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managed care (i.e., care provided by health maintenance
organizations (HMO's)). Prior to April 1990, the Surgery Center
had HMO contracts with 7 HMO's and preferred provider
organizations (PPO's). As of April 1994, the Surgery Center had
contracts with 21 HMO's and PPO's. For the last 6 months of
1993, managed care (i.e., care provided by HMO's and PPO's)
accounted for almost half of the Surgery Center's total facility
invoices. The General Partnership agreement states that Redlands
Hospital agrees to recognize the Surgery Center as an affiliate
for managed care services to the extent legally permissible.
For the last 6 months of 1993, Medicare accounted for about
12 percent of total Surgery Center invoices. Because greater
medical risks attend surgery of older patients, such as the
typical Medicare patient, most Medicare surgeries are performed
in a hospital setting, rather than in a surgery center.
Medicaid reimbursements are substantially below those
provided by Medicare. Medi-Cal is the State of California's
Medicaid program under Federal law. The California Medi-Cal
patient group consists, in large part, of indigents, mothers, and
children. These patients' greatest needs are for emergency room
and obstetrics and gynecology (OB/GYN) medical service. As a
result, this group of patients is more likely to avail themselves
of the emergency room facilities at Redlands Hospital rather than
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