Charles A. and Marian L. Derby, et al. - Page 7

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          Davis area became aware in 1985 that the University of California           
          at Davis (UC-Davis), the largest employer in the region, was                
          considering offering HMO style coverage as a health insurance               
          option for its employees.  In response, a group of Davis area               
          independent physicians, including several of petitioners, began             
          to meet monthly to consider options for dealing with any                    
          significant penetration of the HMO model into the Davis area                
          patient population.                                                         
               B.  Formation of IPA                                                   
               One option for physicians desiring to serve patients with              
          HMO coverage was membership in an independent practice                      
          association (IPA).  An IPA is a collection of independent                   
          physicians formed (typically as a corporate entity) to serve as             
          an intermediary between its member physicians and HMOs.  IPAs               
          negotiate contracts directly with HMOs, administer claims,                  
          collect capitation fees for the HMO patients who select a                   
          physician member, and pay over those fees to the physician                  
               The penetration of the HMO model into the Davis area                   
          continued after 1985.  In 1987, several of petitioners and other            
          local doctors, principally primary care physicians, formed an               
          IPA, the Davis Area Medical Group, Inc., later renamed United               
          Health Medical Group, Inc. (UHMG).6  UHMG negotiated contracts              

               6 By 1994, each petitioner had become a member of UHMG,                

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