the final purchase price and entering
into the definitive purchase agreement to acquire SHR, the Board of Directors
took the following steps:

          1. The Board of Directors appointed a Special Committee, consisting of
     three Directors who are not affiliated with the equity sponsors. The
     Special Committee was authorized to (i) consider, negotiate and approve the
     acquisition of SHR, (ii) retain such legal counsel and advisers and
     consultants as they deem appropriate, (iii) consider, negotiate and approve
     the terms of any financing related to the transaction, and (iv) expend any
     funds in furtherance of the duties granted to it. The final authority to
     approve the acquisition and financing rested with the full Board of
     Directors, but the Board of Directors could not approve any transaction not
     recommended by the Special Committee.

          2. Two of the three equity sponsors along with the Company's
     management members assisted the Special Committee in the evaluations and
     negotiations of the transaction on behalf of the Company. The largest
     common equity sponsor in SHR and the Company represented SHR in its
     evaluation and negotiation of the transaction.

          3. The Special Committee obtained an opinion by the investment banking
     firm of SunTrust Robinson Humphrey, a division of SunTrust Capital Markets,
     Inc., that the purchase price paid for SHR was fair from a financial point
     of view to the equity holders of the Company as well as its bond holders.

     In connection with the acquisition of SHR, subject to certain limitations,
the previous shareholders of SHR and related entities have indemnified us up to
a limit of $10.0 million against any claims asserted against SHR during the
three years subsequent to the date of SHR's acquisition related to tax matters
whose origin was attributable to tax periods prior to May 1, 2002.

SECURITY HOLDERS AGREEMENTS

     In connection with the recapitalization, both Team Health and our
stockholders, Team Health Holdings and Pacific Physician Services, and Team
Health Holdings and all of its unit holders, entered into two separate security
holders agreements. The security holders agreements:

          (1) restrict the transfer of the equity interests of Team Health and
     Team Health Holdings, respectively; and

          (2) grant tag-along rights on certain transfers of equity interests of
     Team Health and Team Health Holdings, respectively.

     Some of the foregoing provisions of the security holders agreements will
terminate upon the consummation of an initial public offering.

REGISTRATION RIGHTS AGREEMENT

     In connection with the recapitalization, both Team Health and our
stockholders, Team Health Holdings and Pacific Physician Services, and Team
Health Holdings and all of its unit holders, entered into two separate
registration rights agreements. Under the registration rights agreements, some
of the holders of capital stock owned by Team Health Holdings (with respect to
our shares) and Cornerstone, Madison Dearborn and Beecken Petty O'Keefe (with
respect to units of Team Health Holdings), respectively, have the right, subject
to various conditions, to require us or Team Health Holdings, as the case may
be, to register any
                                        56
<PAGE>

or all of their common equity interests under the Securities Act of 1933 at our
or Team Health Holdings' expense. In addition, all holders of registrable
securities are entitled to request the inclusion of any common equity interests
of Team Health or Team Health Holdings covered by the registration rights
agreements in any registration statement at our or Team Health Holdings'
expense, whenever we or the Team Health Holdings propose to register any of our
common equity interests under the Securities Act of 1933. In connection with all
such registrations, we or Team Health Holdings have agreed to indemnify all
holders of registrable securities against some liabilities, including
liabilities under the Securities Act of 1933.

MANAGEMENT SERVICES AGREEMENT

     We have also entered into a management services agreement dated March 12,
1999 with Cornerstone, Madison Dearborn and Beecken Petty O'Keefe under which
each of Cornerstone, Madison Dearborn and Beecken Petty O'Keefe have agreed to
provide us with:

          (1) general management services;

          (2) assistance with the identification, negotiation and analysis of
     acquisitions and dispositions;

          (3) assistance with the negotiation and analysis of financial
     alternatives; and

          (4) other services agreed upon by us and each of Cornerstone, Madison
     Dearborn and Beecken Petty O'Keefe.

     In exchange for such services, Cornerstone, Madison Dearborn and Beecken
Petty O'Keefe collectively receive an annual advisory fee of $500,000, plus
reasonable out-of-pocket expenses (payable quarterly). The management services
agreement has an initial term of three years, subject to automatic one-year
extensions unless we or Cornerstone, Madison Dearborn or Beecken Petty O'Keefe
provides written notice of termination. The management services agreement will
automatically terminate upon the consummation of an initial public offering.

TEAM HEALTH HOLDINGS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

     Cornerstone, Madison Dearborn, Beecken Petty O'Keefe and some of the
members of our management and board of directors (collectively, the "Members")
entered into an Amended and Restated Limited Liability Company Agreement. The
Limited Liability Company Agreement governs the relative rights and duties of
the Members.

     Membership Interests.  The ownership interests of the members in Team
Health Holdings consist of preferred units and common units. The common units
represent the common equity of Team Health Holdings and the preferred units
represent the preferred equity of Team Health Holdings. Holders of the preferred
units are entitled to return of capital contributions prior to any distributions
made to holders of the common units. In connection with our 2004 refinancing all
preferred units were redeemed and no preferred units are currently outstanding.

     Distributions.  Subject to any restrictions contained in any financing
agreements to which Team Health Holdings or any of its affiliates is a party,
the board of managers of Team Health Holdings may make distributions, whether in
cash, property or securities of Team Health Holdings at any time or from time to
time in the following order of priority:

          First, to the holders of preferred units, if any, the aggregate unpaid
     amount accrued on such preferred units on a daily basis, at a rate of 10%
     per annum.

          Second, to the holders of preferred units, if any, an amount
     determined by the aggregate Unreturned Capital (as defined and described in
     the Limited Liability Company Agreement).

          Third, to the holders of common units, an amount equal to the amount
     of such distribution that has not been distributed pursuant to clauses
     First through Second above.

                                        57
<PAGE>

     Team Health Holdings may distribute to each holder of units within 75 days
after the close of each fiscal year such amounts as determined by the board of
managers of Team Health Holdings to be appropriate to enable each holder of
units to pay estimated income tax liabilities.

OTHER RELATED PARTY TRANSACTIONS

     We lease office space for our corporate headquarters from Winston Road
Properties, an entity that is owned 50% by Park Med Properties. Two of our
executive officers during 2004, Dr. Massingale and Mr. Hatcher, each own 20% of
Park Med Properties. We paid $676,741 in 2004 to Winston Road Properties in
connection with the lease agreement. In addition, Park Med Properties owns a
building, which houses a medical clinic that is operated by a consolidated
affiliate of the Company. In 2004, the consolidated affiliate paid $123,761 to
Park Med Properties in connection with the lease agreement.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Aggregate fees recognized by the Company during the fiscal years ending
December 31, 2004 and 2003 by its principal accounting firm, Ernst and Young,
LLP, are set forth below. The Audit Committee of the Company's Board of
Directors has considered whether the provision of the non-audit services
described below is compatible with maintaining the principal accountant's
independence.

<Table>
<Caption>
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Audit Fees(1)...............................................  $400,964   $277,750
Audit Related Fees(2).......................................        --         --
Tax Fees(3).................................................   211,703    342,439
All other Fees(4)...........................................       975      1,600
                                                              --------   --------
Total aggregate fees billed.................................  $613,642   $621,789
                                                              ========   ========
</Table>

---------------

(1) Includes the aggregate fees recognized in each of the last two fiscal years
    for professional services rendered by Ernst & Young, LLP for the audit of
    the Company's annual financial statements and the review of financial
    statements included in Form 10-Q, Form 10-K and Form S-4. The fees are for
    services that are normally provided by Ernst & Young, LLP in connection with
    statutory or regulatory filings or engagements.

(2) There were no aggregate fees billed in each of the last two fiscal years for
    assurance and related services by Ernst & Young, LLP that are reasonably
    related to the performance of the audit or review of the Company's financial
    statements.

(3) Includes the aggregate fees recognized in each of the last two fiscal years
    for professional services rendered by Ernst & Young, LLP for tax compliance,
    tax advice, and tax planning.

(4) Includes the aggregate fees recognized in each of the last two fiscal years
    for products and services provided by Ernst & Young, LLP, other than those
    services described above.

                                        58
<PAGE>

                                    PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) (1) CONSOLIDATED FINANCIAL STATEMENTS OF TEAM HEALTH, INC.

        Report of Independent Registered Public Accounting Firm

        Consolidated Balance Sheets

        Consolidated Statements of Operations

        Consolidated Statements of Stockholders' Equity (Deficit) and
        Comprehensive Earnings

        Consolidated Statements of Cash Flows

        Notes to the Consolidated Financial Statements

        (2) FINANCIAL STATEMENT SCHEDULES

     Schedule II -- Valuation and Qualifying Accounts of Team Health, Inc.

     The following schedules are omitted as not applicable or not required under
the rules of Regulation S-X: I, III, IV and V.

     (b) EXHIBITS

     See Exhibit Index.

                                        59
<PAGE>

                               TEAM HEALTH, INC.

                       CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

                                    CONTENTS

<Table>
<S>                                                           <C>
Report of Independent Registered Public Accounting Firm.....  61
Consolidated Balance Sheets.................................  62
Consolidated Statements of Operations.......................  63
Consolidated Statements of Stockholders' Equity (Deficit)     64
  and Comprehensive Earnings................................
Consolidated Statements of Cash Flows.......................  65
Notes to the Consolidated Financial Statements..............  66
</Table>

                                        60
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Team Health, Inc.

     We have audited the accompanying consolidated balance sheets of Team
Health, Inc. as of December 31, 2004 and 2003, and the related consolidated
statements of operations, changes in stockholders' equity (deficit) and
comprehensive earnings and cash flows for each of the three years in the period
ended December 31, 2004. Our audits also included the financial statement
schedule listed in Item 15(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Team Health,
Inc. at December 31, 2004 and 2003, and the consolidated results of operations
and cash flows for each of the three years in the period ended December 31,
2004, in conformity with US generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

     As discussed in Note 2 to the financial statements, in 2002 the Company
changed its method of accounting for goodwill.

                                          /s/ ERNST & YOUNG LLP
                                          --------------------------------------

Nashville, Tennessee
February 7, 2005

                                        61
<PAGE>

                               TEAM HEALTH, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                              -------------------------
                                                                 2004          2003
                                                              -----------   -----------
                                                              (IN THOUSANDS, EXCEPT PER
                                                                     SHARE DATA)
<S>                                                           <C>           <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................   $  17,931     $ 100,964
  Short term investments....................................      64,651            --
  Accounts receivable, less allowance for uncollectibles of
     $126,351 and $120,653 in 2004 and 2003, respectively...     160,852       167,957
  Prepaid expenses and other current assets.................       4,860         4,243
  Receivables under insured programs........................      51,307        62,527
                                                               ---------     ---------
Total current assets........................................     299,601       335,691
Property and equipment, net.................................      17,625        19,967
Other intangibles, net......................................      11,624        16,990
Goodwill....................................................      95,197       167,665
Deferred income taxes.......................................      96,708        96,881
Receivables under insured programs..........................      52,804        60,697
Other.......................................................      36,832        33,158
                                                               ---------     ---------
                                                               $ 610,391     $ 731,049
                                                               =========     =========


LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
  EQUITY (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable..........................................   $  12,004     $  15,169
  Accrued compensation and physician payable................      75,160        76,557
  Other accrued liabilities.................................      72,988        82,876
  Income taxes payable......................................       4,670         9,948
  Current maturities of long-term debt......................      15,000        43,528
  Deferred income taxes.....................................      20,407        20,884
                                                               ---------     ---------
Total current liabilities...................................     200,229       248,962
Long-term debt, less current maturities.....................     413,125       255,887
Other non-current liabilities...............................     195,917       182,557
Mandatory redeemable preferred stock........................          --       158,846
Common stock, $0.01 par value 12,000 shares authorized,
  9,729 and 10,070 shares issued in 2004 and 2003...........          97           101
Additional paid in capital..................................         919           703
Retained earnings (deficit).................................    (198,891)     (113,813)
Less treasury shares at cost................................        (787)       (1,045)
Accumulated other comprehensive earnings (loss).............        (218)       (1,149)
                                                               ---------     ---------
                                                               $ 610,391     $ 731,049
                                                               =========     =========
</Table>

        See accompanying notes to the consolidated financial statements.
                                        62
<PAGE>

                               TEAM HEALTH, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              2004         2003         2002
                                                           ----------   ----------   ----------
                                                                      (IN THOUSANDS)
<S>                                                        <C>          <C>          <C>
Net revenue..............................................  $1,572,174   $1,479,013   $1,230,703
Provision for uncollectibles.............................     563,483      479,267      396,605
                                                           ----------   ----------   ----------
  Net revenue less provision for uncollectibles..........   1,008,691      999,746      834,098
Cost of services rendered
  Professional service expenses..........................     754,222      746,409      635,573
  Professional liability costs...........................      59,839      115,970       36,992
                                                           ----------   ----------   ----------
     Gross profit........................................     194,630      137,367      161,533
General and administrative expenses......................     100,473       95,554       81,744
Management fee and other expenses........................       1,387          505          527
Impairment of intangibles................................      73,177          168        2,322
Depreciation and amortization............................      13,689       22,018       20,015
Interest expense, net....................................      28,949       23,343       23,906
Refinancing costs........................................      14,731           --        3,389
                                                           ----------   ----------   ----------
     Earnings (loss) before income taxes and cumulative
       effect of change in accounting principle..........     (37,776)      (4,221)      29,630
Provision (benefit) for income taxes.....................      11,436       (1,410)      13,198
                                                           ----------   ----------   ----------
Earnings (loss) before cumulative effect of change in
  accounting principle...................................     (49,212)      (2,811)      16,432
Cumulative effect of change in accounting principle, net
  of income tax benefit of $209..........................          --           --         (294)
                                                           ----------   ----------   ----------
Net earnings (loss)......................................     (49,212)      (2,811)      16,138
Dividends on preferred stock.............................       3,602       14,440       13,129
                                                           ----------   ----------   ----------
     Net earnings (loss) attributable to common
       stockholders......................................  $  (52,814)  $  (17,251)  $    3,009
                                                           ==========   ==========   ==========
</Table>

        See accompanying notes to the consolidated financial statements.
                                        63
<PAGE>

                               TEAM HEALTH, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                           AND COMPREHENSIVE EARNINGS

<Table>
<Caption>
                                                                                           ACCUMULATED
                            COMMON STOCK      TREASURY STOCK    ADDITIONAL                    OTHER
                           ---------------   ----------------    PAID IN     RETAINED     COMPREHENSIVE
                           SHARES   AMOUNT   SHARES   AMOUNT     CAPITAL      DEFICIT    EARNINGS (LOSS)     TOTAL
                           ------   ------   ------   -------   ----------   ---------   ---------------   ---------
                                                                (IN THOUSANDS)
<S>                        <C>      <C>      <C>      <C>       <C>          <C>         <C>               <C>
BALANCE AT DECEMBER 31,
  2001...................  10,000    $100       --    $    --      $ --      $ (99,571)      $  (219)      $ (99,690)
  Net earnings...........      --      --       --         --        --         16,138            --          16,138
  Other comprehensive
    loss, net of tax:
  Net change in fair
    value of swaps, net
    of tax of $844.......      --      --       --         --        --             --        (1,396)         (1,396)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
Total comprehensive
  earnings...............                                                                                     14,742
Issuance of stock........      68       1                           644             --            --             645
Dividends on preferred
  stock..................      --      --       --         --        --        (13,129)           --         (13,129)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
BALANCE AT DECEMBER 31,
  2002...................  10,068     101       --         --       644        (96,562)       (1,615)        (97,432)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
  Net loss...............      --      --                            --         (2,811)           --          (2,811)
  Other comprehensive
    loss, net of tax:
  Net change in fair
    value of swaps, net
    of tax of $286.......      --      --       --         --        --             --           466             466
                           ------    ----     ----    -------      ----      ---------       -------       ---------
Total comprehensive
  earnings...............                                                                                     (2,345)
Stock option activity....       2      --       --         --        59             --            --              59
Treasury stock
  purchased..............      --      --     (150)    (1,045)       --             --            --          (1,045)
Dividends on preferred
  stock..................      --      --       --         --        --        (14,440)           --         (14,440)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
BALANCE AT DECEMBER 31,
  2003...................  10,070     101     (150)    (1,045)      703       (113,813)       (1,149)       (115,203)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
  Net loss...............      --      --                            --        (49,212)           --         (49,212)
  Other comprehensive
    income, net of tax:
Net change in fair market
  value of investments
  net of tax of $136.....      --      --       --         --        --             --          (214)           (214)
  Net change in fair
    value of swaps, net
    of tax of $708.......      --      --       --         --        --             --         1,145           1,145
                           ------    ----     ----    -------      ----      ---------       -------       ---------
Total comprehensive
  earnings...............                                                                                    (48,281)
Stock option activity....      21      --       --         --       237             --            --             237
Treasury stock
  reissued...............      --      --        7        100        --             --            --             100
Treasury shares
  cancelled..............    (362)     (4)     362      4,704       (21)        (4,679)           --              --
Treasury stock
  purchased..............      --      --     (271)    (4,546)       --             --            --          (4,546)
Dividends on common
  stock..................      --      --       --         --        --        (27,585)                      (27,585)
Dividends on preferred
  stock..................      --      --       --         --        --         (3,602)           --          (3,602)
                           ------    ----     ----    -------      ----      ---------       -------       ---------
BALANCE AT DECEMBER 31,
  2004...................   9,729    $ 97      (52)   $  (787)     $919      $(198,891)      $  (218)      $(198,880)
                           ======    ====     ====    =======      ====      =========       =======       =========
</Table>

        See accompanying notes to the consolidated financial statements.
                                        64
<PAGE>

                               TEAM HEALTH, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                2004        2003        2002
                                                              ---------   ---------   ---------
                                                                       (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
OPERATING ACTIVITIES
  Net earnings (loss).......................................  $ (49,212)  $  (2,811)  $  16,138
  Adjustments to reconcile net earnings (loss):
    Depreciation and amortization...........................     13,689      22,018      20,015
    Amortization of deferred financing costs................      1,061       1,446       1,583
    Write-off of deferred financing costs...................      6,225          --       3,389
    Provision for uncollectibles............................    563,483     479,267     396,605
    Impairment of intangibles...............................     73,177         168       2,322
    Deferred income taxes...................................       (771)    (13,967)      6,941
    Loss on sale of equipment...............................        887           5          59
    Cumulative effect of change in accounting principle.....         --          --         294
    Equity in joint venture income..........................       (664)       (235)       (346)
    Changes in operating assets and liabilities, net of
       acquisitions:
       Accounts receivable..................................   (556,214)   (490,392)   (407,319)
       Prepaids and other assets............................     (1,732)      5,842      (4,847)
       Income tax receivables...............................     (5,277)     10,761       7,797
       Receivables under insured programs...................     19,113      39,918     (24,388)
       Accounts payable.....................................     (3,575)      1,287      (3,785)
       Accrued compensation and physician payable...........     (7,536)     11,907       4,806
       Other accrued liabilities............................      1,137        (643)      2,797
       Professional liability reserves......................     10,794      37,170      30,419
                                                              ---------   ---------   ---------
Net cash provided by operating activities...................     64,585     101,741      52,480
INVESTING ACTIVITIES
  Purchases of property and equipment.......................     (6,713)     (8,972)     (9,796)
  Sale of property and equipment............................         77           1          31
  Cash paid for acquisitions, net...........................     (3,245)     (2,472)   (165,722)
  Net purchases of short-term investments...................    (64,877)         --          --
  Net purchases of investments by insurance subsidiary......    (10,948)    (13,642)         --
  Other investing activities................................      9,911      (1,194)        725
                                                              ---------   ---------   ---------
Net cash used in investing activities.......................    (75,795)    (26,279)   (174,762)
FINANCING ACTIVITIES
  Payments on notes payable.................................   (301,290)    (21,085)   (121,800)
  Proceeds from notes payable...............................    430,000          --     225,000
  Payments of deferred financing costs......................     (7,892)       (278)     (5,226)
  Proceeds from sales of common stock.......................         62           2         644
  Proceeds from sales of preferred stock....................         --          --       1,270
  Purchase of treasury stock................................     (2,770)       (926)         --
  Proceeds from sale of treasury stock......................        100          --          --
  Dividends paid on common stock............................    (27,585)         --          --
  Redemptions of preferred stock............................   (162,448)         --          --
  Net cash provided by (used in) financing activities.......    (71,823)    (22,287)     99,888
  Increase (decrease) in cash and cash equivalents..........    (83,033)     53,175     (22,394)
  Cash and cash equivalents, beginning of year..............    100,964      47,789      70,183
                                                              ---------   ---------   ---------
  Cash and cash equivalents, end of year....................  $  17,931   $ 100,964   $  47,789
                                                              =========   =========   =========
  Supplemental cash flow information:
  Interest paid.............................................  $  30,693   $  23,365   $  22,404
                                                              =========   =========   =========
  Taxes paid................................................  $  18,574   $   2,557   $   7,864
                                                              =========   =========   =========
</Table>

        See accompanying notes to the consolidated financial statements.
                                        65
<PAGE>

                               TEAM HEALTH, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2004

1.   ORGANIZATION AND BASIS OF PRESENTATION

     Team Health, Inc. (the "Company") believes it is among the largest national
providers of outsourced physician and other healthcare related staffing and
administrative services to hospitals and other healthcare facility providers in
the United States. The Company's regional operating models include comprehensive
programs for emergency medicine, radiology, anesthesiology, inpatient care,
pediatrics and other healthcare services, principally within hospital
departments and other healthcare treatment facilities. The Company provides a
full range of physician and other healthcare facility related staffing and
administrative services, including the: (i) staffing and recruiting of and
credentials coordination for clinical and non-clinical medical professionals;
(ii) provision of administrative support services, such as payroll, insurance
coverage and continuing education services; and (iii) billing and collection of
fees for services provided by the medical professionals.

     The Company has two principal stockholders. Team Health Holdings, LLC
("Holdings"), which is owned by certain equity sponsors and certain members of
the Company's senior management, owns 92.3% of the Company's $0.01 par value
common stock. Caremark Rx, Inc. owns 7.6% of the remaining outstanding common
stock.

2.   SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries and have been prepared in accordance with
accounting principles generally accepted in the United States. All intercompany
and inter-affiliate accounts and transactions have been eliminated.

     The Company consolidates its subsidiaries in accordance with the nominee
shareholder model of Emerging Issues Task Force (EITF) No. 97-2 "Application of
FASB No. 94 and APB Opinion No. 16 to Physician Practice Entities and Certain
Other Entities with Contractual Management Arrangements". The Company's
arrangements with associated professional corporations ("PC") are captive in
nature as a majority of the outstanding voting equity instruments of the
different PCs are owned by a nominee shareholder appointed at the sole
discretion of the Company. The Company has a contractual right to transfer the
ownership of the PC at any time to any person it designates as the nominee
shareholder. This transfer can occur without cause and any cost incurred as a
result of the transfer is minimal. There would be no significant impact on the
PC or the Company as a result of the transfer of ownership. The Company provides
staffing services to its client hospitals through a management services
agreement between a subsidiary of Team Health, Inc. and the PCs.

     CASH AND CASH EQUIVALENTS

     Cash consists primarily of funds on deposit in commercial banks. Cash
equivalents are highly liquid investments with maturities of three months or
less when acquired.

     MARKETABLE SECURITIES

     In accordance with SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities," management determines the appropriate classification of
the Company's investments at the time of purchase and reevaluates such
determination at each balance sheet date. As of December 31, 2004 and 2003, the
Company has classified all marketable debt securities as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in other comprehensive earnings. Realized
gains and losses and declines in value judged to be other-than-temporary on
available for sale securities are recognized in earnings.
                                        66
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ACCOUNTS RECEIVABLE

     Accounts receivable are primarily due from hospitals and clinics,
third-party payers, such as insurance companies, government-sponsored healthcare
programs, including Medicare and Medicaid, and self-insured employers and
patients. Accounts receivable are stated net of reserves for amounts estimated
by management to not be collectible. Concentration of credit risk relating to
accounts receivable is somewhat limited by the diversity and number of
hospitals, patients, payers and by the geographic dispersion of the Company's
operations. In addition, a portion of the Company's military staffing business
is conducted on a sub-contract basis with a third-party direct contractor to the
military. The amount owed by such direct contractor represents approximately
7.5% of the Company's consolidated accounts receivable as of December 31, 2004.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives, which generally range from
3 to 10 years for furniture and equipment, from 3 to 5 years for software and
from 10 to 40 years for buildings and leasehold improvements. Property under
capital lease is amortized using the straight-line method over the life of the
respective lease and such amortization is included in depreciation expense.

     INTANGIBLE ASSETS

     The Company's intangible assets include goodwill and other intangibles that
consist primarily of the fair value of service contracts acquired. Goodwill
represents the excess of purchase price over the fair value of net assets
acquired.

     Effective January 1, 2002, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, goodwill and intangible assets deemed to have
indefinite lives are not amortized. The cost of service contracts and other
intangibles acquired is amortized using the straight-line method over their
estimated lives which was seven years in 2004.

     Goodwill is evaluated for possible impairment on an annual basis or more
frequently if events and circumstances occur that may indicate the potential for
impairment. Goodwill assigned to a reporting unit is evaluated for potential
impairment following a two-step procedure. The fair value of the reporting unit
is initially determined and compared to its carrying value. If the carrying
value exceeds the fair value of the applicable reporting unit, the implied fair
value of the goodwill of the reporting unit is then determined. If it is
determined that the implied fair value of the goodwill of the reporting unit is
less than the carrying value of goodwill, an impairment loss is recorded equal
to such difference.

     The carrying value of other intangibles is evaluated when indicators are
present to determine whether such intangibles may be impaired with respect to
their recorded values. If this review indicates that certain intangibles will
not be recoverable, as determined based on the undiscounted cash flows derived
from the assets acquired over the remaining estimated asset life, the carrying
value of the intangibles is reduced by the estimated shortfall of discounted
cash flows.

                                        67
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     DEFERRED FINANCING COSTS

     Deferred financing costs, which are included in other noncurrent assets and
are amortized over the term of the related debt using the interest method,
consist of the following as of December 31 (in thousands):

<Table>
<Caption>
                                                               2004     2003
                                                              ------   -------
<S>                                                           <C>      <C>
Deferred financing costs....................................  $7,892   $11,333
Less accumulated amortization...............................    (812)   (4,859)
                                                              ------   -------
                                                              $7,080   $ 6,474
                                                              ======   =======
</Table>

     RISK MANAGEMENT

     Although the Company does not principally engage in the practice of
medicine or provide medical services, it does require the physicians with whom
it contracts to obtain professional liability insurance coverage and makes this
insurance available to these physicians. The Company typically provides claims-
made coverage on a per incident and annual aggregate limit per physician to
affiliated physicians and other healthcare practitioners. In addition, the
Company has claims-made coverage on a per incident and annual aggregate limit
for all corporate entities.

     Effective March 12, 2003, the Company began providing for its professional
liability losses principally under a program of self-insurance, including the
use of a wholly owned captive insurance company. The Company's estimated losses
under the self-insurance program are determined using periodic actuarial
estimates of losses and related expenses, adjusted on an interim basis for
actual physician hours worked and loss development trends. Any differences
between amounts previously recorded and the results of updated actuarial studies
of prior periods are recorded in the period when such differences are known.

     Professional liability insurance expense consists of premium cost, an
accrual to establish reserves for future payments under the self-insured
retention component and an accrual to establish a reserve for future claims
incurred but not reported.

     DERIVATIVES

     The Company utilizes derivative financial instruments to reduce interest
rate risks. The Company does not hold or issue derivative financial instruments
for trading purposes. The Company recognizes all derivatives as either assets or
liabilities in the statement of financial condition and measures those
instruments at fair value. Changes in the fair value of these instruments are
reported in earnings or other comprehensive income depending on the use of the
derivative and whether it qualifies for hedge accounting. The accounting for
gains and losses associated with changes in the fair value of the derivative and
the effect on the consolidated financial statements depends on its hedge
designation and whether the hedge is highly effective in achieving offsetting
changes in the fair value of cash flows of the asset or liability hedged. During
2004 the fair value of interest rate swaps, net of tax, increased approximately
$1.1 million. In 2003, the fair value, net of tax increased approximately $0.5
million. In 2002, the fair value, net of tax, decreased approximately $1.4
million. In all years the change in fair value was recognized through other
comprehensive earnings.

     REVENUE RECOGNITION

     Net revenues consist of fee-for-service revenue, contract revenue and other
revenue. Net revenues are recorded in the period services are rendered.

     Net revenues are principally derived from the provision of healthcare
staffing services to patients within healthcare facilities. The form of billing
and related risk of collection for such services may vary by customer. The
following is a summary of the principal forms of the Company's billing
arrangements and how net revenue

                                        68
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

is recognized for each. A significant portion (74% of our net revenue in 2004)
resulted from fee-for-service patient visits. Fee-for-service revenue represents
revenue earned under contracts in which the Company bills and collects the
professional component of charges for medical services rendered by the Company's
contracted and employed physicians. Under the fee-for-service arrangements, the
Company bills patients for services provided and receives payment from patients
or their third-party payers. Fee-for-service revenue is reported net of
contractual allowances and policy discounts. All services provided are expected
to result in cash flows and are therefore reflected as net revenues in the
financial statements. Fee-for-service revenue is recognized in the period that
the services are rendered to specific patients and reduced immediately for the
estimated impact of contractual allowances in the case of those patients having
third-party payer coverage. The recognition of net revenue (gross charges less
contractual allowances) from such visits is dependent on such factors as proper
completion of medical charts following a patient visit, the forwarding of such
charts to one of our billing centers for medical coding and entering into our
billing systems and the verification of each patient's submission or
representation at the time services are rendered as to the payer(s) responsible
for payment of such services. Net revenues are recorded based on the information
known at the time of entering of such information into our billing systems as
well as an estimate of the net revenues associated with medical charts for a
given service period that have not been processed yet into our billing systems.
The above factors and estimates are subject to change. For example, patient
payer information may change following an initial attempt to bill for services
due to a change in payer status. Such changes in payer status have an impact on
recorded net revenue due to differing payers being subject to different
contractual allowance amounts. Such changes in net revenue are recognized in the
period that such changes in payer become known. Similarly, the actual volume of
medical charts not processed into our billing systems may be different from the
amounts estimated. Such differences in net revenue are adjusted in the following
month based on actual chart volumes processed.

     Contract revenue represents revenue generated under contracts in which the
Company provides physician and other healthcare staffing and administrative
services in return for a contractually negotiated fee. Contract revenue consists
primarily of billings based on hours of healthcare staffing provided at agreed
to hourly rates. Revenue in such cases is recognized as the hours are worked by
the Company's staff. Additionally, contract revenue also includes supplemental
revenue from hospitals where the Company may have a fee-for-service contract
arrangement. Contract revenue for the supplemental billing in such cases is
recognized based on the terms of each individual contract. Such contract terms
generally either provide for a fixed monthly dollar amount or a variable amount
based upon measurable monthly activity, such as hours staffed, patient visits or
collections per visit compared to a minimum activity threshold. Such
supplemental revenues based on variable arrangements are usually contractually
fixed on a monthly, quarterly or annual calculation basis considering the
variable factors negotiated in each such arrangement. Such supplemental revenues
are recognized as revenue in the period when such amounts are determined to be
fixed and therefore contractually obligated as payable by the customer under the
terms of the respective agreement.

     Other revenue consists primarily of revenue from management and billing
services provided to outside parties. Revenue is recognized for such services
pursuant to the terms of the contracts with customers. Generally, such contracts
consist of fixed monthly amounts with revenue recognized in the month services
are rendered or as hourly consulting fees recognized as revenue as hours are
worked in accordance with such arrangements. Additionally, the Company derives a
small percentage of revenue from providing administrative and billing services
that are contingent upon the collection of third-party physician billings,
either by us on their behalf or other third-party billing companies. Such
revenues are not considered earned and therefore not recognized as revenue until
actual cash collections are achieved in accordance with the contractual
arrangements for such services.

     Net revenues are reduced for management's estimates of amounts that will
not be collected. The resulting net revenue less provision for uncollectibles
reflects net cash collections for services rendered in the period plus
management's estimate of the remaining collections to be realized for services
rendered in the period. Such
                                        69
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimates of amounts to be collected are subject to adjustment as actual
experience is realized. If subsequent collections experience indicates that an
adjustment to previously recorded collection estimates is necessary, such change
of estimate adjustment is recorded in the current period in which such
assessment is made.

     Management in estimating the amounts to be collected resulting from its
over six million annual fee-for-service patient visits and procedures considers
such factors as prior contract collection experience, current period changes in
payer mix and patient acuity indicators, reimbursement rate trends in
governmental and private sector insurance programs, resolution of credit
balances, the estimated impact of billing system effectiveness improvement
initiatives and trends in collections from self-pay patients. The complexity of
the estimation process associated with the Company's fee-for-service volumes and
diverse payer mix, along with the difficulty of assessing such factors as
changes in the economy impacting the number of healthcare insured versus
uninsured patients and other socio-economic trends that can have an impact on
collection rates, could result in subsequent adjustments to previously reported
revenues.

     The Company derives a significant portion of its net revenues less
provision for uncollectibles from government sponsored healthcare programs. Net
revenue less provision for uncollectibles derived from the Medicare and Medicaid
programs was approximately 23%, 19% and 20% of total net revenue less provision
for uncollectibles in years 2004, 2003 and 2002, respectively. In addition, net
revenues less provision for uncollectibles derived from the TRICARE Program,
which is the U.S. military's dependent healthcare program, was approximately
21%, 23% and 15% in 2004, 2003 and 2002, respectively.

     SEGMENT REPORTING

     The Company provides its services through five operating segments which are
aggregated into two reportable segments, Healthcare Services and Management
Services. The Healthcare Services segment, which is an aggregation of healthcare
staffing, clinics, and occupation health, provides comprehensive healthcare
service programs to users and providers of healthcare services on a
fee-for-service as well as a cost plus basis. The Management Services segment,
which consists of medical group management services and external billing and
collection services, provides a range of management and billing services on a
fee basis. These services include strategic management, management information
systems, third-party payer contracting, financial and accounting support,
benefits administration and risk management, scheduling support, operations
management and quality improvement services.

     IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

     Effective January 1, 2002, the Company adopted the provisions of SFAS No.
142, Goodwill and Other Intangible Assets. Under SFAS No. 142, goodwill and
intangible assets deemed to have indefinite lives are no longer amortized but
are subject to impairment tests on an annual basis, or more frequently if
certain indicators arise. Other intangible assets continue to be amortized over
their useful lives. The Company completed its required initial impairment
testing of goodwill during 2002. As a result of this review, the Company
concluded that a portion of its recorded goodwill was impaired. Accordingly, an
impairment loss of $0.5 million ($0.3 million net of taxes) was recorded in 2002
as the cumulative effect of a change in accounting principle.

     On December 31, 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation -- Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation, to provide alternative methods
of transition to the fair value method of accounting for stock-based employee
compensation under SFAS No. 123. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting,
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported earnings in annual and interim financial statements.
While the Statement does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair
                                        70
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value method, the disclosure provisions of SFAS No. 148 are applicable to all
companies with stock-based employee compensation, regardless of whether the
accounting for that compensation is using the fair value method of SFAS No. 123
or the intrinsic value method of Opinion 25. As more fully discussed in Note 15,
the Company has adopted the disclosure requirements of SFAS No. 148 and the fair
value recognition provisions of SFAS 123, Accounting for Stock-Based
Compensation, prospectively for all new awards granted to employees after
January 1, 2003.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity-type instruments, must now be accounted for as
liabilities. The financial instruments affected include mandatory redeemable
stock, certain financial instruments that require or may require the issuer to
buy back some of its shares in exchange for cash or other assets and certain
obligations that can be settled with shares of stock. The provisions of SFAS No.
150 are applicable to the Company's financial statements beginning in 2005. The
Company has determined that the adoption of SFAS No. 150 will not have a
material effect on the results of its operations or financial condition.

     In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 provides guidance on how to
identify a variable interest entity (VIE) and determine when the assets,
liabilities, non-controlling interests, and results of operations of a VIE are
to be included in an entity's consolidated financial statements. A VIE exists
when either the total equity investment at risk is not sufficient to permit the
entity to finance its activities by itself, or the equity investors lack one of
three characteristics associated with owning a controlling financial interest.
Those characteristics include the direct or indirect ability to make decisions
about an entity's activities through voting rights or similar rights, the
obligation to absorb the expected losses of an entity if they occur, and the
right to receive the expected residual returns of the entity if they occur.

     FIN 46 was effective immediately for new entities created or acquired after
February 1, 2003. The Company has no interest in any entities created nor did it
acquire any entities after February 1, 2003. In December 2003, the FASB
published a revision to FIN 46 ("FIN 46R") to clarify some of the provisions of
the interpretation and defer the effective date of implementation for certain
entities. Under the guidance of FIN 46R, entities that do not have interests in
structures that are commonly referred to as special purpose entities are
required to apply the provisions of the interpretation in financial statements
for periods ending after March 14, 2004. Management believes that FIN 46R does
not have a material impact to the Company.

     On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-Based Payment, which is a revision of SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of
Cash Flows. Generally, the approach in SFAS No. 123(R) is similar to the
approach described in SFAS No. 123. However, SFAS No. 123(R) requires all
shared-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative.

     Under the definition provided in SFAS No. 123(R) the Company is considered
a nonpublic entity therefore the provisions of SFAS No. 123(R) are effective for
the Company beginning January 1, 2006. Early adoption is permitted in periods in
which financial statements have not been issued. The Company expects to adopt
SFAS No. 123(R) beginning January 1, 2006.

     As previously discussed the Company adopted the fair-value-based method of
accounting for share-based payments effective January 1, 2003 using the
prospective method described in SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. Currently, the Company uses the
minimum value method to estimate the value of stock options granted to
employees. In accordance with the transition provisions of SFAS No. 123(R) the
Company will continue to account for nonvested awards outstanding at

                                        71
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the date of adoption of SFAS No. 123(R) in the same manner as they had been
accounted for prior to adoption for financial statement recognition purposes.
For those options that are granted after the adoption SFAS No. 123(R) the
Company will no longer be permitted to use the minimum-value method and instead
will be required to use an acceptable option-pricing model. The Company has not
yet determined which specific option-pricing model it will use.

     SFAS No. 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. While the Company cannot estimate what those
amounts will be in the future (because they depend on, among other things, when
employees exercise stock options), there were no amounts of operating cash flows
recognized in prior periods for such excess tax deductions in 2004, 2003 or
2002.

     USE OF ESTIMATES

     The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

3.   ACQUISITIONS

     During 2004, the Company made payments of approximately $0.7 million with
respect to contingent payments established as a result of certain previous
acquisitions. These amounts represent payments of purchase price and have been
recorded as goodwill. Such amounts are not deductible for tax purposes.

     Effective December 31, 2003, the Company acquired all of the outstanding
stock of a corporation that provides hospital physician staffing services under
two contracts at locations in Ohio. The purchase price for the acquired
corporation was $1.6 million, including $0.1 million which was paid in cash on
December 31, 2003 and the remaining $1.5 million paid in January 2004. As of
December 31, 2004, the Company may have to make up to an additional $0.9 million
in future payments if targeted future earnings are achieved.

     Effective September 1, 2002, the Company acquired all of the outstanding
stock of three corporations held by a single stockholder. The acquired
corporations provide hospital emergency department and hospital physician
staffing services under five contracts for locations in West Virginia and
Virginia. The purchase price for the acquired corporations was $8.6 million of
which $5.2 million was paid in cash at September 1, 2002 with the remainder of
the purchase price due in four annual installments of $0.9 million, $0.9
million, $1.1 million and $0.5 million commencing on October 31, 2003. In
addition, the Company as of December 31, 2004, may have to pay up to $2.0
million in future contingent payments.

     On May 1, 2002, the Company acquired all of the operations of Spectrum
Health Resources ("SHR"). SHR is a leading provider of permanent healthcare
staffing services to military treatment facilities. The acquisition of SHR,
which provides services similar to the existing staffing operations of the
Company, significantly expanded the Company's base of business by providing an
entry into a portion of the healthcare staffing market not previously served by
the Company The Company acquired the operations of SHR through the purchase of
all of the outstanding stock of the parent company of SHR and the refinancing of
the parent company's outstanding debt. The total purchase price for SHR was paid
in cash and totaled approximately $145.7 million.

     The Company's three equity sponsors control a majority of the Company's
voting common stock. Those three equity sponsors were also controlling equity
investors in SHR prior to and at the time of entering into the

                                        72
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

definitive purchase agreement. Prior to negotiating the final purchase price and
entering into the definitive purchase agreement to acquire SHR, the Board of
Directors took the following steps:

          1.  The Board of Directors appointed a Special Committee, consisting
     of three Directors who are not affiliated with the equity sponsors. The
     Special Committee was authorized to (i) consider, negotiate and approve the
     acquisition of SHR, (ii) retain such legal counsel and advisers and
     consultants as they deem appropriate, (iii) consider, negotiate and approve
     the terms of any financing related to the transaction, and (iv) expend any
     funds in furtherance of the duties granted to it. The final authority to
     approve the acquisition and financing rested with the full Board of
     Directors, but the Board of Directors could not approve any transaction not
     recommended by the Special Committee.

          2.  Two of the three equity sponsors along with the Company's
     management members assisted the Special Committee in the evaluations and
     negotiations of the transaction on behalf of the Company. The largest
     common equity sponsor in SHR and the Company represented SHR in its
     evaluation and negotiation of the transaction.

          3.  The Special Committee obtained an opinion by the
     investment-banking firm of SunTrust Robinson Humphrey, a division of
     SunTrust Capital Markets, Inc., that the purchase price paid for SHR was
     fair from a financial point of view to the equity holders of the Company as
     well as its bond holders.

     Effective January 1, 2002, the Company completed the acquisition of certain
of the assets and related business operations of two businesses. The operations
acquired include those of L&S Medical Management, Inc. ("L&S") and a pediatric
services business. L&S provides billing and other management services on a
management fee basis to anesthesiology practices, principally in the
Southeastern portion of the United States. The pediatric services operation
provides evenings and weekend pediatric urgent care and non-trauma emergency
practice services at several locations in Florida. The pediatric services
provided are billed by the Company on a fee-for-service basis.

     The assets and operations of L&S were acquired for $6.4 million in cash and
the Company as of December 31, 2004, may have to make up to $2.5 million in
future contingent payments relating to this acquisition. The assets and
operations of the three pediatric services locations were acquired for $4.7
million in cash. The Company as of December 31, 2004, may have to make up to
$3.4 million in future contingent payments for the existing business operations
if targeted future earnings levels are achieved.

     The following schedule summarizes investing activities related to
acquisitions and contingent payments included in the consolidated statements of
cash flows for 2004, 2003 and 2002, respectively, (in thousands):

<Table>
<Caption>
                                                           2004     2003       2002
                                                          ------   -------   --------
<S>                                                       <C>      <C>       <C>
Fair value of net operating assets acquired (liabilities
  assumed)..............................................  $2,536   $(3,116)  $  3,676
Fair value of contracts acquired........................      --     2,110     21,510
Goodwill................................................     709     3,478    140,536
                                                          ------   -------   --------
Cash paid for acquisitions, net.........................  $3,245   $ 2,472   $165,722
                                                          ======   =======   ========
</Table>

     The acquisitions noted above were accounted for using the purchase method
of accounting. The operating results of the acquired businesses have been
included in the accompanying consolidated statements of operations from their
respective dates of acquisition.

4.   GOODWILL IMPAIRMENT LOSS

     During 2004, the Company derived approximately $207.5 million of revenue
for services rendered to military personnel and their dependents as either a
subcontractor under the TRICARE program administered by the Department of
Defense or by direct contracting with military treatment facilities. The Company
had

                                        73
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

historically provided its services principally through subcontract arrangements
with managed care organizations that contracted directly with the TRICARE
program. In 2004, the military subjected all of its outsourced healthcare
staffing to a re-bidding process with successful bidders contracting directly
with military treatment facilities.

     During the second quarter of 2004, the Department of Defense announced that
it would seek proposals to obtain its outsourced healthcare staffing positions
in a manner different than previously used to acquire such positions. The most
significant announcement was that the military was no longer going to obtain
such staffing through managed care organizations with whom the Company had
previously secured a preferred subcontractor status position. Instead, the
military announced that it was going to secure such positions through a
competitive bidding process regardless of past incumbency in staffing such
positions. The introduction of a new form of competition posed an immediate
threat to the existing revenues and operating margins being experienced by the
Company. Furthermore, because responsibility for such contracting within the
military was turned over to government procurement officers, the aspect of
pricing versus existing relationships and service levels was going to prevail in
terms of vendor selection by the military. In addition, the various branches of
the military established certain restrictive criteria for purposes of
eligibility to bid on certain of their staffing requests for certain proposals,
some of which precluded our Company from bidding for new staffing contracts.

     The Department of Defense and its various military branches began on June
1, 2004, awarding contracts for the civilian positions that it required going
forward. The process of awarding healthcare staffing contracts by the government
varied by branch of the military and by military base location within the
various branches of the military. The award process included soliciting requests
for proposals from organizations that provide civilian healthcare staffing,
including the use of restrictive government or military approved vendor lists,
some of which did not include the Company. In other instances, the military
re-bid its business on a basis that is inclusive of existing providers, such as
the Company, without the use of restricted vendor lists. Furthermore, the
awarding of certain bids was restricted to small business or minority qualified
businesses for which the Company was not eligible to even bid for the contracts.
The new military staffing contracts resulting from the re-bidding process vary
as to form and duration on an individual staffing position basis. The duration
of such contracts typically ranges from one year with no renewal options to
renewal options on the part of the military with such option periods ranging
from one to five years. The above noted facts and circumstances were concluded
by management to be a "triggering event" under the provisions of SFAS No. 142,
"Goodwill and Other Tangible Assets".

     The following is a summary of the Company's military staffing revenues that
were subject to re-bidding under the new TRICARE program contracting process (in
thousands):

<Table>
<S>                                                           <C>
Annual revenue derived from contracts subject to
  re-bidding................................................  $210,700
Annual revenue value of bids won to date (including new
  business of $20.1 million)................................  $138,200
Percentage of revenue retained or new business won to total
  of annual revenue re-bid..................................        66%
</Table>

     Management concluded that the Company's previous revenues and operating
margins were materially adversely affected as a result of the re-bidding
process. The Company prior to the recognition of any impairment loss had $127.9
million of goodwill related to its military staffing business The Company
recorded an impairment loss of $73.2 million relating to its military business
goodwill in 2004.

     The goodwill impairment loss was determined following the provisions of
SFAS No. 142. Accordingly, the Company initially estimated the fair market value
of the military staffing business. The fair market value of the business was
determined using a multiple of projected cash flows based on known contracts won
as well as management's estimate of its expectations of winning bids for
remaining business contracts to be awarded by the military. The average cash
flow multiple was derived from averaging the cash flow multiples for public
companies in the healthcare staffing market over a two-year period. The carrying
value of the business exceeded its estimated fair market value. The fair market
value was allocated to the underlying net assets of

                                        74
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the business following generally accepted accounting principles for allocating
purchase prices. This included an allocation of value to the components of
working capital; contract intangibles (based on a discounting of future cash
flows estimated to be derived from such contracts) with the remainder of such
fair value assigned to goodwill. The aforementioned allocation process included
estimates for additional business contracts to be awarded by the military
projected to be won by the Company based on the Company's experience in winning
new contracts not previously held by the Company and in recognition of the
Company's experience and capabilities in providing such ongoing staffing
services to the military.

5.   OTHER INTANGIBLE ASSETS

     The following is a summary of other intangible assets and related
amortization as of December 31, 2004 and 2003 for intangibles that are subject
to amortization (in thousands):

<Table>
<Caption>
                                                             GROSS CARRYING   ACCUMULATED
                                                                 AMOUNT       AMORTIZATION
                                                             --------------   ------------
<S>                                                          <C>              <C>
As of December 31, 2004:
  Contracts................................................     $31,956         $20,560
  Other....................................................         448             220
                                                                -------         -------
     Total.................................................     $32,404         $20,780
                                                                =======         =======
As of December 31, 2003:
  Contracts................................................     $35,614         $18,898
  Other....................................................         448             174
                                                                -------         -------
     Total.................................................     $36,062         $19,072
                                                                =======         =======
</Table>

     Total amortization expense for other intangibles was $5.4 million, $10.6
million and $4.8 million for the years 2004, 2003 and 2002, respectively.

     The estimated annual amortization expense for intangibles for the next five
years is as follows (in thousands):

<Table>
<S>                                                           <C>
2005........................................................  $4,147
2006........................................................   2,582
2007........................................................   2,151
2008........................................................   1,798
2009........................................................     688
</Table>

     During 2004, the Company recorded an additional $0.7 million of goodwill
and in 2003 recorded an additional $3.5 million of goodwill and $2.1 million of
contract intangibles as a result of its acquisitions during the periods and
contingent acquisition payments made for previous acquisitions. Contract
intangibles are amortized over their estimated lives which are approximately
seven years.

     During 2003 and 2002, the Company recorded as an impairment loss $0.2
million and $2.3 million, respectively, to reduce its contract intangibles to
their estimated fair value. The impairment losses recorded in 2003 and 2002 are
the result of either reduced contract profitability and thus expected future
cash flows, or a termination of contracts for which an intangible asset had
previously been recorded.

                                        75
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31 (in
thousands):

<Table>
<Caption>
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Buildings and leasehold improvements........................  $  5,256   $  4,885
Furniture and equipment.....................................    27,584     30,280
Software....................................................     8,070      8,824
                                                              --------   --------
                                                                40,910     43,989
Less accumulated depreciation...............................   (23,285)   (24,022)
                                                              --------   --------
                                                              $ 17,625   $ 19,967
                                                              ========   ========
</Table>

     Depreciation expense in 2004, 2003 and 2002 was approximately $8.3 million,
$9.0 million and $9.4 million, respectively.

7. RECEIVABLES UNDER INSURED PROGRAMS

     Receivables under insured programs represent the portion of the Company's
reserves for professional liability losses estimated to be reimbursable under
commercial insurance company policies. The entities providing professional
liability coverage to the Company are creditworthy commercial insurance
companies and the Company believes these companies will be able to fully satisfy
their obligations under the insurance contracts.

8. OTHER ASSETS

     Other assets consist of the following as of December 31 (in thousands):

<Table>
<Caption>
                                                               2004      2003
                                                              -------   -------
<S>                                                           <C>       <C>
Investments.................................................  $24,356   $14,641
Deferred financing costs....................................    7,080     6,474
Other.......................................................    5,396    12,043
                                                              -------   -------
                                                              $36,832   $33,158
                                                              =======   =======
</Table>

     Investments represent funds held within the Company's captive insurance
company to meet expected professional liability insurance loss obligations.

9. INVESTMENTS

     Short term investments have a maturity of less than a year and consist
primarily of commercial paper, treasury notes, and euro deposits. Long term
investments represent securities held by the captive insurance subsidiary and
consist primarily of money market funds, treasury notes, and certificates of
deposits. At December 31 the amortized cost basis and aggregate fair value of
the Company's available-for-sale securities by contractual maturities were as
follows (in thousands):

<Table>
<Caption>
                                                      2004                      2003
                                             -----------------------   -----------------------
                                             AMORTIZED    AGGREGATE    AMORTIZED    AGGREGATE
                                             COST BASIS   FAIR VALUE   COST BASIS   FAIR VALUE
                                             ----------   ----------   ----------   ----------
<S>                                          <C>          <C>          <C>          <C>
Due in less than one year..................   $71,142      $70,903      $14,641      $14,641
Due after one year through five years......    18,215       18,104           --           --
                                              -------      -------      -------      -------
                                              $89,357      $89,007      $14,641      $14,641
                                              =======      =======      =======      =======
</Table>

                                        76
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of December 31, 2004, there were $3,000 of gross unrealized gains and
$353,000 of gross unrealized losses on investments. There were no gross
unrealized gains or unrealized losses on investments as of December 31, 2003.
There were no realized gains or losses on investments for the years ended
December 31, 2004 and 2003.

10. OTHER ACCRUED LIABILITIES

     The Company's other accrued liabilities at December 31 consist of the
following (in thousands):

<Table>
<Caption>
                                                               2004      2003
                                                              -------   -------
<S>                                                           <C>       <C>
Professional liability loss reserves........................  $55,214   $66,136
Other.......................................................   17,774    16,740
                                                              -------   -------
                                                              $72,988   $82,876
                                                              =======   =======
</Table>

11. LONG-TERM DEBT

     Long-term debt as of December 31 consists of the following (in thousands):

<Table>
<Caption>
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Term Loan Facilities........................................  $248,125   $199,415
9% Senior Subordinated Notes................................   180,000         --
12% Senior Subordinated Notes...............................        --    100,000
                                                              --------   --------
                                                               428,125    299,415
Less current portion........................................   (15,000)   (43,528)
                                                              --------   --------
                                                              $413,125   $255,887
                                                              ========   ========
</Table>

     The Term Loan Facilities consist of the following (in thousands):

<Table>
<S>                                                           <C>        <C>
Senior Secured Term Loan A..................................  $     --   $ 56,478
Senior Secured Term Loan B..................................   248,125    142,937
                                                              --------   --------
                                                              $248,125   $199,415
                                                              ========   ========
</Table>

     The interest rates for any senior revolving credit facility borrowings
(none outstanding in 2004) are based on a grid which is based on the
consolidated ratio of total funded debt to earnings before interest, taxes,
depreciation and amortization, all as defined in the credit agreement. The
interest rate on any current Term Loan B amount outstanding is equal to the euro
dollar rate plus 3.25% or the agent bank's base rate plus 2.25%. In the event of
a default by the Company under its bank loan covenants, such interest rates
would increase by 2% over the current rates then in effect. Upon expiration of
the current interest rate period, the Company would have to pay the agent bank's
base rates plus 2% plus the maximum applicable margin. Under the bank's base
rate borrowing base, the maximum applicable margin for any senior revolving
credit facility borrowing amounts is 2.75% and for Term Loan B amounts is 3.25%.

     The interest rate at December 31, 2004 was 5.81% for amounts outstanding
under Term Loan B. In addition, the Company pays a commitment fee for the
revolving credit facility which was equal to 0.5% of the commitment at December
31, 2004. No funds have been borrowed under the revolving credit facility as of
December 31, 2004, but the Company had $3.8 million of standby letters of credit
outstanding against the revolving credit facility commitment. The Company has a
forward interest rate swap agreement that became effective April 29, 2004, to
effectively convert $35.0 million of floating-rate borrowings to 3.2% fixed-rate
borrowings through March 31, 2007. These agreements expose the Company to credit
losses in the event of

                                        77
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

non-performance by the counterparties to its financial instruments. The
counterparties are creditworthy financial institutions and the Company
anticipates that the counterparties will be able to fully satisfy their
obligations under the contracts.

     The Company issued on March 23, 2004, 9% Senior Subordinated Notes
("Notes") in the amount of $180.0 million due April 1, 2012. The Notes are
subordinated in right of payment to all senior debt of the Company and are
senior in right of payment to all existing and future subordinated indebtedness
of the Company. Interest on the Notes accrues at the rate of 9% per annum,
payable semi-annually in arrears on April 1 and October 1 of each year.
Beginning on April 1, 2008, the Company may redeem some or all of the Notes at
any time at various redemption prices.

     The Notes are guaranteed jointly and severally on a full and unconditional
basis by all of the Company's majority-owned operating subsidiaries ("Subsidiary
Guarantors") as required by the Indenture Agreement. The Company is a holding
company with no assets or operations apart from the ownership of its operating
subsidiaries.

     Both the 9% Notes and the current term loan facility contain both
affirmative and negative covenants, including limitations on the Company's
ability to incur additional indebtedness, sell material assets, retire, redeem
or otherwise reacquire its capital stock, acquire the capital stock or assets of
another business, pay dividends, and require the Company to meet or exceed
certain coverage, leverage and indebtedness ratios. The terms of both the
current term loan facility and the Notes restrict the amount of dividends
payable by the Company. As of December 31, 2004, no dividends are available for
payment under the most restrictive terms of the Company's debt agreements.

     The senior credit agreement includes a provision for the prepayment of a
portion of the outstanding term loan amounts at any year-end if the Company
generates "excess cash flow," as defined in the agreement. The Company has
estimated that it will be required to make an excess cash flow payment of
approximately $15.0 million for fiscal 2004 by April 30, 2005. The estimated
excess cash flow payment has been included within current maturities of
long-term debt in the accompanying balance sheet at December 31, 2004.

     Effective March 23, 2004, the Company completed a tender offer for its then
outstanding 12% Senior Subordinated Notes in the amount of $100.0 million, plus
a call premium of $8.2 million and entered into its current senior credit
facilities with a group of banks. As a result of entering into the new senior
credit facilities and the redemption of its 12% Senior Subordinated Notes, the
Company recognized in 2004 refinancing costs of approximately $14.7 million
($9.0 million net of related income tax benefit of $5.7 million), principally
relating to the write-off of approximately $6.2 million of capitalized financing
costs on its previously outstanding long-term debt and the incurrence of the
call premium to redeem the 12% Senior Subordinated Notes. In addition, as a
result of repayment of underlying borrowings during 2004, the Company recorded
as additional interest expense approximately $1.7 million in 2004 related to an
interest rate swap agreement to reflect its value on a mark-to-market basis. The
interest rate swap agreement was subsequently terminated in 2004.

     Aggregate annual maturities of long-term debt as of December 31, 2004 are
as follows (in thousands):

<Table>
<S>                                                           <C>
2005........................................................  $ 15,000
2006........................................................     2,373
2007........................................................     2,373
2008........................................................     2,373
2009........................................................     2,373
Thereafter..................................................   403,633
                                                              --------
                                                              $428,125
                                                              ========
</Table>

                                        78
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. OTHER NONCURRENT LIABILITIES

     Other noncurrent liabilities consist of the following as of December 31 (in
thousands):

<Table>
<Caption>
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Professional liability loss reserves........................  $187,514   $165,798
Deferred compensation.......................................     6,615     12,626
Other.......................................................     1,788      4,133
                                                              --------   --------
                                                              $195,917   $182,557
                                                              ========   ========
</Table>

     The Company's professional liability loss reserves at December 31 consist
of the following (in thousands):

<Table>
<Caption>
                                                                2004       2003
                                                              --------   --------
<S>                                                           <C>        <C>
Estimated losses under self-insured programs................  $138,617   $108,710
Estimated losses under commercial insurance programs........   104,111    123,224
                                                              --------   --------
                                                               242,728    231,934
  Less -- estimated amount payable within one year..........    55,214     66,136
                                                              --------   --------
                                                              $187,514   $165,798
                                                              ========   ========
</Table>

     The Company provides for its estimated professional liability losses
through a combination of commercial insurance company coverage as well as
reserves established to provide for future payments under self-insured retention
components and to establish reserves for future claims incurred but not
reported. During the period March 12, 1999 through March 11, 2003, the primary
source of the Company's coverage for such risks was a professional liability
insurance policy provided through one insurance carrier. The policy with the
Company's primary insurance carrier for such coverage and period provided
coverage for potential liabilities on a "claims-made" basis. The policy included
the ability for the Company to be able to exercise a "tail" premium option. The
tail premium option included an aggregate limit of $130.0 million during the
period March 12, 1999 to March 11, 2003. As a result of conditions in the
professional liability insurance market, the Company decided that it would
provide, beginning March 12, 2003, for such risks previously covered by the
Company's primary insurance carrier through a captive insurance company. Since
March 12, 2003, loss estimates on a "claims-made" basis are being provided for
and funded within the captive insurance company. Additionally, the Company is
providing for an actuarial estimate of losses for professional liability claims
incurred but not reported since March 12, 2003.

     The option for the tail premium was exercised by the Company effective
March 11, 2003, and its cost of approximately $30.6 million, was paid in April
2003. The Company had previously recorded the cost of such option over the
four-year period ended March 11, 2003.

     The Company's decision to forego commercial professional liability
insurance in favor of a self-insured program was, in part, based on the results
of an actuarial study. The actuarial study was prepared to provide the Company
with an actuarial estimate of the current annual cost of its professional
liability claim losses and related expenses and also to estimate the Company's
potential exposure to prior period losses under the $130.0 million aggregate
policy limit. The foregoing actuarial study included numerous underlying
estimates and assumptions, including assumptions as to future claim losses, the
severity and frequency of such projected losses, loss development factors, and
others. The results of the actuarial study included a projection that the
Company would incur a loss resulting from claims for the covered periods
exceeding the $130.0 million aggregate insurance company loss limit under the
previous policy. Such loss estimate, discounted at 4% over the projected future
payment periods, totaled $50.8 million and is reflected in the Company's
statement of operations for 2003.

                                        79
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's provisions for losses subsequent to March 11, 2003, that are
not covered by commercial insurance company coverage are subject to subsequent
adjustment should future actuarial projected results for such periods indicate
projected losses are greater or less than previously projected. In addition, the
results of future actuarial studies may result in the loss estimate provision
under the aggregate policy limit to be further adjusted upward or downward as
actuarial results are realized over time.

13. REDEMPTION OF 10% CUMULATIVE PREFERRED STOCK

     During 2004, the Board of Directors of the Company authorized the
redemption of the Company's 10% Cumulative Preferred Stock. On March 23, 2004,
the Company redeemed its 10% Cumulative Preferred Stock in the amount of
approximately $162.4 million, including accrued dividends.

14. STOCKHOLDERS' EQUITY

     During 2004 and 2003, the Company recorded the cost of acquiring 271,020
and 70,828 shares, respectively, of its common stock and common units of
Holdings from members of its management at a total cost of $4.5 million in 2004
and $0.9 million in 2003. The consideration for the shares acquired in 2004
consisted of cash of $2.7 million and a note payable in the amount of $1.8
million payable in two equal installments on January 1, 2005 and 2006.

     During 2004, the Company sold 22,600 shares of its $0.01 par value common
stock to members of its management for net proceeds of $0.1 million. During
2002, the Company sold 67,513 shares of its $.01 par value common stock to
members of its management and Board of Directors for net proceeds of $0.6
million.

     In 2004, the Board of Directors authorized the Company to cancel certain
common shares that had been acquired from former members of management and were
accounted for as treasury shares. Certain of the previously repurchased treasury
shares represented common units in Holdings and the remainder were common shares
of the Company. To facilitate the share cancellation, the Company and Holdings
exchanged a like number of common shares and units each owned of the other.
Following the exchange with Holdings, the Company cancelled 362,321 common
shares which reduced the carrying value of treasury shares by $4.7 million. As
of December 31, 2004, the Company held 51,833 treasury shares at a cost of $0.8
million.

     The Company's Board of Directors declared a cash dividend to shareholders
of record as of March 18, 2004, in the amount of approximately $27.6 million
which was subsequently paid on March 23, 2004. The Board of Directors also
authorized a compensatory payment to holders of stock options in lieu of a cash
dividend in the amount of approximately $2.5 million of which $1.3 million was
paid and expensed on March 23, 2004, with the balance of $1.1 million to be paid
and expensed in future periods as such stock options vest.

15. STOCK OPTIONS

     The Company's 1999 Stock Option Plan (the "Plan") allows the granting of
stock options to employees, consultants and directors of the Company. The
Company has reserved 1,245,926 shares of common stock for issuance. The options
vest at the end of an eight-year period, but allow for the possible acceleration
of vesting if certain performance related criteria are met.

     Effective January 1, 2003, the Company adopted the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation,
prospectively to all new awards granted to employees after January 1, 2003.
Prior to January 1, 2003, the Company applied the recognition and measurement
provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations in accounting for options awarded. No stock-based
employee compensation expense is reflected in net earnings for 2002 as all
options granted prior to January 1, 2003 had an exercise price equal to the
market value of the underlying common stock on the date of grant. Therefore, the
expense related to stock-based employee compensation
                                        80
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

included in the determination of net earnings for 2002 is less than that which
would have been recognized if the fair value method had been applied to all
awards since adoption of the plan. The following table illustrates the effect on
net earnings (loss) if the fair value method had been applied to all outstanding
and unvested awards in each period (in thousands):

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                           2004       2003      2002
                                                         --------   --------   ------
<S>                                                      <C>        <C>        <C>
Net earnings (loss) attributable to common
  stockholders.........................................  $(52,814)  $(17,251)  $3,009
Add: stock-based employee compensation expense included
  in net earnings (loss) attributable to common
  stockholders, net of related tax effects.............        43         19        5
Deduct: Total stock-based employee compensation expense
  determined under fair value based method for all
  awards, net of related tax effects...................      (164)      (151)    (114)
                                                         --------   --------   ------
Pro forma net earnings (loss) attributable to common
  stockholders.........................................  $(52,935)  $(17,383)  $2,900
                                                         ========   ========   ======
</Table>

     Stock option activity during 2002, 2003 and 2004 was as follows (options in
thousands):

<Table>
<Caption>
                                                NUMBER OF                 WEIGHTED AVERAGE
                                                 OPTIONS    PRICE RANGE    EXERCISE PRICE
                                                ---------   -----------   ----------------
<S>                                             <C>         <C>           <C>
Outstanding at December 31, 2001..............     497      $ 1.50-4.50        $ 2.39
Granted.......................................     359       4.50-12.00         10.34
Cancelled.....................................      (6)       1.50-4.50          2.00
                                                   ---      -----------        ------
Outstanding at December 31, 2002..............     850       1.50-12.00          5.75
Granted.......................................      49            13.50         13.50
Exercised.....................................      (2)            1.50          1.50
Cancelled.....................................     (34)       1.50-4.50          2.00
                                                   ---      -----------        ------
Outstanding at December 31, 2003..............     863       1.50-13.50          6.34
Granted.......................................      25            15.18         15.18
Exercised.....................................     (23)       1.50-4.50          2.69
Cancelled.....................................     (38)      1.50-12.00          2.74
                                                   ---      -----------        ------
Outstanding at December 31, 2004..............     827      $1.50-15.18        $ 6.85
                                                   ===      ===========        ======
</Table>

     The following table summarizes information about stock options outstanding
at December 31, 2004 (options in thousands):

<Table>
<Caption>
                 WEIGHTED                    WEIGHTED AVERAGE
  OPTIONS        AVERAGE         OPTIONS        REMAINING
OUTSTANDING   EXERCISE PRICE   EXERCISABLE   CONTRACTUAL LIFE
-----------   --------------   -----------   ----------------
<S>           <C>              <C>           <C>
280....           $ 1.50           221             5.0
195....             4.50           111             6.5
278....            12.00            89             7.4
49.....            13.50             6             8.4
25.....            15.18            --             9.5
    ---           ------           ---             ---
827....           $ 6.85           427             6.5
    ===           ======           ===             ===
</Table>

                                        81
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of December 31, 2004, 2003 and 2002, there were 426,687, 148,343 and
161,532 shares that were vested and exercisable, respectively.

     Approximately 46,000 of the 826,725 options outstanding at December 31,
2004 were granted to affiliated independent contractor physicians in previous
years. The Company recorded $6,396 of compensation expense in 2004, $18,061 in
2003 and $9,000 in 2002, based on grant date assumptions of a fair value of
$0.68 per option, 6.0% risk-free interest rate and a ten year expected option
life relating to these options.

     The following table represents the weighted average fair value of options
granted during 2004, 2003 and 2002:

<Table>
<Caption>
                                                               WEIGHTED
                                                               AVERAGE
                                                              FAIR VALUE
                                                              ----------
<S>                                                           <C>
2004........................................................    $5.27
2003........................................................    $4.45
2002........................................................    $2.60
</Table>

     The fair value of stock options was estimated at the date of grant using
the minimal value option pricing model with the following assumptions: expected
dividend yield of 0% in 2004, 2003 and 2002; risk-free interest rate of 4.27%,
4.0% and 2.0% in 2004, 2003 and 2002, respectively; and an expected life of ten
years in 2004, 2003 and 2002.

16. NET REVENUE

     Net revenue in 2004, 2003 and 2002, respectively, consisted of the
following (in thousands):

<Table>
<Caption>
                                                      2004         2003         2002
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Fee for service revenue..........................  $1,168,099   $1,040,996   $  907,596
Contract revenue.................................     373,918      408,147      292,740
Other revenue....................................      30,157       29,870       30,367
                                                   ----------   ----------   ----------
                                                   $1,572,174   $1,479,013   $1,230,703
                                                   ==========   ==========   ==========
</Table>

17. INCOME TAXES

     The provision for income tax expense (benefit) consists of the following
(in thousands):

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          2004       2003      2002
                                                         -------   --------   -------
<S>                                                      <C>       <C>        <C>
Current:
  Federal..............................................  $11,668   $ 15,468   $ 4,336
  State................................................    2,902      2,524     1,904
                                                         -------   --------   -------
                                                          14,570     17,992     6,240
Deferred:
  Federal..............................................   (2,346)   (17,699)    7,646
  State................................................     (788)    (1,703)     (688)
                                                         -------   --------   -------
                                                          (3,134)   (19,402)    6,958
                                                         -------   --------   -------
                                                         $11,436   $ (1,410)  $13,198
                                                         =======   ========   =======
</Table>

                                        82
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The reconciliation of income tax expense computed at the federal statutory
tax rate to income tax expense (benefit) is as follows:

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                                             ------------------------
                                                             2004      2003      2002
                                                             -----     -----     ----
<S>                                                          <C>       <C>       <C>
Tax at statutory rate......................................  (35.0)%   (35.0)%   35.0%
State income tax (net of federal tax benefit)..............    2.3      (1.0)     1.6
Change in valuation allowance..............................    1.6        --      3.3
Costs not deductible for tax purposes......................   68.1       5.2      1.5
Resolution of tax issue....................................   (5.1)       --       --
Other......................................................   (1.8)     (2.6)     3.1
                                                             -----     -----     ----
                                                              30.1%    (33.4)%   44.5%
                                                             =====     =====     ====
</Table>

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the
Company's deferred tax assets and liabilities are as follows at December 31 (in
thousands):

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                 2004         2003
                                                              ----------   ----------
<S>                                                           <C>          <C>
Current deferred tax assets:
  Accounts receivable.......................................   $ 14,940     $ 12,890
  Accrued compensation and other............................      3,636        2,478
  Professional liability reserves...........................      2,301          865
                                                               --------     --------
     Total current deferred tax assets......................     20,877       16,233
                                                               --------     --------
Current deferred tax liabilities:
  Affiliate deferred revenue................................    (41,284)     (37,117)
                                                               --------     --------
     Total current deferred tax liabilities.................    (41,284)     (37,117)
                                                               --------     --------
Net current deferred tax liabilities........................   $(20,407)    $(20,884)
                                                               ========     ========
Long term deferred tax assets:
  Accrued compensation and other............................   $    796     $  2,100
  Amortization and depreciation.............................     49,161       56,669
  Professional liability reserves...........................     45,620       41,378
  Net operating losses......................................      4,006        2,623
                                                               --------     --------
     Total long term deferred tax assets....................     99,583      102,770
                                                               --------     --------
Long term deferred tax liabilities:
  Other reserves............................................         --       (3,630)
  Valuation allowance.......................................     (2,875)      (2,259)
                                                               --------     --------
Net long-term deferred tax asset............................   $ 96,708     $ 96,881
                                                               ========     ========
Total deferred tax assets...................................   $120,460     $119,003
Total deferred tax liabilities..............................    (41,284)     (40,747)
Valuation allowance.........................................     (2,875)      (2,259)
                                                               --------     --------
Net deferred tax assets.....................................   $ 76,301     $ 75,997
                                                               ========     ========
</Table>

                                        83
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company as of December 31, 2004, had operating loss carryforwards in
various states that begin to expire in 2010 through 2030.

18. RETIREMENT PLANS

     The Company's employees participated in various employee benefit plans
sponsored by the Company. The plans are primarily defined contribution plans.
The various entities acquired or merged into the Company have various retirement
plans that have been terminated, frozen or amended with terms consistent with
the Company's plans. The Company's contributions to the plans were approximately
$3.0 million in 2004, $3.3 million in 2003 and $3.6 million 2002.

     The Company maintains a retirement savings plan for its employees. The plan
is a defined benefit contribution plan in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. The plan provides for a
discretionary match by the Company up to a maximum of 50% of the first 6% of
compensation contributed by employees. The Company's provisions in 2004, 2003
and 2002 reflect the maximum discretionary provisions provided for under the
amended plan.

     The Company also maintains non-qualified deferred compensation plans for
certain of its employees. Total deferred compensation payable as of December 31,
2004 and 2003 was approximately $7.3 million and $12.9 million, respectively.
During 2004, the assets held within a rabbi trust that was maintained for the
benefit of certain members of the Company's senior management were paid to its
employee participants in connection with a refinancing of the Company's capital
structure. The rabbi trust had held preferred units in Team Health Holdings,
LLC. The deferred compensation liability and related investment held by the
rabbi trust were carried as a long-term liability and a long-term asset at
December 31, 2003 in the amount of $8.6 million.

19. COMMITMENTS AND CONTINGENCIES

     LEASES

     The Company leases office space for terms of primarily one to ten years
with options to renew for additional periods. Future minimum payments due on
these noncancelable operating leases at December 31, 2004 are as follows (in
thousands):

<Table>
<S>                                                            <C>
2005........................................................   $ 8,716
2006........................................................     7,783
2007........................................................     6,142
2008........................................................     4,373
2009........................................................     2,058
     Thereafter.............................................     1,554
                                                               -------
                                                               $30,626
                                                               =======
</Table>

     Operating lease costs were approximately $8.4 million, $8.0 million and
$7.3 million for the years ended December 31, 2004, 2003 and 2002, respectively.

     LITIGATION

     We are party to various pending legal actions arising in the ordinary
operation of our business such as contractual disputes, employment disputes and
general business actions as well as professional liability actions. We believe
that any payment of damages resulting from these types of lawsuits would be
covered by insurance,

                                        84
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exclusive of deductibles, would not be in excess of related reserves, and such
liabilities, if incurred, should not have a significant negative effect on the
results of operations and financial condition of our Company.

     INDEMNITY

     In connection with the acquisition of a company that specializes in
providing medical staff providers to military treatment facilities on May 1,
2002, subject to certain limitations, the previous shareholders of such company
and its related entities have indemnified the Company up to a limit of $10.0
million relating to any claims asserted against the acquired company during the
three years subsequent to the date of its acquisition related to tax matters
whose origin was attributable to tax periods prior to May 1, 2002.

     HEALTHCARE REGULATORY MATTERS

     Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. Compliance with such laws and regulations
can be subject to future governmental review and interpretation as well as
significant regulatory action. From time to time, governmental regulatory
agencies will conduct inquiries and audits of the Company's practices. It is the
Company's current practice and future intent to cooperate fully with such
inquiries.

     In addition to laws and regulations governing the Medicare and Medicaid
programs, there are a number of federal and state laws and regulations governing
such matters as the corporate practice of medicine and fee splitting
arrangements, anti-kickback statutes, physician self-referral laws, false or
fraudulent claims filing and patient privacy requirements. The failure to comply
with any of such laws or regulations could have an adverse impact on our
operations and financial results. It is management's belief that the Company is
in substantial compliance in all material respects with such laws and
regulations.

     CONTINGENT ACQUISITION PAYMENTS

     As of December 31, 2004, the Company may have to pay up to $8.8 million in
future contingent payments as additional consideration for acquisitions made
prior to December 31, 2004. These payments will be made and recorded as
additional purchase price should the acquired operations achieve the financial
targets contracted in the respective agreements related to their acquisition.

     OFFICE OF INSPECTOR GENERAL INFORMATION REQUEST

     On March 30, 2004, the Company received a subpoena from the Department of
HHS Office of Inspector General ("OIG"), located in Concord, California,
requesting certain information for the period 1999 to present relating to its
billing practices. To date, the Company has produced and delivered to the OIG
certain requested information, and the OIG has stayed further requests. The
Company has learned in conversations with representatives of the OIG and the
United States Attorney for the Northern District of California, the basis for
the issuance of the subpoena is a complaint filed in the United States District
Court for the Northern District of California ("Court") by an individual on
behalf of the government. The identity of the qui tam relator and portions of
the qui tam complaint remain sealed by the Court pending the government's
investigation. The portions of the complaint not under seal allege that the
Company engaged in certain billing practices that resulted in the Company's
receipt of duplicate payments for the same medical service and that the Company
misled certain providers about the entities that were performing their billing
services. Additionally, the portions of the complaint not under seal allege that
the Company terminated the employment of the individual who filed the complaint
in retaliation for that individual's bringing of these allegations to the
attention of the Company. The Company denies these allegations and does not
believe that any of its current or prior billing practices would form the basis
for a violation of federal law.

                                        85
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company is fully cooperating with the OIG in its request described
herein and have been producing and delivering to the OIG the requested
documents. However, due to lack of more specific information available to it at
this time, it is unable to ascertain the full scope of the government's inquiry
or the qui tam relator's complaint. Management cannot predict the outcome of
this investigation or suit or their respective durations. If this investigation
results in current or prior billing practices being identified as violative of
applicable laws or regulations, results in penalties being imposed upon the
Company, or results in an adverse determination in the qui tam relator's
complaint against it, the impact could have a material adverse effect on the
Company's business and financial condition.

20. RELATED PARTY TRANSACTIONS

     The Company leases office space from several partnerships that are
partially or entirely owned by certain employees of the Company. The leases were
assumed by the Company as part of merger or purchase transactions. Total related
party lease costs were approximately $1.0 million in 2004, 2003 and 2002. In
addition, the Company has a management services agreement with three of our
equity sponsors to provide certain management services. Management services paid
under this arrangement were $0.5 million in 2004, 2003, and 2002.

21. SEGMENT REPORTING

     The Company has two reportable segments: Healthcare Services and Management
Services. Healthcare Services provides professional healthcare staffing in
various healthcare provider settings, such as hospitals, clinics and military
treatment facilities. Management Services consists of medical group management
services and external billing and collection services.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Segment amounts disclosed are
prior to any elimination entries made in consolidation, except in the case of
net revenue, where intercompany charges have been eliminated. Certain expenses
are not allocated to the segments. These unallocated expenses are corporate
expenses, net interest expense, depreciation and amortization, refinancing costs
and income taxes. The Company evaluates segment performance based on profit and
loss before the aforementioned expenses. Assets not identifiable to an
individual segment are corporate assets, which are primarily comprised of cash
and cash equivalents, short term investments, computer related fixed assets and
intercompany receivables and loans (which are eliminated in consolidation).

                                        86
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents financial information for each reportable
segment. Depreciation, amortization, impairment of intangibles, management fee
and other expenses separately identified in the consolidated statements of
operations are included as a reduction to the respective segments' operating
earnings for each year below (in thousands):

<Table>
<Caption>
                                                         2004        2003       2002
                                                      ----------   --------   --------
<S>                                                   <C>          <C>        <C>
Net Revenues:
Healthcare Services.................................  $  988,688   $984,023   $817,346
Management Services.................................      20,003     15,723     16,752
                                                      ----------   --------   --------
                                                      $1,008,691   $999,746   $834,098
                                                      ==========   ========   ========
Operating Earnings:
Healthcare Services.................................  $   36,013   $ 46,909   $ 86,814
Management Services.................................       3,494      4,542      3,059
General Corporate...................................     (33,603)   (32,329)   (32,948)
                                                      ----------   --------   --------
                                                      $    5,904   $ 19,122   $ 56,925
                                                      ==========   ========   ========
Capital Expenditures:
Healthcare Services.................................  $    1,810   $  5,457   $  3,011
Management Services.................................       1,012        715      1,927
General Corporate...................................       3,891      2,800      4,858
                                                      ----------   --------   --------
                                                      $    6,713   $  8,972   $  9,796
                                                      ==========   ========   ========
Total Assets:
Healthcare Services.................................  $  376,436   $463,927   $545,689
Management Services.................................      19,576     21,645      2,998
General Corporate...................................     214,379    245,477    125,553
                                                      ----------   --------   --------
                                                      $  610,391   $731,049   $674,240
                                                      ==========   ========   ========
</Table>

                                        87
<PAGE>
                               TEAM HEALTH, INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

22. FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used by the Company in
estimating the fair value of the Company's financial instruments:

<Table>
<S>                                         <C>
Cash and cash equivalents:                  The carrying amount reported in the balance
                                            sheets for cash and cash equivalents
                                            approximates its fair value.
Accounts receivable:                        The carrying amount reported in the balance
                                            sheets for accounts receivable approximates its
                                            fair value.
Investments:                                The fair market value of investments were
                                            determined based upon quoted market rates, where
                                            available, or discounted cash flows if no market
                                            value was available.
Long-term debt:                             Fair values for debt were determined based on
                                            interest rates that are currently available to
                                            the Company for issuance of debt with similar
                                            terms and remaining maturities for debt issues
                                            that are not traded on quoted market prices. The
                                            fair value of the Company's total debt, which
                                            has a carrying value of $428.1 million, is
                                            approximately $424.1 million.
Interest rate swap:                         The fair value of the Company's interest rate
                                            swap agreement was zero at December 31, 2004
                                            based on quoted market prices for similar
                                            interest rate contracts.
</Table>

                                        88
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Knoxville, Tennessee, on February 28, 2005.

                                          TEAM HEALTH, INC.

                                             /s/ H. LYNN MASSINGALE, M.D.
                                          --------------------------------------
                                                 H. Lynn Massingale, M.D.
                                                 Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed below on February 28, 2005, by the following
persons on behalf of the registrant and in the capacities indicated.

                                          TEAM HEALTH, INC.

                                             /s/ H. LYNN MASSINGALE, M.D.
                                          --------------------------------------
                                                 H. Lynn Massingale, M.D.
                                           Chief Executive Officer and Director
                                              (Principal Executive Officer)

                                               /s/ ROBERT J. ABRAMOWSKI
                                          --------------------------------------
                                                   Robert J. Abramowski
                                          Executive Vice President Finance and
                                          Administration
                                           (Principal Financial and Accounting
                                                         Officer)

                                                    /s/ DAVID JONES
                                          --------------------------------------
                                                       David Jones
                                               Vice President and Treasurer

                                                /s/ NICHOLAS W. ALEXOS
                                          --------------------------------------
                                                    Nicholas W. Alexos
                                                         Director

                                        89
<PAGE>

                                                /s/ GLENN A. DAVENPORT
                                          --------------------------------------
                                                    Glenn A. Davenport
                                                         Director

                                                  /s/ EARL P. HOLLAND
                                          --------------------------------------
                                                     Earl P. Holland
                                                         Director

                                                  /s/ DANA J. O'BRIEN
                                          --------------------------------------
                                                     Dana J. O'Brien
                                                         Director

                                                /s/ KENNETH W. O'KEEFE
                                          --------------------------------------
                                                    Kenneth W. O'Keefe
                                                         Director

                                                /s/ TIMOTHY P. SULLIVAN
                                          --------------------------------------
                                                   Timothy P. Sullivan
                                                         Director

                                        90
<PAGE>

                                 EXHIBIT INDEX

<Table>
<C>      <S>
 1.1     Purchase Agreement dated as of March 12, 2004 by and among
         Team Health, Inc. and J.P. Morgan Securities Inc., Banc of
         America Securities LLC, Merrill Lynch Pierce Fenner & Smith
         Incorporated and ABN Amro Incorporated.*
 2.1     Recapitalization Agreement dated January 25, 1999 by and
         among Team Health, Inc., MedPartners, Inc., Pacific
         Physician Services, Inc. and Team Health Holdings, L.L.C.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.1     Charter of Team Health Group, Inc. dated March 29, 1994.
         (Incorporated by reference to Team Health, Inc.'s Amendment
         to Form S-4 dated July 26, 1999)*
 3.2     Articles of Amendment to the Charter of Team Health Group,
         Inc. dated December 30, 1994. (Incorporated by reference to
         Team Health, Inc.'s Amendment to Form S-4 dated July 26,
         1999)*
 3.3     Articles of Amendment to the Charter of Team Health Group,
         Inc. dated March 7, 1997. (Incorporated by reference to Team
         Health, Inc.'s Amendment to Form S-4 dated July 26, 1999)*
 3.4     Articles of Amendment to the Charter of Team Health, Inc.
         dated March 11, 1999. (Incorporated by reference to Team
         Health, Inc.'s Amendment to Form S-4 dated July 26, 1999)*
 3.5     By-laws of Team Health, Inc. dated July 2, 2001.*
 3.6     Articles of Incorporation for Access Nurse PM, Inc. dated
         June 6, 2000.*
 3.7     Bylaws of Access Nurse PM, Inc., dated June 7, 2000.*
 3.8     Articles of Incorporation of After Hours Pediatric
         Practices, Inc. dated November 1, 2001. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated May 8,
         2002)*
 3.9     Articles of Amendment to the Articles of Incorporation of
         After Hours Pediatric Practices, Inc. dated May 1, 2003.*
 3.10    Bylaws of After Hours Pediatric Practices, Inc. dated
         December 10, 2001. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated May 8, 2002)*
 3.11    Certificate of Incorporation of American Clinical Resources,
         Inc. (f/k/a Spectrum Healthcare Nationwide, Inc.) dated May
         10, 2001. (Incorporated by reference to Registrant's Form
         10-Q filed on August 12, 2003)*
 3.12    Certificate of Amendment to Certificate of Incorporation of
         Spectrum Healthcare Nationwide, Inc. dated December 10,
         2002.*
 3.13    Amended and Restated By-Laws of American Clinical Resources,
         Inc.*
 3.14    Amended and Restated Articles of Incorporation of Charles L.
         Springfield, Inc. dated November 21, 1997. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.15    By-laws of Charles Springfield, M.D. dated March 16, 1981.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.16    Amendment to By-laws of Charles L. Springfield, Inc. dated
         November 20, 1997. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.17    Charter of Clinic Management Services, Inc. (f/k/a Park Med,
         P.C. and f/k/a Allways Care Clinic, Inc.) dated November 21,
         1990. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.18    Articles of Amendment to the Charter of Allways Care Clinic,
         Inc. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.19    Articles of Amendment to the Charter of Allways Care Clinic,
         Inc. dated December 14, 1992. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.20    Articles of Amendment to the Charter of Allways Care Clinic,
         Inc. dated October 18, 1993. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.21    Articles of Amendment to the Charter of Park Med, P.C. dated
         March 25, 1994. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.22    By-laws of Clinic Management Services, Inc. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.23    Bylaws of Correctional Healthcare Advantage, Inc. dated
         December 3, 2002. (Incorporated by reference to Team Health,
         Inc.'s Form 10-Q dated May 15, 2003)*
 3.24    Articles of Incorporation of Correctional Healthcare
         Advantage, Inc. (f/k/a Correctional Healthcare Solutions,
         Inc.), dated December 2, 2002. (Incorporated by reference to
         Team Health, Inc.'s Form 10-Q dated May 15, 2003)*
 3.25    Articles of Amendment to Articles of Incorporation of
         Correctional Healthcare Solutions, Inc., dated December 4,
         2002. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated May 15, 2003)*
 3.26    Articles of Incorporation of Cullman Emergency Physicians,
         Inc. (f/k/a Provident Imaging Consultants, Inc. and f/k/a
         Paragon Imaging Consultants, Inc.) dated May 4, 1993.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.27    Certificate of Amendment of Certificate of Incorporation of
         Provident Imaging Consultants, Inc. dated March 3, 1994.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.28    Articles of Amendment to the Certificate of Incorporation of
         Paragon Imaging Consultants, Inc. dated January 28, 2004.*
 3.29    By-laws of Paragon Imaging Consultants, Inc. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.30    Articles of Incorporation of Daniel & Yeager, Inc. dated
         October 25, 1989. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.31    By-laws of Daniel & Yeager, Inc. dated October 6, 1989.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.32    Articles of Amendment and Restatement of the Articles of
         Incorporation of Drs. Sheer, Ahearn & Associates, Inc. dated
         August 15, 2000.*
 3.33    Amended and Restated By-laws of Drs. Sheer, Ahearn &
         Associates, Inc. dated February 15, 1989. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.34    Charter of Emergency Coverage Corporation (f/k/a ECC
         Emergency Coverage Corporation) dated January 14, 1982.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.35    Articles of Amendment to the Charter of ECC Emergency
         Coverage Corporation dated February 7, 1986. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.36    Articles of Amendment to the Charter of Emergency Coverage
         Corporation dated January 15, 1989. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.37    Articles of Amendment to the Charter of ECC Emergency
         Coverage Corporation dated November 11, 1991. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June
         9,1999)*
 3.38    Articles of Amendment to the Charter of Emergency Coverage
         Corporation dated February 15, 1993. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.39    By-Laws of Emergency Coverage Corporation (f/k/a ECC
         Emergency Coverage Corporation). (Incorporated by reference
         to Team Health, Inc.'s Form S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.40    Amendment to By-laws of Emergency Coverage Corporation dated
         June 12, 1995. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.41    Restated Certificate of Incorporation of Emergency Physician
         Associates, Inc. (f/k/a Emergency Physicians Associates,
         P.A.). (Incorporated by reference to Team Health, Inc.'s
         Form S-4 dated June 9, 1999)*
 3.42    By-laws of Emergency Physician Associates, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.43    Articles of Incorporation of Emergency Professional
         Services, Inc. (f/k/a Emergency Professional Services of
         Ohio, Inc.) dated December 29, 1977. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.44    Certificate of Amendment to Articles of Incorporation of
         Emergency Professional Services of Ohio, Inc. dated May 17,
         1990. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.45    Certificate of Amendment to Articles of Incorporation of
         Emergency Professional Services of Ohio, Inc. dated March
         29, 1979. (Incorporated by reference to Team Health, Inc.'s
         Form S-4 dated June 9, 1999)*
 3.46    Certificate of Amendment to the Articles of Incorporation of
         Emergency Professional Services of Ohio, Inc. dated June 24,
         1988. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.47    Certificate of Amendment to the Articles of Incorporation of
         Emergency Professional Services, Inc. dated February 15,
         1988. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.48    Certificate to Amend the Articles of Incorporation of
         Emergency Professional Services, Inc. dated September 30,
         1997. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.49    Amended Code of Regulations of Emergency Professional
         Services, Inc.*
 3.50    Charter of Erie Shores Emergency Physicians, Inc.*
 3.51    Code of Regulations of Erie Shores Emergency Physicians,
         Inc. dated January 1, 2004.*
 3.52    Partnership Agreement of Fischer Mangold, a California
         General Partnership dated February 21, 1996. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.53    Articles of Incorporation of Greenbrier Emergency
         Physicians, Inc. dated April 10, 2003. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated August 11,
         2003)*
 3.54    Bylaws of Greenbrier Emergency Physicians, Inc. dated April
         10, 2003. (Incorporated by reference to Team Health, Inc.'s
         Form 10-Q dated August 11, 2003)*
 3.55    Articles of Incorporation of Healthcare Alliance, Inc. dated
         January 4, 1995. (Incorporated by reference to Team Health,
         Inc.'s Form 10-Q dated November 7, 2002)*
 3.56    Amended and Restated Bylaws of Healthcare Alliance, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 7, 2002)*
 3.57    Articles of Incorporation of Herschel Fischer, Inc. dated
         February 18, 1997. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.58    By-laws of Herschel Fischer, Inc. dated February 21, 1997.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.59    Articles of Incorporation of IMBS, Inc. dated November 30,
         1995. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.60    Bylaws of IMBS, Inc. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.61    Articles of Incorporation of Inphynet Contracting Services,
         Inc. (f/k/a EMSA Contracting Service, Inc.) dated November
         30, 1995. (Incorporated by reference to Team Health, Inc.'s
         Form S-4 dated June 9, 1999)*
 3.62    By-laws of Inphynet Contracting Services, Inc. (f/k/a EMSA
         Contracting Service, Inc.). (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.63    Articles of Amendment to Articles of Incorporation of
         Inphynet Contracting Services, Inc. (f/k/a EMSA Contracting
         Services, Inc.) dated March 4, 1999.*
 3.64    Articles of Amendment to the Articles of Incorporation of
         Inphynet Contracting Services, Inc., dated March 11, 1999.*
 3.65    Articles of Amendment to the Articles of Incorporation of
         Inphynet Contracting Services, Inc. dated December 21,
         2000.*
 3.66    Articles of Incorporation of InPhyNet Hospital Services,
         Inc. dated November 30, 1995. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.67    By-laws of InPhyNet Hospital Services, Inc. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.68    Articles of Incorporation of Inphynet South Broward
         Services, Inc. (f/k/a EMSA South Broward, Inc.) dated
         December 3, 1996. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.69    By-laws of Inphynet South Broward Services, Inc. (f/k/a EMSA
         South Broward, Inc.). (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.70    Articles of Amendment to Articles of Incorporation of EMSA
         South Broward, Inc. dated March 4, 1999.*
 3.71    Articles of Incorporation of Karl G. Mangold, Inc. dated
         February 14, 1997. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.72    By-laws of Karl G. Mangold, Inc. dated February 20, 1997.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.73    Articles of Incorporation of Kelly Medical Services
         Corporation (f/k/a Kelly Medical Corporation) dated August
         13, 1985. (Incorporated by reference to Team Health, Inc.'s
         Form 10-Q dated November 7, 2002)*
 3.74    Articles of Amendment to Articles of Incorporation of Kelly
         Medical Services Corporation (f/k/a Kelly Medical
         Corporation) dated September 16, 2002. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated November 7,
         2002)*
 3.75    Amended and restated bylaws of Kelly Medical Corporation.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 7, 2002)*
 3.76    Charter of Med: Assure Systems, Inc. dated February 9, 1987.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.77    Articles of Amendment to the Charter of Med: Assure Systems,
         Inc. dated October 28, 1992. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated March 7, 1990)*
 3.78    Articles of Amendment to the Charter of Med: Assure Systems,
         Inc. dated October 28, 1992. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.79    By-laws of Med: Assure Systems, Inc. dated February 25,
         1987. Articles of Amendment to the Charter of Med: Assure
         Systems, Inc. dated October 28, 1992. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.80    Articles of Incorporation of Medical Management Resources,
         Inc. (f/k/a New MMR, Inc.) dated December 13, 1999.*
 3.81    Articles of Amendment to Articles of Incorporation of New
         MMR, Inc. dated January 7, 2000.*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.82    Bylaws of Medical Management Resources, Inc. (f/k/a New MMR,
         Inc.) dated December 13, 1999.*
 3.84    Amended and restated bylaws of Medical Services, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 7, 2002)*
 3.85    Articles of Incorporation of MetroAmerican Radiology, Inc.
         dated April 19, 1989. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.86    By-laws of MetroAmerican Radiology, Inc. dated April 23,
         1989. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.87    Partnership Agreement of Mt. Diablo Emergency Physicians
         Partnership, a California General Partnership, dated June 1,
         1997. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.88    Articles of Incorporation of Northwest Emergency Physicians,
         Incorporated dated June 4, 1985. (Incorporated by reference
         to Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.89    By-laws of Northwest Emergency Physicians, Incorporated.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.90    Articles of Incorporation of Paragon Contracting Services,
         Inc. dated November 30, 1995. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.91    By-laws of Paragon Contracting Services, Inc. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.92    Certificate of limited Partnership of Paragon Healthcare
         Limited Partnership, dated August 3, 1993. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.93    Amendment to the Certificate of Limited Partnership of
         Paragon Healthcare Limited Partnership, dated October 30,
         1996. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.94    Articles of Incorporation of Physician Integration
         Consulting Services, Inc. dated August 2, 1993.
         (Incorporated by reference to Team Health, Inc.'s Form 10-K
         dated March 1, 2002)*
 3.95    By-laws of Physician Integration Consulting Services, Inc.
         dated August 11, 1993. (Incorporated by reference to Team
         Health, Inc.'s Form 10-K dated March 1, 2002)*
 3.96    Articles of Incorporation of Quantum Plus, Inc. dated
         January 27, 1997. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.97    By-laws of Quantum Plus, Inc. dated February 1, 1997.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.98    Amended and Restated Articles of Incorporation of Reich,
         Seidelmann & Janicki Co. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.99    Code Regulations of Reich, Seidelmann & Janicki Co.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.100   Articles of Incorporation of King Wendel Ragona Rosendorf
         Radiology Associates of Hollywood, P.A.*
 3.101   Articles of Amendment to the Articles of Incorporation of
         Rosendorf, Marguiles, Borushok & Shoenbaum Radiology
         Associates of Hollywood, Inc.(f/k/a King Wendel Ragona
         Rosendorf Radiology Associates, Inc.) dated March 15, 1999.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.102   By-laws of Rosendorf, Marguiles, Borushok & Schoenbaum
         Radiology Associates of Hollywood, Inc. (f/k/a Radiology
         Associates of Hollywood, Inc.). (Incorporated by reference
         to Team Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.103   Charter of Southeastern Emergency Physicians, Inc. dated
         January 3, 1985. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.104   Articles of Amendment to the Charter of Southeastern
         Emergency Physicians, Inc. dated October 28, 1992.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.105   Articles of Amendment to the Charter of Southeastern
         Emergency Physicians, Inc. dated February 7, 1990.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.106   Articles of Amendment to the Charter of Southeastern
         Emergency Physicians, Inc. dated July 1, 1986. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
 3.107   Articles of Amendment to the Charter of Southeastern
         Emergency Physicians, Inc. dated January 15, 1989.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.108   By-laws of Southeastern Emergency Physicians, Inc. dated
         July 1, 1986. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.109   Charter of Southeastern Emergency Physicians of Memphis,
         Inc. (f/k/a Nusep, Inc.) dated November 6, 1990.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.110   Articles of Amendment to the Charter of Nusep, Inc. dated
         February 7, 1991. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.111   Articles of Amendment to the Charter of Southeastern
         Emergency Physicians of Memphis, Inc. dated December 15,
         1992. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.112   By-laws of Southeastern Emergency Physicians Of Memphis,
         Inc. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
 3.113   Certificate of Incorporation of Spectrum Cruise Care, Inc.
         dated July 11, 1996. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated August 12, 2002)*
 3.114   Amended and Restated Bylaws of Spectrum Cruise Care, Inc.*
 3.115   Certificate of Incorporation of Spectrum Healthcare
         Resources of Delaware, Inc. dated November 3, 1994.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated August 12, 2002)*
 3.116   Amended and Restated By-laws of Spectrum Healthcare
         Resources of Delaware, Inc. (Incorporated by reference to
         Team Health, Inc.'s Form 10-Q dated August 12, 2002)*
 3.117   By-laws of Spectrum Healthcare Resources, Inc. (Incorporated
         by reference to Team Health, Inc.'s Form 10-Q dated August
         12, 2002)*
 3.118   Certificate of Incorporation of Spectrum Healthcare
         Resources, Inc. dated November 3, 1994. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated August 12,
         2002)*
 3.119   Certificate of Incorporation of Spectrum Healthcare
         Services, Inc. dated January 18, 1994. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated August 12,
         2002)*
 3.120   Certificate of Amendment of Restated Certificate of
         Incorporation of Spectrum Healthcare Services, Inc. dated
         July 21, 1997. (Incorporated by reference to Team Health,
         Inc.'s Form 10-Q dated August 12, 2002)*
 3.121   Amended and Restated Bylaws of Spectrum Healthcare Services,
         Inc. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated August 12, 2002)*
 3.122   Certificate of Incorporation of Spectrum Healthcare, Inc.
         dated December 5, 1996. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated August 12, 2002)*
 3.123   Amended and Restated By-Laws of Spectrum Healthcare, Inc.*
 3.124   Certificate of Incorporation of Spectrum Primary Care of
         Delaware, Inc. dated November 3, 1994. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated August 12,
         2002)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.125   By-laws of Spectrum Primary Care of Delaware, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated August 12, 2002)*
 3.126   Certificate of Incorporation of Spectrum Primary Care, Inc.
         (f/k/a Spectrum Occupational Health Services, Inc.) dated
         August 30, 1994. (Incorporated by reference to Team Health,
         Inc.'s Form 10-Q dated August 12, 2002)*
 3.127   Amended and Restated Bylaws of Spectrum Primary Care, Inc.
         (f/k/a Spectrum Occupational Health Services, Inc.)*
 3.128   Certificate of Amendment of Restated Certificate of
         Incorporation of Spectrum Occupational Health Services, Inc.
         dated November 3, 1994. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated August 12, 2002)*
 3.129   Charter of Team Anesthesia, Inc. dated November 3, 1999.*
 3.130   Bylaws of Team Anesthesia, Inc. dated November 4, 1999.*
 3.131   Articles of Incorporation of Team Health Anesthesia
         Management Services, Inc. (f/k/a Integrated Specialists
         Management Services, Inc.) dated January 20, 1994.
         (Incorporated by reference to Team Health, Inc.'s 10-K dated
         March 1, 2002)*
 3.132   Certificate of Amendment to Articles of Incorporation of
         Integrated Specialists Management Services, Inc. dated
         January 29, 1997. (Incorporated by reference to Team Health,
         Inc.'s 10-K dated March 1, 2002)*
 3.133   Certificate of Amendment of Articles of Incorporation of
         Integrated Specialists Management Services, Inc. dated
         September 5, 2002.*
 3.134   Bylaws of Integrated Specialists Management Services, Inc.
         dated July 18, 1994. (Incorporated by reference to Team
         Health, Inc.'s 10-K dated March 1, 2002)*
 3.135   Third Amendment to Bylaws of Integrated Specialists
         Management Services, Inc. dated February 23, 2001.
         (Incorporated by reference to Team Health, Inc.'s 10-K dated
         March 1, 2002)*
 3.136   Fifth Amendment to Bylaws of Integrated Specialists
         Management Services, Inc. dated June 12, 2001. (Incorporated
         by reference to Team Health, Inc.'s 10-K dated March 1,
         2002)*
 3.137   Sixth Amendment to Bylaws of Integrated Specialists
         Management Services, Inc. dated July 30, 2001. (Incorporated
         by reference to Team Health, Inc.'s 10-K dated March 1,
         2002)*
 3.138   Charter of Team Health Financial Services, Inc. dated
         October 9, 1997. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.139   By-laws of Team Health Financial Services, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.140   Certificate of Limited Partnership of Team Health Southwest,
         L.P., dated May 20, 1998. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
 3.141   Articles of Incorporation of Team Radiology, Inc. dated
         October 6, 1993. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
 3.142   By-laws of Team Radiology, Inc. dated November 5, 1993.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.143   Articles of Organization of TH Contracting Midwest, LLC
         dated June 27, 2003. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated November 5, 2003)*
 3.144   Certificate of Limited Partnership of Team Health Billing
         Services, L.P., dated October 21, 1997. (Incorporated by
         reference to Team Health, Inc.'s 10-K dated March 1, 2002)*
 3.145   Operating Agreement of TH Contracting Midwest, LLC.*
 3.146   Amended and Restated Articles of Incorporation of The
         Emergency Associates for Medicine, Inc. dated August 30,
         1996. (Incorporated by reference to Team Health, Inc.'s Form
         S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
 3.147   By-laws of The Emergency Associates for Medicine, Inc.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 3.148   Certificate and Articles of Organization of Team Health
         Contracting of Missouri, LLC dated October 6, 2004.*
 3.149   Articles of Incorporation of Northwest Hospital Medicine
         Physicians, Inc. dated December 15, 2004.**
 3.150   Bylaws of Northwest Hospital Medicine Physicians, Inc. dated
         January 1, 2005.**
 3.151   Articles of Organization of Healthcare Revenue Recovery
         Group, LLC.**
 4.1     Indenture dated as of March 12, 1999 by and among Team
         Health, Inc., the Guarantors listed on the signature pages
         thereto and the United States Trust Company of New York.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
 4.2     Supplemental Indenture dated March 28, 2001. (Incorporated
         by reference to Team Health, Inc.'s Form 10-Q dated November
         7, 2002)*
 4.3     Supplemental Indenture dated September 3, 2001.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 7, 2002)*
 4.4     Supplemental Indenture dated May 31, 2002. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated November 7,
         2002)*
 4.5     Fourth Supplemental Indenture dated November 11, 2002.
         (Incorporated by reference to Team Health, Inc.'s Form 10-K
         dated March 25, 2003)*
 4.6     Fifth Supplemental Indenture dated September 9, 2003.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 5, 2003)*
 4.7     Sixth Supplemental Indenture dated as of March 12, 2004.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated May 10, 2004)*
 4.8     Indenture dated as of March 23, 2004 by and among Team
         Health, Inc., the Guarantors listed on the signature pages
         thereto, and the Bank of New York. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated May 10,
         2004)*
 4.9     Form of Exchange Note (included in Exhibit 4.8).
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated May 10, 2004)*
 4.10    Registration Rights Agreement dated as of March 12, 2004 by
         and among Team Health, Inc., the guarantors listed on the
         Schedule thereto, and J.P. Morgan Securities Inc., Banc of
         America Securities LLC and Merrill Lynch Pierce Fenner &
         Smith Incorporated. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated May 10, 2004)*
 5.1     Opinion of Kirkland & Ellis, LLP.*
 5.2     Opinion of Haskell Slaughter Young & Redicker, LLC.*
 5.3     Opinion of Foley & Lardner LLP.*
 5.4     Opinion of Blackwell Sanders Peper Martin LLP.*
 5.5     Opinion of Sherman, Silverstein, Kohl, Rose & Podolsky P.A.*
 5.6     Opinion of Parker, Poe, Adams & Berstein LLP.*
 5.7     Opinion of Ulmer & Berne LLP.*
 5.8     Opinion of London & Amburn, PC.*
 5.9     Opinion of Durham, Jones and Pinegar, PC.*
 5.10    Opinion of Bowles Rice McDavid Graff & Love, PLLC.*
10.1     Registration Rights Agreement dated as of March 12, 1999 by
         and among Team Health, Inc., the guarantors listed on the
         signature pages thereto and Donaldson, Lufkin & Jenrette
         Securities Corporation, NationsBanc Montgomery Securities
         LLC and Fleet Securities, Inc. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
</Table>
<PAGE>
<Table>
<C>      <S>
10.2     Purchase Agreement dated as of March 5, 1999 by and among
         Team Health, Inc. and the guarantors listed on the signature
         pages thereto and Donaldson, Lufkin & Jenrette Securities
         Corporation, NationsBanc Montgomery Securities LLC and Fleet
         Securities, Inc. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
10.3     Equity Deferred Compensation Plan of Team Health, Inc.
         effective January 25, 1999. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
10.4     Management Services Agreement dated as of March 12, 1999 by
         and among Team Health, Inc., Madison Dearborn Partners II,
         L.P., Beecken, Petty & Company, L.L.C. and Cornerstone
         Equity Investors LLC. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
10.5     Registration Agreement dated as of March 12, 1999 by and
         among Team Health, Inc., Team Health Holdings, L.L.C.,
         Pacific Physician Services, Inc. and certain other
         stockholders of Team Health, Inc. who are from the to time
         party thereto. (Incorporated by reference to Team Health,
         Inc.'s Form S-4 dated June 9, 1999)*
10.6     Registration Agreement dated as of March 12, 1999 by and
         among Team Health Holdings, L.L.C., each of the persons
         listed on Schedule A thereto and certain other
         securityholders of Team Health, Inc. who are from time to
         time party thereto. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
10.7     Trust Agreement dated as of January 25, 1999 by and among
         Team Health, Inc. and The Trust Company of Knoxville.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
10.8     Credit Agreement dated as of March 12, 1999 by and among
         Team Health, Inc., the banks, financial institutions and
         other institutional lenders named herein, Fleet National
         Bank, NationsBank, N.A., NationsBanc Montgomery Securities
         LLC and Donaldson, Lufkin & Jenrette Securities Corporation.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
10.9     Sheer Ahearn & Associates Plan Provision Nonqualified Excess
         Deferral Plan effective September 1, 1998. (Incorporated by
         reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
10.10    Amendment and Restatement of Emergency Professional
         Services, Inc. Deferred Compensation Plan effective January
         31, 1996. (Incorporated by reference to Team Health, Inc.'s
         Form S-4 dated June 9, 1999)*
10.11    Lease Agreement dated August 27, 1992 between Med: Assure
         Systems and Winston Road Properties for our corporate
         headquarters located at 1900 Winston Road, Knoxville, TN.
         (Incorporated by reference to Team Health, Inc.'s Form S-4
         dated June 9, 1999)*
10.12    Lease Agreement dated August 27, 1999 between Americare
         Medical Services, Inc. and Winston Road Properties for space
         located at 1900 Winston Road, Knoxville, TN. (Incorporated
         by reference to Team Health, Inc.'s Form S-4 dated June 9,
         1999)*
10.13    1999 Stock Option Plan of Team Health, Inc. (Incorporated by
         reference to Team Health, Inc.'s Amendment to Form S-4 dated
         July 26, 1999)*
10.14    Form of Employment Agreement for Dr. Massingale and Messrs.
         Hatcher, Sherlin, Joyner and Jones. (Incorporated by
         reference to Team Health, Inc.'s Form 10-K dated March 7,
         2001)*
10.15    Amendment No. 1 to Credit Agreement dated as of March 12,
         1999. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated May 8, 2001)*
10.16    Amendment No. 1 to Security Agreement dated as June 30,
         2001. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated August 9, 2001)*
10.17    Amendment No. 2 to Credit Agreement dated as of March 12,
         1999. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated November 14, 2001)*
</Table>
<PAGE>
<Table>
<C>      <S>
10.18    Credit Agreement dated May 1, 2002 among Team Health, Inc.,
         The Banks, Financial Institutions and Other Institutional
         Lenders Named Therein, Fleet National Bank, Bank of America,
         N.A., and Banc of America Securities, LLC. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated August 12,
         2002)*
10.19    Amendment No. 1 to Credit Agreement dated May 1, 2002.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated May 15, 2003)*
10.20    Amendment No. 2 to Credit Agreement dated May 1, 2002.
         (Incorporated by reference to Team Health, Inc.'s Form 10-Q
         dated November 5, 2003)*
10.21    Credit Agreement, dated as of March 23, 2004, by and among
         Team Health, Inc., Team Health Holdings, L.L.C., the
         Subsidiary Guarantors (as defined therein), the Lenders (as
         defined therein), and Bank of America, N.A. (Incorporated by
         reference to Team Health, Inc.'s Form 10-Q dated May 10,
         2004)*
10.22    Security and Pledge Agreement, dated as of March 23, 2004,
         by and among Team Health, Inc., the Subsidiary Guarantors
         (as defined therein) and Bank of America, N.A. (Incorporated
         by reference to Team Health, Inc.'s Form 10-Q dated May 10,
         2004)*
10.23    Holdings Pledge Agreement, dated as of March 23, 2004, by
         and among Team Health Holdings, L.L.C. and Bank of America,
         N.A. (Incorporated by reference to Team Health, Inc.'s Form
         10-Q dated May 10, 2004)*
10.24    Borrower Pledge Agreement (Cayman Islands Subsidiary), dated
         as of March 23, 2004, by and among Team Health, Inc. and
         Bank of America, N.A. (Incorporated by reference to Team
         Health, Inc.'s Form 10-Q dated May 10, 2004)*
10.25    Team Health, Inc. Non-Qualified Supplemental Executive
         Retirement Plan dated as of January 1, 2004. (Incorporated
         by reference to Team Health, Inc.'s Form 10-Q dated May 10,
         2004)*
10.26    Stockholders Agreement dated as of March 12, 1999 by and
         among Team Health, Inc., Team Health Holdings, L.L.C.,
         Pacific Physicians Services, Inc., and certain other
         stockholders of the Team Health, Inc. who are from time to
         time party hereto. (Incorporated by reference to Team
         Health, Inc.'s Form S-4 dated June 9, 1999)*
10.27    Securityholders Agreement dated as of March 12, 1999 by and
         among Team Health Holdings, L.L.C., each of the persons
         listed on Schedule A thereto and certain other
         securityholders of Team Health Holdings, L.L.C. who are from
         time to time party thereto. (Incorporated by reference to
         Team Health, Inc.'s Form S-4 dated June 9, 1999)*
10.28    Employment agreement dated October 4, 2004 between Team
         Health, Inc. and Gregory S. Roth, President and Chief
         Operating Officer.*
14.1     Code of Ethics.**
21.1     Subsidiaries of Registrant.**
31.1     Certification by Lynn Massingale, M.D. pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.**
31.2     Certification by Robert J. Abramowski pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.**
32.1     Certification by Lynn Massingale, M.D. pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.**
32.2     Certification by Robert J. Abramowski pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.**
</Table>

---------------

 * Previously filed by the Company in its prior S-4 Registration Statement and
   subsequent filings with the Securities and Exchange Commission.

** Filed herewith.
<PAGE>

                                   ITEM 15(A)

                               TEAM HEALTH, INC.
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                        FOR THE YEARS ENDED DECEMBER 31,
                                 (IN THOUSANDS)

<Table>
<Caption>
                                           BALANCE AT
                                           BEGINNING    COSTS AND                         BALANCE AT
                                           OF PERIOD    EXPENSES    OTHER   DEDUCTIONS   END OF PERIOD
                                           ----------   ---------   -----   ----------   -------------
<S>                                        <C>          <C>         <C>     <C>          <C>
2004.....................................   $120,653    $563,483    $ --     $557,785      $126,351
2003.....................................   $109,156    $479,267    $ --     $467,770      $120,653
2002.....................................   $101,175    $396,605    $ --     $388,624      $109,156
</Table>