IHC Care, Inc. - Page 13




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               Petitioner determined that, from 1985 to April 1994, its fee           
          schedule produced payments to primary care physicians that were             
          20 percent below mid-market rates.  For all physician services,             
          petitioner calculated that its fee schedule represented a                   
          discount (relative to the amount billed) of approximately 14                
          percent in 1993, 20 percent in 1994, 28 percent in 1995, and 33             
          percent in 1996.                                                            
               Between 1985 and 1995, petitioner withheld between 10 and 20           
          percent of its payments to physicians, unless the physicians                
          achieved certain budgetary savings.  In 1996, petitioner                    
          discontinued withholding payments to physicians.                            
               Prior to April 1996, petitioner made incentive payments to             
          physicians who controlled expenses and reduced the cost of                  
          providing health care services to petitioner’s enrollees.                   
          Eligible physicians received incentive payments for years in                
          which petitioner’s actual health care costs were less than its              
          projected costs.                                                            
               Approximately 21 percent of petitioner’s expenditures for              
          physician services was attributable to services provided by                 
          physicians employed by Health Services.  The remaining 79 percent           
          of such expenditures was attributable to services provided by               
          independent physicians.                                                     
               Petitioner fulfilled its obligation to arrange for its                 
          enrollees to receive hospital services by contracting with a                






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