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formed medical group would then affiliate with a larger
organization seeking to acquire group practices. A "steering
committee" of six UHMG physicians was formed for purposes of
exploring an affiliation. Letters announcing the physicians'
interest in forming a medical group and affiliating with a larger
organization were sent to five potential acquirers: U.C.-Davis
Medical Center, Foundation Health Corp., Woodland Clinic, Mercy
Healthcare of Sacramento, and Sutter Health, all of which were
seeking to acquire or affiliate with medical practices.
B. Rejection of Foundation Health Corp. Affiliation
The steering committee met and negotiated with
representatives of the foregoing entities and recommended that
the group affiliate with Foundation Health Corp. (Foundation).
Foundation was an HMO operated for profit and publicly traded; it
had embarked on a course of becoming a "Kaiser model" HMO; i.e.,
one that acquired medical practices as a means of expanding its
patient base or "market share" in California. Foundation had
offered what steering committee members believed was the most
generous financial consideration, including substantial cash
payments for the intangible assets, or goodwill, associated with
the UHMG physicians' practices. Foundation considered the UHMG
physicians more valuable to it as a medical group (rather than
individual practices) because its experience had shown that
existing working arrangements between physicians, such as call
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