Hospital Corporation of America and Subsidiaries - Page 17

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               Mr. Castille, who had been the risk manager of Humana Inc.,            
          a competing hospital chain, was hired to head Parthenon's loss              
          prevention and quality assurance operation.  Mr. Anderson, a                
          former controller of an insurance brokerage firm in the State of            
          Kentucky, became head of Parthenon's financial operations.                  
               On October 28, 1977, HCA contributed an additional $1                  
          million to Parthenon as paid-in capital.                                    
               During March 1978, HCA management learned that Continental,            
          which had been providing workers' compensation insurance to                 
          petitioners, was not interested in renewing coverage under any              
          type of insurance plan.  As a captive insurer, Parthenon could              
          not insure workers' compensation risks directly, but it could               
          reinsure7 the risks of an admitted company, if the admitted                 
          company agreed to "front" the business; i.e., to insure the risks           
          and then reinsure them with Parthenon.  In that event, the States           
          would look to the admitted company for payment of the losses, and           
          the admitted company would look to Parthenon for reimbursement.             
          Accordingly, during March 1978, HCA, Ideal Mutual Insurance Co.             
          (Ideal Mutual), and Parthenon negotiated an arrangement whereby             
          Ideal Mutual agreed to provide workers' compensation insurance to           
          petitioners and Parthenon agreed to reinsure Ideal Mutual on that           

          7  Reinsurance is a contract with a second insurer in which the             
          second insurer agrees to provide coverage of risks that the first           
          insurer has already assumed under an insurance contract with                
          another party.  1 Couch on Insurance 3d, sec. 1:4, at 1-8 to 1-9            
          (1995).                                                                     




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