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Geisinger HMO arranged for its enrollees to receive hospital
services by contracting for such services with other Geisinger
entities (Geisinger hospitals and outpatient clinics that were
recognized as exempt organizations) and independent hospitals.
Geisinger HMO arranged for its enrollees to receive physician
services by contracting for such services with Clinic--a
tax-exempt Geisinger affiliate. Clinic provided physician
services through a combination of 400 staff physicians and by
contracting with independent physicians for their services.
Geisinger HMO was organized as a separate entity to avoid
regulatory difficulties and to simplify operations from an
organizational and managerial standpoint.
Geisinger HMO offered enrollment to groups (with a minimum
of 100 eligible enrollees) and individuals (and certain
dependents) residing in 17 of the 27 counties in which the
Geisinger system operated. Individual enrollees were required to
be at least 18 years of age. Individual enrollees were required
to complete a medical questionnaire, whereas group enrollees were
not subject to this requirement. All enrollees generally paid
the same premium based on a community rating system. During the
period in question, Geisinger HMO had approximately 71,000
individual and group enrollees.
Geisinger HMO also enrolled slightly more than 1,000
Medicare recipients at a reduced rate under a “wraparound” plan
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