- 32 -                                         
          coverages of risks above Parthenon's retained limits of                     
          liability.  Final adjustments were made at the end of each year             
          to recalculate the ultimate premium reflected by the actual                 
          number of appropriate exposure units.                                       
               After receiving bills from Parthenon, HCA generally paid the           
          premium amounts in a timely fashion by check or wire transfer               
          and, using the schedules provided by Parthenon's accounting                 
          department described above, charged each hospital its individual            
          premium, determined by application of rates to that hospital's              
          exposure base and adding the hospital's share of the reinsurance            
          premium.                                                                    
               During early 1985, Mr. Klaassen concluded that Parthenon's             
          losses were developing more adversely than originally had been              
          anticipated.  Additionally, Parthenon made certain procedural               
          changes to improve its claims reporting process that had the                
          effect of making actuarial predictions temporarily more                     
          difficult.                                                                  
               Accordingly, on four occasions during 1985 through 1987,               
          Parthenon's consulting actuary advised Parthenon that its                   
          reserves were no longer adequate.  Consequently, HCA paid                   
          Parthenon payments classified by HCA as additional premiums to              
          fund reserve deficiencies.  In each case, the additional amount             
Page:  Previous   22   23   24   25   26   27   28   29   30   31   32   33   34   35   36   37   38   39   40   41   NextLast modified: May 25, 2011