Charles A. and Marian L. Derby, et al. - Page 10

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          stays,8 fewer-than-average Caesarian sections, etc.  The UHMG               
          physicians were therefore courted by several HMO and hospital               
          organizations in the area as acquisition targets.                           
               In petitioners' view, the IPA model, which they had adopted            
          in forming UHMG, did not prove to be an especially effective                
          means of preserving the economic viability of their medical                 
          practice in a managed care environment, where the risk of having            
          sicker-than-average patients was shifted from insurers to health            
          care providers.  That was so because, while the IPA arrangement             
          provided a mechanism whereby petitioners could treat patients               
          with HMO coverage, the IPA arrangement did not create a capital             
          pool, or result in sufficient size, to allow for the management,            
          or effective spreading, of the foregoing new risk.  Instead,                
          petitioners believed, effective management of the risk would                
          require that they affiliate with a larger organization.  They               
          also believed that such an affiliation would bring them greater             
          leverage in negotiating capitation rates with HMOs and other                
          insurers.  A final impetus towards affiliation was the                      
          anticipation, by petitioners and other members of the medical               
          community, that managed care would spread and consolidation of              
          healthcare providers would increase as a result of a major effort           

               8  UHMG physicians had pioneered the use of a "hospitalist",           
          i.e., the full-time assignment of a physician from their group to           
          a hospital to oversee the care of hospitalized patients of other            
          UHMG physicians, rather than having each physician individually             
          care for his or her hospitalized patients.                                  

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