Charles A. and Marian L. Derby, et al. - Page 14

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          corporation of a regional health care system comprising a wide              
          range of inpatient and outpatient clinics as well as acute care             
          hospitals located in Northern California.  Sutter Health had a              
          section 501(c)(3) subsidiary, Sutter Medical Foundation (SMF),              
          that operated group medical practices that were integrated with             
          Sutter Health's affiliated hospitals in an integrated delivery              
          system.  SMF operated its group medical practices through                   
          professional service agreements with groups of local physicians.            
          Sutter Health hoped to expand into the Davis area in 1994 by                
          acquiring a local medical group to integrate with its hospitals             
          in the area.  To accomplish this, Sutter Health envisioned having           
          SMF purchase the assets of local physicians and enter into a                
          professional services agreement with those physicians organized             
          as a medical group.  Acquiring a physician group was important to           
          Sutter Health, as it represented an immediate roster of patients            
          for its clinics and acute care hospitals.11                                 
               Many of the UHMG physicians had privileges at the existing             
          Sutter Health hospital in Davis and had been involved in the                

          individually.  Moreover, Woodland typically required physicians             
          it employed to sign noncompete agreements, and petitioners were             
          unwilling to agree to such restrictions.  The committee                     
          terminated  discussions with U.C.-Davis and Mercy Healthcare for            
          reasons not fully disclosed in the record; at least one UHMG                
          physician believed U.C.-Davis Medical Center was too large and              
               11 SMF was not interested in contracting with physicians               

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