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in the event that petitioner achieved a budget surplus, the
physicians may have qualified to receive additional payments.
However, in the event petitioner experienced a budget deficit,
the physicians did not incur any additional financial obligation.
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
members of independent physician medical groups.
Petitioner fulfilled its obligation to arrange for its
enrollees to receive hospital services by contracting with a
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
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