Note 21 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies Disclosure [Text Block]

NOTE 21 - COMMITMENTS AND CONTINGENCIES:

Capital Leases -

Refer to Note 14 for a summary of capital lease commitments.

Reliance on Third Party Vendors -

Our fertility and vein clinics are dependent on a limited number of primary third-party vendors that produce supplies and medications vital to treating infertility and vein disease.  Should any of these vendors experience a supply shortage, it may have an adverse impact on the operations of our clinical locations and network members.  To date, no shortage or disruption has been experienced.

Employment Agreements

We have an employment agreement with our President and Chief Executive Officer. Pursuant to that agreement, we may terminate the President and Chief Executive Officer’s employment without cause on thirty days notice, in which event severance pay equal to twelve months’ base salary  plus an annual bonus, calculated without regard to the condition precedents established under the bonus plan, will be payable in a lump sum. Under the employment agreement, if we had terminated Mr. Higham effective December 31, 2011, based on his 2011 compensation, he would have been paid an aggregate of $420,000 of which represents his 2011 base salary and $315,000 of which represents his 2011 bonus.

The employment agreement further provides that in the event that within one year after a “Change of Control” (as defined therein) of the Company occurs, and  the President and Chief Executive Officer’s employment is terminated, the President and Chief Executive Officer will be paid a lump sum amount equal to their base salary for a 24-month period following termination, plus twice the full amount of their annual bonus based on their then current salary, without regard to the condition precedents established for the bonus payment. Based on this change of control provision, if there had been a change of control of the Company in 2011 and the President and Chief Executive Officer’s employment had terminated effective December 31, 2011, either for “Good Reason” or without cause, then the President and Chief Executive Officer would be entitled to termination pay equal to $840,000 representing his then annualized base salary for 24-months, plus $630,000 representing twice the amount to which he was eligible under our Executive Incentive Compensation Plan for 2011.

We have also entered into indemnification and change in control severance agreements with certain of our Corporate officers, which include, among other terms, noncompetitive provisions and salary and benefits continuation.  Our minimum aggregate commitment under these agreements at December 31, 2011 was approximately $3.2 million.

Commitments to Partners -

In accordance with the majority of our Partner agreements, we are obligated to: (i) on an ongoing basis, advance funds to the fertility centers to fund operations and provide services; and (ii) on a monthly basis, transfer to the fertility centers funds equal to the net accounts receivable generated that month to finance those receivables less any amounts owed to us for services fees and/or advances.

Legal Settlement -

On January 15, 2009, a patient of our Partner fertility center, Fertility Centers of Illinois, S.C.(“FCI”), filed suit (Heather Kornick vs. Lawrence A. Jacobs, M.D. and Fertility Centers of Illinois, S.C.), in the Circuit Court of Cook County, Illinois (the “Kornick Lawsuit”),  alleging, among other things, a failure to diagnose plaintiff's adrenal cortical carcinoma. In June 2009, plaintiff amended their complaint to add the Company and, more recently, two of the Company's nurse employees, as defendants.  The parties participated in a mediation on July 5, 2011 and have received a release from the plaintiff dated July 28, 2011, in consideration of $4.5 million, $1.65 million of which the Company is obligated to pay.  The balance of the settlement amount is the responsibility of the Company’s insurance carrier and FCI.  The Company’s obligation of $1.65 million is reflected on the financial statements for the year ending December 31, 2011 as “Other Expense”.

Litigation -

From time to time, we and our Partner fertility centers, and vein clinics and their physicians are parties to legal proceedings in the ordinary course of business. We are exposed to claims of professional negligence based on services performed by our employees, including physician assistants and nurse practitioners, as well as based on our relationships with physicians providing treatments at our Partner fertility centers and vein clinics.

The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available.  As of December 31, 2011, the Company has not recorded any expense related to any outstanding litigation because it has not yet been determined if a liability has incurred related to outstanding litigation. Although, we are vigorously defending the allegations, we cannot assure you that we will ultimately prevail and if so, if the liability can be reasonably estimated.  Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

We maintain medical malpractice insurance with limits of $3 million per claim, regardless of the number of the covered defendants, and $10 million per year in the aggregate, with respect to our Partner fertility centers, and with limits generally equal to $1 million per physician and $10 million per year in the aggregate, with respect to our vein clinics. Our Partner fertility centers, vein clinics and their physicians are additional named insured’s under our policies. All of our insurance policies are subject to deductibles or a self-insured retention. A portion of the insurance for certain of our fertility centers is provided by ARTIC. 

Insurance -

As of December 31, 2011 and 2010, we and our affiliated fertility and vein care centers were insured with respect to medical malpractice risks on a claims made basis.  We believe, either through this captive insurance company, or on the open market, we will be able to obtain continued coverage for both our fertility and vein care physicians in the future. We are not aware of any claims against us or our affiliated medical practices, which would expose us, or our affiliated medical practices to liabilities in excess of insured amounts.

As of December 31, 2011 and 2010, we also carried policies to insure against liability, theft, property loss, business interruption and a variety of other business risks. We also maintain an appropriate insurance reserve to cover estimated deductible amounts should a claim be filed under our policies.  Premiums paid to the captive insurance company, which we manage for the benefit of our Fertility Partners were $2,141,000, $2,124,000, and $2,140,000 for the years ended December 31, 2011, 2010 and 2009, respectively.