IHC Health Plans, Inc. - Page 5

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               B.  IHC Health Services, Inc.                                          
               In 1983, IHC transferred its hospitals and substantially all           
          its remaining operating assets, together with substantially all             
          its outstanding tax-exempt debt and other liabilities, to IHC               
          Health Services, Inc. (Health Services), a newly formed nonprofit           
          affiliate.  As a result of this reorganization, IHC ceased to               
          operate hospitals and assumed the position of a parent company              
          overseeing the operations of several nonprofit and for profit               
          affiliates.  IHC was Health Services’ sole member.                          
          Health Services was IHC’s principal health care delivery                    
          organization.  During 1994, Health Services began to conduct its            
          activities through two divisions, the hospital division and the             
          physician division, which are described in detail below.                    
               1.  The Hospital Division                                              
               As of December 31, 1999, the hospital division comprised 22            
          hospitals (including 2,644 licensed beds) located in Utah and               
          Idaho.  All of Health Services’ hospitals, with the exception of            
          Primary Children’s Medical Center (Primary Children’s) and McKay-           
          Dee Institute for Behavioral Medicine (McKay-Dee Institute), were           
          general acute care hospitals that provided inpatient and                    
          outpatient services, and varying levels of emergency, ancillary,            
          and specialized services.                                                   
               Primary Children’s specialized in pediatric care in the                
          Intermountain West (defined generally as the area covering                  

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