Medical Groups Form CMG Insurance Co. for Self Insuring Medical Malpractice

June 23, 2005

HealthCare Partners Medical Group, Bright Medical Associates Inc., Bristol Park Medical Group Inc., and Lakeside Medical Associates, A Medical Group Inc. have formed the California Medical Group Insurance Company, Risk Retention Group (CMG Insurance) to self
insure for medical malpractice.

CMG was approved as a licensed insurer by the Arizona Department of Insurance and approved to do business by the California Department of Insurance effective June 1, 2005.

“CMG Insurance, a risk retention group, allows us to better control our
futures by creating available, stable coverage over the long term,” said
Robert Margolis, MD, CEO of HealthCare Partners. “The new company will also enable us to provide more disciplined underwriting by capturing and acting on better actuarial data.” CMG will provide the medical groups with both professional health care liability and general liability insurance.

According to Matthew Mazdyasni, CFO of HealthCare Partners, the medical group paid approximately $2.6 million in insurance premiums in 2004-2005. “Self insuring in a risk retention group offers better control of premiums and expenses. CMG will conduct analysis and trending and provide us with benchmarking reports. We anticipate that under CMG Insurance, HealthCare Partners will see insurance premium costs reduced by approximately 50%.”

Created under the Federal Liability Risk Retention Act of 1986, CMG
Insurance will be managed by AON Risk Services. It is conservatively capitalized on a one-to-one ratio of premium to surplus and is wholly owned by the four, now self-insured medical groups.

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