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panel of hospitals including Health Services hospitals and a
limited number of independent hospitals. Petitioner generally
compensated its contractor hospitals pursuant to a modified
diagnosis related group (DRG) payment system under which an
enrollee admitted to a hospital on either an inpatient or
outpatient basis would be assigned a DRG and the hospital would
be paid a fixed fee consistent with the DRG schedule.
Approximately 90 percent of petitioner’s expenditures for
inpatient hospital services and approximately 91 percent of
petitioner’s expenditures for outpatient hospital services were
attributable to services provided by Health Services hospitals.
A substantial portion of petitioner’s enrollees’ admissions
to independent hospitals were for admissions to either University
of Utah Medical Center (UMC) or Davis Hospital and Medical
Center. In particular, Health Services entered into special
contracts with UMC to obtain services from UMC’s: (1)
Intermountain Burn Center (the only certified burn center in the
region); (2) Neuropsychiatric Institute (to provide psychiatric
beds when LDS Hospital temporarily exceeded its inpatient
capacity); and (3) Pain Management Center. Some UMC admissions
were related to a unique relationship between Primary Children’s
Hospital, a Health Services hospital dedicated to acute care
pediatric services, and UMC’s specialized genetic research and
other pediatric-related teaching and research programs. In
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