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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark one)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2011.

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from 
to

Commission file number: 001-33930





IPC THE
HOSPITALIST COMPANY, INC.

(Exact name of registrant as specified in its charter)







|                                                                 |  |                                     
|---------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                         |  | 95-4562058                          
|(State or other jurisdiction of
incorporation or organization)   |  | (I.R.S. Employer Identification No.)
|                                                                 | 
|4605 Lankershim Boulevard, Suite 617
North Hollywood, California |  | 91602                               
|(Address of principal executive offices)                         |  | (Zip code)                          

Registrants telephone number, including area code: (888) 447-2362





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

As of April 20, 2011, there were 16,368,624 shares of the registrants common stock, $0.001 par value, outstanding.









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##### Table of Contents

IPC The Hospitalist Company, Inc.

FORM 10-Q

QUARTERLY REPORT

TABLE OF CONTENTS





|              |  |                                                                                       |    |  |    | 
|------------- |  | ------------------------------------------------------------------------------------- | -- |  | -- | 
|              |  | Page                                                                                  |   
|              | 
|PART I        |  |                                                                                       |    | 
|              |  |                                                                                      
|Item 1        |  | Consolidated Financial Statements (unaudited)                                         |    |  |    | 
|              |  | Consolidated Balance Sheets  March 31, 2011 and December 31, 2010                    |    |  | 3  | 
|              |  | Consolidated Statements of Income  Three months ended March 31, 2011 and 2010        |    |  | 4  | 
|              |  | Consolidated Statements of Cash Flows  Three months ended March 31, 2011 and 2010    |    |  | 5  | 
|              |  | Notes to Consolidated Financial Statements                                            |    |  | 6  | 
|Item 2        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |    |  | 15 | 
|Item 3        |  | Quantitative and Qualitative Disclosures about Market Risk                            |    |  | 19 | 
|Item 4        |  | Controls and Procedures                                                               |    |  | 19 | 
|              |  |                                                                                      
|              |  | PART II                                                                               |    |  |    | 
|              |  |                                                                                      
|Item 1        |  | Legal Proceedings                                                                     |    |  | 20 | 
|Item 6        |  | Exhibits                                                                              |    |  | 20 | 
|              | 
|Signatures    |  |                                                                                       | 21 | 
|Exhibit Index |  |                                                                                       | 22 | 

Note: Items 1A, 2, 3,
4 and 5 of Part II are omitted because they are not applicable.



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

IPC The Hospitalist Company, Inc.

Consolidated Balance Sheets

(dollars in thousands, except for share data)



|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- |  | ---------------- | - | ------- | 
|                                                                                                                                                                            |  | March 31,2011 |         |  | December 31,2010 |  
|                                                                                                                                                                            |  | (Unaudited)   |         |  | (Adjusted)       |  
|Assets                                                                                                                                                                      |  |               |         |  |                  |   |         | 
|Current assets:                                                                                                                                                             |  |               |         |  |                  |   |         | 
|Cash and cash equivalents                                                                                                                                                   |  | $             | 18,315  |  |                  | $ | 18,935  | 
|Accounts receivable, net                                                                                                                                                    |  |               | 69,369  |  |                  |   | 54,161  | 
|Insurance receivable for malpractice claims - current portion, net                                                                                                          |  |               | 7,086   |  |                  |   | 6,491   | 
|Prepaid expenses and other current assets, net                                                                                                                              |  |               | 7,808   |  |                  |   | 9,672   | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total current assets                                                                                                                                                        |  |               | 102,578 |  |                  |   | 89,259  | 
|Property and equipment, net                                                                                                                                                 |  |               | 4,140   |  |                  |   | 4,100   | 
|Goodwill                                                                                                                                                                    |  |               | 154,043 |  |                  |   | 149,289 | 
|Other intangible assets, net                                                                                                                                                |  |               | 2,164   |  |                  |   | 2,282   | 
|Deferred tax assets, net                                                                                                                                                    |  |               | 2,323   |  |                  |   | 2,323   | 
|Insurance receivable for malpractice claims - less current portion, net                                                                                                     |  |               | 12,801  |  |                  |   | 11,725  | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total assets                                                                                                                                                                |  | $             | 278,049 |  |                  | $ | 258,978 | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|                                                                                                                                                                            |  |              
|Liabilities and Stockholders Equity                                                                                                                                        |  |               |         |  |                  |   |         | 
|Current liabilities:                                                                                                                                                        |  |               |         |  |                  |   |         | 
|Accounts payable and accrued liabilities                                                                                                                                    |  | $             | 6,378   |  |                  | $ | 3,708   | 
|Accrued compensation                                                                                                                                                        |  |               | 23,072  |  |                  |   | 19,472  | 
|Payables for practice acquisitions                                                                                                                                          |  |               | 27,915  |  |                  |   | 27,715  | 
|Medical malpractice and self-insurance reserves, current portion                                                                                                            |  |               | 7,706   |  |                  |   | 6,940   | 
|Deferred tax liabilities                                                                                                                                                    |  |               | 784     |  |                  |   | 784     | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total current liabilities                                                                                                                                                   |  |               | 65,855  |  |                  |   | 58,619  | 
|Medical malpractice and self-insurance reserves, less current portion                                                                                                       |  |               | 27,747  |  |                  |   | 25,871  | 
|Other Long-term liabilities                                                                                                                                                 |  |               | 23      |  |                  |   | 23      | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total liabilities                                                                                                                                                           |  |               | 93,625  |  |                  |   | 84,513  | 
|Stockholders equity:                                                                                                                                                       |  |               |         |  |                  |   |         | 
|Preferred stock, $0.001 par value, 15,000,000 shares authorized, none issued                                                                                                |  |               |        |  |                  |   |        | 
|Common stock, $0.001 par value, 50,000,000 shares authorized, 16,353,047 and 16,287,377 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively |  |               | 16      |  |                  |   | 16      | 
|Additional paid-in capital                                                                                                                                                  |  |               | 132,901 |  |                  |   | 130,661 | 
|Retained earnings                                                                                                                                                           |  |               | 51,507  |  |                  |   | 43,788  | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total stockholders equity                                                                                                                                                  |  |               | 184,424 |  |                  |   | 174,465 | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 
|Total liabilities and stockholders equity                                                                                                                                  |  | $             | 278,049 |  |                  | $ | 258,978 | 
|                                                                                                                                                                            |  |               |         |  |                  |   |         | 

The accompanying notes are an integral part of these consolidated financial statements.



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IPC The Hospitalist Company, Inc.

Consolidated Statements of Income

(dollars in thousands, except for per share data)

(unaudited)



|                                                                 |  |                              |         |   |      |   |        |  
|---------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | -
|                                                                 |  | Three Months Ended March 31, |        
|                                                                 |  | 2011                         |         |   | 2010 |  
|Net revenue                                                      |  | $                            | 113,387 |   |      | $ | 87,704 |  
|Operating expenses:                                              |  |                              |         |   |      |   |        |  
|Cost of servicesphysician practice salaries, benefits and other |  |                              | 82,097  |   |      |   | 63,660 |  
|General and administrative                                       |  |                              | 17,775  |   |      |   | 13,980 |  
|Net change in fair value of contingent consideration             |  |                              | 292     |   |      |   | 13     |  
|Depreciation and amortization                                    |  |                              | 755     |   |      |   | 623    |  
|                                                                 |  |                              |         |   |      |   |        |  
|Total operating expenses                                         |  |                              | 100,919 |   |      |   | 78,276 |  
|                                                                 |  |                              |         |   |      |   |        |  
|Income from operations                                           |  |                              | 12,468  |   |      |   | 9,428  |  
|Investment income                                                |  |                              | 5       |   |      |   | 3      |  
|Interest expense                                                 |  |                              | (22     | ) |      |   | (22    | )
|                                                                 |  |                              |         |   |      |   |        |  
|Income before income taxes                                       |  |                              | 12,451  |   |      |   | 9,409  |  
|Income tax provision                                             |  |                              | 4,732   |   |      |   | 3,670  |  
|                                                                 |  |                              |         |   |      |   |        |  
|Net income                                                       |  | $                            | 7,719   |   |      | $ | 5,739  |  
|                                                                 |  |                              |         |   |      |   |        |  
|Net income per share:                                            |  |                              |         |   |      |   |        |  
|Basic                                                            |  | $                            | 0.47    |   |      | $ | 0.35   |  
|                                                                 |  |                              |         |   |      |   |        |  
|Diluted                                                          |  | $                            | 0.46    |   |      | $ | 0.35   |  
|                                                                 |  |                              |         |   |      |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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IPC The Hospitalist Company, Inc.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)



|                                                                                  |  |                              |         |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                  |  | Three Months Ended March 31, |        
|                                                                                  |  | 2011                         |         |   | 2010 |  
|Operating activities                                                              |  |                              |         |   |      |   |        |  
|Net income                                                                        |  | $                            | 7,719   |   |      | $ | 5,739  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         |   |      |   |        |  
|Depreciation and amortization                                                     |  |                              | 755     |   |      |   | 623    |  
|Stock-based compensation expense                                                  |  |                              | 992     |   |      |   | 679    |  
|Net change in fair value of contingent consideration                              |  |                              | 292     |   |      |   | 13     |  
|Changes in assets and liabilities:                                                |  |                              |         |   |      |   |        |  
|Accounts receivable                                                               |  |                              | (15,208 | ) |      |   | (2,016 | )
|Prepaid expenses and other current assets                                         |  |                              | 1,864   |   |      |   | 2,900  |  
|Accounts payable and accrued liabilities                                          |  |                              | 2,670   |   |      |   | 1,995  |  
|Accrued compensation                                                              |  |                              | 3,600   |   |      |   | 1,951  |  
|Medical malpractice and self-insurance reserves, net                              |  |                              | 971     |   |      |   | 227    |  
|Accrued professional liability settlement                                         |  |                              |        |   |      |   | (750   | )
|                                                                                  |  |                              |         |   |      |   |        |  
|Net cash provided by operating activities                                         |  |                              | 3,655   |   |      |   | 11,361 |  
|                                                                                  |  |                              |         |   |      |   |        |  
|                                                                                  |  |                             
|Investing activities                                                              |  |                              |         |   |      |   |        |  
|Acquisitions of physician practices                                               |  |                              | (4,965  | ) |      |   | (2,555 | )
|Purchase of property and equipment                                                |  |                              | (558    | ) |      |   | (852   | )
|                                                                                  |  |                              |         |   |      |   |        |  
|Net cash used in investing activities                                             |  |                              | (5,523  | ) |      |   | (3,407 | )
|                                                                                  |  |                              |         |   |      |   |        |  
|                                                                                  |  |                             
|Financing activities                                                              |  |                              |         |   |      |   |        |  
|Net proceeds from issuance of common stock                                        |  |                              | 1,045   |   |      |   | 752    |  
|Excess tax benefits from stock-based compensation                                 |  |                              | 203     |   |      |   | 179    |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net cash provided by financing activities                                         |  |                              | 1,248   |   |      |   | 931    |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net (decrease) increase in cash and cash equivalents                              |  |                              | (620    | ) |      |   | 8,885  |  
|Cash and cash equivalents, beginning of period                                    |  |                              | 18,935  |   |      |   | 31,473 |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                          |  | $                            | 18,315  |   |      | $ | 40,358 |  
|                                                                                  |  |                              |         |   |      |   |        |  
|                                                                                  |  |                             
|Supplemental disclosure of cash flow information                                  |  |                              |         |   |      |   |        |  
|Cash paid for:                                                                    |  |                              |         |   |      |   |        |  
|Interest                                                                          |  | $                            | 22      |   |      | $ | 22     |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Income taxes                                                                      |  | $                            | 971     |   |      | $ | 147    |  
|                                                                                  |  |                              |         |   |      |   |        |  
|                                                                                  |  |                             
|Acquisitions of physician practices consisted of the following:                   |  |                              |         |   |      |   |        |  
|Acquired assets - goodwill, intangible and other                                  |  | $                            | 4,873   |   |      | $ | 1,373  |  
|Net decrease in payables for practice acquisitions                                |  |                              | 92      |   |      |   | 1,182  |  
|                                                                                  |  |                              |         |   |      |   |        |  
|Net cash paid for acquisitions                                                    |  | $                            | 4,965   |   |      | $ | 2,555  |  
|                                                                                  |  |                              |         |   |      |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



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IPC The Hospitalist Company, Inc.

Notes to the Consolidated Financial Statements

(Unaudited)

March 31, 2011

Note 1. Operations and Significant Accounting Policies

Business

IPC The Hospitalist Company, Inc. and its wholly-owned
subsidiaries (the Company, IPC, we, us, and our) is a national physician group practice company that operates and manages full-time hospitalist practices. Hospitalists are acute-care
physician specialists, who focus on a patients hospital care from time of admission to discharge and have no outpatient responsibilities. Hospitalists practice exclusively in hospitals or other inpatient facilities, including acute, sub-acute
and long-term care settings. The physicians are primarily full-time employees of our subsidiaries or consolidated professional medical corporations (the Professional Medical Corporations), although part-time and temporary physicians are also
employed or contracted on an as-needed basis. Also, unless otherwise expressly stated or the context otherwise requires, our affiliated hospitalists refer to physicians, nurse practitioners and physician assistants employed or contracted
by either our wholly-owned subsidiaries or our Professional Medical Corporations. References to practices or practice groups refer to our Professional Medical Corporations and the wholly-owned subsidiaries of IPC that provide
medical services, unless otherwise expressly stated or the context otherwise requires.

We prepared the accompanying unaudited
consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) on the same basis as our audited annual financial statements. In our opinion, these financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial information set forth therein. Certain information and footnote disclosures normally included in financial statements prepared in accordance with
U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations, although we believe that the following disclosures, when read in conjunction with the audited consolidated financial
statements and notes thereto as of December 31, 2010, are adequate to make the information presented not misleading. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 2010 filed with the SEC on March 7, 2011.

Principles of
Consolidation

Our consolidated financial statements include the accounts of IPC The Hospitalist Company, Inc. and its
wholly owned subsidiaries and the Professional Medical Corporations managed under long-term management agreements. Some states have laws that prohibit business entities, such as IPC, from practicing medicine, employing physicians to practice
medicine, exercising control over medical decisions by physicians (collectively known as the corporate practice of medicine), or engaging in certain arrangements with physicians, such as fee-splitting. In states that have these restrictions, we
operate by maintaining long-term management contracts with the Professional Medical Corporations, which are each owned and operated by physicians, and which employ or contract with additional physicians to provide hospitalist services. Under the
management agreements, we provide and perform all non-medical management and administrative services, including financial management, information systems, marketing, risk management and administrative support. The management agreements have an
initial term of 20 years and are automatically renewable for successive 10-year periods unless terminated by either party for cause. The management agreements are not terminable by the Professional Medical Corporations, except in the case of gross
negligence, fraud, or other illegal acts by us, or bankruptcy of IPC.

Through the management agreements and our relationship
with the stockholders of the Professional Medical Corporations, we have exclusive authority over all non-medical decision making related to the ongoing business operations of the Professional Medical Corporations. Further, our rights under the
management agreements are unilaterally salable or transferable. Based on the provisions of the agreements, we have determined that the Professional Medical Corporations are variable interest entities (VIEs), and that we are the primary
beneficiary because we have control over the operations of these VIEs. Consequently, we consolidate the revenue and expenses of the Professional Medical Corporations from the date of execution of the management agreements. All intercompany
balances and transactions have been eliminated in consolidation.



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Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions of the fair value of certain
reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the financial statements are prepared. Significant estimates include the estimated net realizable value of accounts receivable, medical malpractice
insurance receivable and payable for known claims, liabilities for claims incurred but not reported (IBNR) related to medical malpractice, fair value of contingent consideration related to business combinations and the analysis of goodwill for
impairment.

The process of estimating these assets and liabilities involves judgment decisions, which are subject to an
inherent degree of uncertainty. Actual results could differ from those estimates. The results of operations for the current interim period are not necessarily indicative of the results for the entire year ending December 31, 2011.

Fair Value of Financial Instruments

Our consolidated balance sheets as of March 31, 2011 included the following financial instruments: cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities. We
consider the carrying amounts of these financial instruments to approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

Accounts Receivable and Concentration of Credit Risk

For the three months ended March 31, 2011 and 2010, total patient volume consisted of the following percentage that was from Medicare
and Medicaid programs:



|                               |  |                              |  |     
|------------------------------ |  | ---------------------------- |  | ----
|                               |  | Three Months Ended March 31,
|                               |  | 2011                         |  | 2010
|Medicare and Medicaid patients |  | 52%                          |  | 51% 

Our accounts
receivable are stated at the amounts expected to be collected. Except with respect to the Medicare and Medicaid programs, concentrations of credit risk, which consist primarily of accounts receivable, is limited due to the large number of payors
that compose our diverse payor mix and patient base. Accounts receivable from Medicare and Medicaid made up the following percentage of total net accounts receivable:



|                                                     |  |               |  |                 
|---------------------------------------------------- |  | ------------- |  | ----------------
|                                                     |  | March 31,2011 |  | December 31,2010
|Percentage of receivables from Medicare and Medicaid |  | 39%           |  | 37%             

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.



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Note 2. Recently Adopted Accounting Principles

In August 2010, the FASB issued revised GAAP on the presentation of insurance claims and related insurance recoveries. The revised GAAP
requires a healthcare entity to present medical malpractice claims and similar liabilities without consideration of insurance recoveries. Related insurance recoveries are to be presented as a receivable net of a valuation allowance for uncollectible
amounts. On January 1, 2011, we adopted the revised GAAP to separately present reserves for known malpractice claims and receivables for the related insurance recoveries on an undiscounted basis based upon actuarial loss projections using our
historical loss experience. We also elected to retroactively apply the revised GAAP to 2010 for comparability. The retroactive application of this revised GAAP changed our consolidated balance sheet as of December 31, 2010, but had no impact on
our 2010 consolidated statements of income and cash flows.

The following table summarizes the increases to our assets and
liabilities as a result of our adoption of the revised GAAP (in thousands).



|                                                                                                                                             |  |               |        |  |                  |   |        | 
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                                                                                                                             |  | March 31,2011 |        |  | December 31,2010 |  
|Assets:                                                                                                                                      |  |               |        |  |                  |   |        | 
|Insurance receivable for malpractice claims - current portion, net                                                                           |  | $             | 7,086  |  |                  | $ | 6,491  | 
|Insurance receivable for malpractice claims - less current portion, net                                                                      |  |               | 12,801 |  |                  |   | 11,725 | 
|                                                                                                                                             |  |               |        |  |                  |   |        | 
|Total                                                                                                                                        |  | $             | 19,887 |  |                  | $ | 18,216 | 
|                                                                                                                                             |  |               |        |  |                  |   |        | 
|                                                                                                                                             |  |              
|Liabilities:                                                                                                                                 |  |               |        |  |                  |   |        | 
|Medical malpractice claims reserve, current portion (included in medical malpractice and self-insurance reserves, current
portion)           |  | $             | 7,086  |  |                  | $ | 6,491  | 
|Medical malpractice claims reserve, less current portion (included in medical malpractice and self-insurance reserves, less
current portion) |  |               | 12,801 |  |                  |   | 11,725 | 
|                                                                                                                                             |  |               |        |  |                  |   |        | 
|Total                                                                                                                                        |  | $             | 19,887 |  |                  | $ | 18,216 | 
|                                                                                                                                             |  |               |        |  |                  |   |        | 

Note 3. Acquisitions

In connection with the acquisition of hospitalist physician practices, we generally record goodwill and other identifiable intangible assets consisting of physician and hospital agreements. The results of
operations of the acquired practices are included in the consolidated financial statements from the date of acquisition. In addition to the initial consideration paid at the close of these transactions, the asset purchase agreements generally
provide for future consideration to be paid based upon the achievement of certain operating results of the acquired practices as of certain measurement dates. These additional payments are not contingent upon the future employment of the sellers.
The estimated fair value of additional future consideration is recognized at the acquisition-date. Subsequent changes, if any, to the acquisition-date fair value are recognized as part of on-going operations.

During the three months ended March 31, 2011, we completed the acquisition of assets of three hospitalist physician practices. In
addition to the initial consideration paid at the close of these transactions, the asset purchase agreements provide for additional consideration to be paid generally after the first year of operation, based upon the future operating results of the
acquired practices, as defined in each purchase agreement. For the latest practice acquisition completed in late March 2011, an estimate of the contingent consideration was recorded on a provisional basis, pending completion of the valuation study.



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The following table summarizes the total amounts recorded during the three months ended
March 31, 2011, related to the acquisition of hospitalist practices (dollars in thousands):



|                                                        |  |   |        |  
|------------------------------------------------------- |  | - | ------ | -
|Acquired assets  paid and accrued:                     |  |   |        |  
|Goodwill                                                |  | $ | 4,754  |  
|Other intangible assets                                 |  |   | 119    |  
|                                                        |  |   |        |  
|Total acquired assets                                   |  |   | 4,873  |  
|                                                        |  |   |        |  
|Cash paid for acquisitions:                             |  |   |        |  
|2011 transactions                                       |  |   | (3,196 | )
|Contingent consideration                                |  |   | (1,513 | )
|Other - prior year transactions                         |  |   | (256   | )
|                                                        |  |   |        |  
|Total cash paid for acquisitions                        |  |   | (4,965 | )
|                                                        |  |   |        |  
|Decrease in payables for practice acquisitions          |  |   | (92    | )
|Net change in fair value of contingent consideration    |  |   | 292    |  
|                                                        |  |   |        |  
|Net change in payables for practice acquisitions        |  |   | 200    |  
|Payables for practice acquisitions, beginning of period |  |   | 27,715 |  
|                                                        |  |   |        |  
|Payables for practice acquisitions, end of period       |  | $ | 27,915 |  
|                                                        |  |   |        |  

Note 4. Debt

Our amended and restated loan agreement (Credit Facility) provides a revolving line of credit of $30.0 million, with a sublimit of $5.0 million for the issuance of letters of credit. The Credit Facility
has a maturity date of September 15, 2011. The Credit Facility is available for working capital, practice acquisitions and capital expenditures. As of March 31, 2011, we had a letter of credit of $0.1 million outstanding and $29.9
million available under the revolving line of credit.

The revolving line of credit is limited by a formula based on a certain
multiple times the trailing twelve months of earnings before interest, taxes, depreciation, amortization and certain non-cash items. Borrowings under the Credit Facility bear interest at a rate, based on either LIBOR plus 1.5% to 2.0%, or the
lenders prime rate, as selected by us for each advance. We pay an unused commitment fee equal to 0.25% per annum on the difference between the revolving line capacity and the average balance outstanding during the year. Outstanding
amounts advanced to us under the revolving line of credit are repayable on or before the maturity date.

The Credit Facility
is secured by all of our current and future personal and intellectual property assets, except those held subject to purchase money loans and capital leases. The Credit Facility includes various customary financial covenants and restrictions, as well
as customary remedies for our lenders following an event of default. As of March 31, 2011, we were in compliance with such financial covenants and restrictions.

Note 5. Medical Malpractice Liability Insurance

We maintain medical
malpractice insurance coverage that indemnifies us and our employed health care professionals on a claims-made basis. Our claims-made coverage covers those claims reported during the policy period on a first dollar coverage up to our policy limits
on new claims reported during the policy period. In December 2010, we renewed our annual professional liability insurance policy for 2011 effective January 1, 2011 under the same terms as our 2010 policy. We expect to be able to continue to
obtain coverage in future years; however, there can be no assurance that we will obtain substantially similar coverage as is provided under the 2011 policy at acceptable costs and on favorable terms upon expiration.

We record reserves for claims incurred but not reported (IBNR) on an undiscounted basis based upon actuarial loss projections using our
historical loss experience. On January 1, 2011, we adopted the revised GAAP which requires us to separately present reserves for known malpractice claims and receivables for related insurance recoveries on an undiscounted basis based upon
actuarial loss projections using our historical loss experience. We also elected to retroactively apply the revised GAAP to 2010 for comparability purpose. The retroactive application of this revised GAAP changed our consolidated balance sheet as of
December 31, 2010, but had no impact on our 2010 consolidated statements of income and cash flows.



9



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##### Table of Contents

Total accrued medical malpractice reserves and related insurance receivables were as follows
(in thousands):



|                  |  |                     |        |  |                   |   |        |             |  |  |                  |  |  |                     |        |  |               |   |        |             |  |   |                  |  |  |  |        |  |  |  |        | 
|----------------- |  | ------------------- | ------ |  | ----------------- | - | ------ | ----------- |  |  | ---------------- |  |  | ------------------- | ------ |  | ------------- | - | ------ | ----------- |  | - | ---------------- |  |  |  | ------ |  |  |  | ------ | 
|                  |  | March 31, 2011      |        |  | December 31, 2010 |  
|                  |  | Assets              |        |  | Liabilities       |   |        | Assets      |  |  | Liabilities      | 
|                  |  | InsuranceReceivable |        |  | ClaimsReserve     |   |        | IBNRReserve |  |  | TotalLiabilities |  |  | InsuranceReceivable |        |  | ClaimsReserve |   |        | IBNRReserve |  |   | TotalLiabilities | 
|Current Portion   |  | $                   | 7,086  |  |                   | $ | 7,132  |             |  |  | 574              |  |  |                     | 7,706  |  |               | $ | 6,491  |             |  | $ | 6,597            |  |  |  | 343    |  |  |  | 6,940  | 
|Long-term Portion |  |                     | 12,801 |  |                   |   | 12,801 |             |  |  | 14,946           |  |  |                     | 27,747 |  |               |   | 11,725 |             |  |   | 11,725           |  |  |  | 14,146 |  |  |  | 25,871 | 
|                  |  |                     |        |  |                   |   |        |             |  |  |                  |  |  |                     |        |  |               |   |        |             |  |   |                  |  |  |  |        |  |  |  |        | 
|Total             |  | $                   | 19,887 |  |                   | $ | 19,933 |             |  |  | 15,520           |  |  |                     | 35,453 |  |               | $ | 18,216 |             |  | $ | 18,322           |  |  |  | 14,489 |  |  |  | 32,811 | 
|                  |  |                     |        |  |                   |   |        |             |  |  |                  |  |  |                     |        |  |               |   |        |             |  |   |                  |  |  |  |        |  |  |  |        | 

Note 6. Income Taxes

Following are the income tax provisions and effective tax rates for the three months ended March 31, 2011 and 2010 (dollars in thousands):



|                     |  |                              |       |   |      |   |       |  
|-------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                     |  | Three Months Ended March 31, |      
|                     |  | 2011                         |       |   | 2010 |  
|Income tax provision |  | $                            | 4,732 |   |      | $ | 3,670 |  
|                     |  |                              |       |   |      |   |       |  
|Effective tax rate   |  |                              | 38.0  | % |      |   | 39.0  | %
|                     |  |                              |       |   |      |   |       |  

The decrease in the effective tax rate in 2011 reflects a change in our effective state tax rate. The
effective tax rates differ from the statutory U.S. federal income tax rate of 35.0% due primarily to state income taxes.

Our
accounting policy is to include interest and penalties related to income tax liabilities in income tax expense. As of March 31, 2011, we had accrued a total of $10,000 for estimated interest and penalties related to uncertain tax positions.

The tax years 2006 to 2009 remain open to examination by the major taxing jurisdictions to which we are subject. The statute
of limitations for tax years 1997 to 2005 has expired, except that the tax years 1997 to 2002 are subject to adjustment of net operating losses by the Internal Revenue Service. We are subject to taxation in the United States and various state
jurisdictions. We are not aware of any notices of examination by any taxing authorities.

We make our best estimate of
the tax rate expected to be applicable for the full fiscal year. The rate so determined is used to compute our income taxes expense for an interim period.

Note 7. Stock-Based Compensation

At March 31, 2011, we had a
stock-based employee compensation program, for which we had reserved a total of 3,406,779 common shares for issuance. In accordance with our Equity Participation Plan (Equity Plan), for each calendar year until 2013, the number of shares authorized
for issuance under our Equity Plan will increase in an amount equal to 2.5% of the total number of shares of our common stock outstanding at the close of the first trading day of each year. Pursuant to our Equity Plan, the available shares of our
common stock for issuance were increased by 407,921 on January 3, 2011. As of March 31, 2011, there were 236,529 shares of our common stock available for issuance under our Equity Plan.

The options under our Equity Plan generally vest over a four-year period from date of grant, and terminate on the 10th anniversary of the
agreement date. Restricted stock awards generally vest over a four-year period from date of the award.

All options and
restricted stock awards granted during the three months ended March 31, 2011 were issued with exercise prices equal to the closing price of our common stock on the NASDAQ Global Select Market on the dates of the grant.



10



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##### Table of Contents

Stock-based compensation expense is recognized when the options and restricted stock awards
are vested, and is included in total general and administrative expenses as follows (in thousands):



|                                 |  |                              |     |  |      |   |     | 
|-------------------------------- |  | ---------------------------- | --- |  | ---- | - | --- | 
|                                 |  | Three months ended March 31, |    
|                                 |  | 2011                         |     |  | 2010 |  
|Stock-based compensation expense |  | $                            | 992 |  |      | $ | 679 | 
|                                 |  |                              |     |  |      |   |     | 

As of March 31, 2011, there was $12,181,000 of total unrecognized compensation cost related to
non-vested stock-based compensation arrangements granted under our Equity Plan, which is expected to be recognized over a weighted-average period of 3.2 years.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model based on the following weighted-average assumptions:

The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues. The expected
volatility is based on historical volatility levels of our public company peer group and the volatility of our stock price since our initial public offering in January 2008. The expected option life of each award granted was calculated using the
simplified method in accordance with GAAP.

The grant date fair value of each restricted stock award is based on
the closing stock price on the grant date of the award as reported by NASDAQ Global Select Market.

The following table
summarizes the option activities in our Equity Plan during the three months ended March 31, 2011.



|                                            |  |        |           |   |                                |   |       |                                          |  |  |                         |  |  |                           |        |  |  |   |       | 
|------------------------------------------- |  | ------ | --------- | - | ------------------------------ | - | ----- | ---------------------------------------- |  |  | ----------------------- |  |  | ------------------------- | ------ |  |  | - | ----- | 
|                                            |  | Shares |           |   | Weighted-AverageExercise Price |   |       | Weighted-AverageRemainingContractualTerm |  |  | AggregateIntrinsicValue |  |  | WeightedAverage FairValue |       
|                                            |  |        |           |   |                                |   |       | (Years)                                  |  |  | (in 000)               |  |  |                           |       
|Options outstanding as of December 31, 2010 |  |        | 1,309,525 |   |                                | $ | 18.92 |                                          |  |  |                         |  |  |                           |        |  |  | $ | 8.10  | 
|Changes during period:                      |  |        |           |   |                                |   |       |                                          |  |  |                         |  |  |                           |        |  |  |   |       | 
|Granted                                     |  |        | 358,250   |   |                                |   | 45.33 |                                          |  |  |                         |  |  |                           |        |  |  |   | 19.25 | 
|Exercised                                   |  |        | (17,263   | ) |                                |   | 10.12 |                                          |  |  |                         |  |  |                           |        |  |  |   | 4.61  | 
|Forfeited                                   |  |        | (222      | ) |                                |   | 2.62  |                                          |  |  |                         |  |  |                           |        |  |  |   | 1.18  | 
|                                            |  |        |           |   |                                |   |       |                                          |  |  |                         |  |  |                           |        |  |  |   |       | 
|Options outstanding as of March 31, 2011    |  |        | 1,650,290 |   |                                | $ | 24.75 |                                          |  |  | 8.05                    |  |  | $                         | 34,251 |  |  |   | 10.56 | 
|                                            |  |        |           |   |                                |   |       |                                          |  |  |                         |  |  |                           |        |  |  |   |       | 
|Options exercisable as of March 31, 2011    |  |        | 784,904   |   |                                | $ | 16.20 |                                          |  |  | 7.10                    |  |  | $                         | 22,929 |  |  |   | 6.84  | 
|                                            |  |        |           |   |                                |   |       |                                          |  |  |                         |  |  |                           |        |  |  |   |       | 



11



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##### Table of Contents

The following table summarizes the restricted stock award activities in our Equity Plan
during the three months ended March 31, 2011.



|                                                            |  |        |        |   |                                          |  |      |                         |  |   |                           |  |  |   |       | 
|----------------------------------------------------------- |  | ------ | ------ | - | ---------------------------------------- |  | ---- | ----------------------- |  | - | ------------------------- |  |  | - | ----- | 
|                                                            |  | Shares |        |   | Weighted-AverageRemainingContractualTerm |  |      | AggregateIntrinsicValue |  |   | WeightedAverageFair Value | 
|                                                            |  |        |        |   | (Years)                                  |  |      | (in 000 )              |  |   |                           | 
|Restricted stock awards outstanding as of December 31, 2010 |  |        | 6,473  |   |                                          |  |      |                         |  |   |                           |  |  | $ | 21.63 | 
|Changes during period:                                      |  |        |        |   |                                          |  |      |                         |  |   |                           |  |  |   |       | 
|Granted                                                     |  |        | 19,608 |   |                                          |  |      |                         |  |   |                           |  |  |   | 45.54 | 
|Released                                                    |  |        | (1,057 | ) |                                          |  |      |                         |  |   |                           |  |  |   | 23.65 | 
|                                                            |  |        |        |   |                                          |  |      |                         |  |   |                           |  |  |   |       | 
|Restricted stock awards outstanding as of March 31, 2011    |  |        | 25,024 |   |                                          |  | 3.25 |                         |  | $ | 1,136                     |  |  |   | 40.28 | 
|                                                            |  |        |        |   |                                          |  |      |                         |  |   |                           |  |  |   |       | 

Note 8. Earnings Per Share

Basic net income per share is calculated by dividing net income for the period by the weighted-average number of common shares outstanding during the period. Diluted net income per share is calculated by
dividing net income for the period by the weighted average number of shares outstanding during the period plus the dilutive effect of our outstanding stock awards and shares issuable under our employee stock purchase plan using the treasury stock
method.

The calculations of basic and diluted net income per share for the three months ended March 31, 2011 and 2010
are as follows (dollars in thousands, except for per share data):



|                                                                                 |  |                             |            |  |      |   |            | 
|-------------------------------------------------------------------------------- |  | --------------------------- | ---------- |  | ---- | - | ---------- | 
|                                                                                 |  | Three Months
EndedMarch 31, |           
|                                                                                 |  | 2011                        |            |  | 2010 |  
|Basic:                                                                           |  |                             |            |  |      |   |            | 
|Net income                                                                       |  | $                           | 7,719      |  |      | $ | 5,739      | 
|                                                                                 |  |                             |            |  |      |   |            | 
|Weighted average number of common shares outstanding                             |  |                             | 16,323,125 |  |      |   | 16,220,128 | 
|                                                                                 |  |                             |            |  |      |   |            | 
|Basic net income per share                                                       |  | $                           | 0.47       |  |      | $ | 0.35       | 
|                                                                                 |  |                             |            |  |      |   |            | 
|                                                                                 |  |                            
|Diluted:                                                                         |  |                             |            |  |      |   |            | 
|Net income                                                                       |  | $                           | 7,719      |  |      | $ | 5,739      | 
|                                                                                 |  |                             |            |  |      |   |            | 
|Weighted average number of common shares outstanding                             |  |                             | 16,323,125 |  |      |   | 16,220,128 | 
|Weighted average number of dilutive common shares equivalents from stock options |  |                             | 416,400    |  |      |   | 369,272    | 
|                                                                                 |  |                             |            |  |      |   |            | 
|Common shares and common share equivalents                                       |  |                             | 16,739,525 |  |      |   | 16,589,400 | 
|                                                                                 |  |                             |            |  |      |   |            | 
|Diluted net income per share                                                     |  | $                           | 0.46       |  |      | $ | 0.35       | 
|                                                                                 |  |                             |            |  |      |   |            | 

Outstanding stock options with an exercise price above market are excluded from our diluted computation as
their effect would be anti-dilutive. At March 31, 2011, there were approximately 113,000 outstanding stock options with an exercise price above the average market price for the three months ended March 31, 2011.



12



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##### Table of Contents

Note 9. Commitments and Contingencies

Legal

In the ordinary course of our business, we become involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services provided
by our affiliated hospitalists. We may also become subject to other lawsuits which could involve significant claims and/or significant defense costs.

We believe, based upon our review of pending actions and proceedings, that the outcome of such legal actions and proceedings will not have a material adverse effect on our business, financial condition,
results of operations, or cash flows. The outcome of such actions and proceedings, however, cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, financial
condition, results of operations, or cash flows in a future period.

Government Inquiry

On June 7, 2010, we received a civil investigative demand (CID) issued by the Department of Justice, U.S. Attorneys
Office for the Northern District of Illinois. The CID requests information concerning claims that we have submitted to Medicare and Medicaid. The CID covers the period from January 1, 2003, through June 4, 2010, and seeks
production of a range of documents relating to our Medicare and Medicaid participation, physician arrangements, operations, billings and compliance programs. We believe we have a strong compliance focus, and that we operate with appropriate
billing policies, procedures, provider training, and compliance programs and controls. We continue to discuss with representatives of the government the scope of the CID and continue to respond to discovery requests. To our knowledge, no
proceedings have been initiated against us at this time, although it is not possible to predict whether or when proceedings might be initiated, when this matter may be resolved or what impact, if any, the outcome of this matter might have on our
consolidated financial position, results of operations, or cash flows.

Note 10. Fair Value Measurement

Some of our assets and liabilities are measured and recorded at fair value, which is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The established fair value hierarchy distinguishes between market participant assumptions based on market data
obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entitys own assumptions about market participant assumptions (Level 3). This hierarchy is used to measure fair value as follows:



| |  |  | Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities.
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Level 2 inputs include quoted prices for similar assets and liabilities in active markets; quoted prices in markets that are not active; and other
inputs that are observable or can be corroborated by observable market data for the asset or liability.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3 inputs are unobservable inputs for the asset or liability that are supported by little or no market activity.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following table presents our liabilities measured at fair value on a recurring basis as
of March 31, 2011 (dollars in thousands):



|                                                                                                            |  |                                                                 |   |  |                                            |   |   |                                        |  |   |               |  |  |   |        | 
|----------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------- | - |  | ------------------------------------------ | - | - | -------------------------------------- |  | - | ------------- |  |  | - | ------ | 
|                                                                                                            |  | Quoted Price InActive Markets forIdentical Instruments(Level
1) |   |  | Significant OtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |  |   | Total Balance | 
|Accrued contingent consideration for practice acquisitions (included in payables for practice acquisitions) |  | $                                                               |  |  |                                            | $ |  |                                        |  | $ | 27,915        |  |  | $ | 27,915 | 
|                                                                                                            |  |                                                                 |   |  |                                            |   |   |                                        |  |   |               |  |  |   |        | 

The following table presents a reconciliation for our liabilities measured at fair value on a recurring
basis using significant unobservable inputs (level 3) for the three months ended March 31, 2011 (dollars in thousands):



|                                          |  |                                                          |        |  
|----------------------------------------- |  | -------------------------------------------------------- | ------ | -
|                                          |  | Accrued ContingentConsideration forPractice Acquisitions |       
|Beginning balance at January 1, 2011      |  | $                                                        | 27,459 |  
|Addition through acquisition transactions |  |                                                          | 1,677  |  
|Change in fair value realized             |  |                                                          | 292    |  
|Payments                                  |  |                                                          | (1,513 | )
|                                          |  |                                                          |        |  
|Ending balance at March 31, 2011          |  | $                                                        | 27,915 |  
|                                          |  |                                                          |        |  

Our payables for practice acquisitions includes, among other items, accrued contingent consideration, the
fair value of which is determined using widely accepted valuation techniques, which include the utilization of the income approach valuation method for estimating future consideration to be paid based on projected earnings of the acquired practices
as of certain measurement dates. The earnings projections and the related fair value of our accrued contingent consideration for practice acquisitions are reassessed on a quarterly basis. The addition of $1,677,000 represents the initial accrual of
contingent consideration for the three practices acquisitions completed during the three months ended March 31, 2011. For the latest practice acquisition completed in late March 2011, an estimate of the contingent consideration was recorded on
a provisional basis, pending completion of the valuation study.

Note 11. Subsequent Events

Subsequent to March 31, 2011, we acquired the assets of one hospitalist physician practice.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following managements discussion and analysis should be read in conjunction with the unaudited consolidated financial
statements and the notes thereto included in this Quarterly Report. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Managements Discussion and Analysis of Financial Condition and
Results of Operations included in our most recent Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (SEC) on March 7, 2011.

The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995 regarding future events and the future results of IPC that are based on managements current expectations, estimates, projections, and assumptions about our business. Words such as may, will, could,
should, target, potential, project, expects, anticipates, intends, plans, believes, sees, estimates and variations of
such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in our most recent Annual Report on Form 10-K, including the
section entitled Risk Factors, as well as those discussed from time to time in the Companys other SEC filings and reports. In addition, such statements could be affected by general industry and market conditions. Such
forward-looking statements speak only as of the date of this Quarterly Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to
reflect events or circumstances after the date of this Report, or for changes made to this document by wire services or internet service providers. If we update or correct one or more forward-looking statements, investors and others should not
conclude that we will make additional updates or corrections with respect to other forward-looking statements.

Overview and Recent Developments

We are a leading provider of hospitalist services in the United States. Hospitalist medicine is organized around inpatient care, primarily delivered in acute hospitals, but also in post-acute facilities,
and is focused on providing, managing and coordinating the care of patients in facility based care settings. We believe we are the largest dedicated hospitalist company in the United States based on revenues, patient encounters and number of
affiliated hospitalists. Our early entry into the emerging hospitalist industry has permitted us to establish a reputation and leadership position that we believe is closely identified with hospitalist medicine.

Acquisitions

During the three months ended March 31, 2011, we acquired the assets of three hospitalist physician practices for a total estimated purchase price of $4,873,000. In connection with these
acquisitions, we recorded goodwill of $4,754,000 and other identifiable intangible assets of $119,000 consisting of physician, payor and hospital agreements. Total transaction costs of $256,000 for our acquisition activities during the three months
ended March 31, 2011 were expensed as incurred.

Subsequent to March 31, 2011, we acquired the assets of one
hospitalist physician practice.

Rate Changes by Government Sponsored Programs

The Medicare program reimburses for our services based upon the rates in the Medicare Physician Fee Schedule, and each year the Medicare
program updates the Physician Fee Schedule reimbursement rates based on a formula approved by Congress in the Balanced Budget Act of 1997. Many private payors use the Medicare fee schedule to determine their own reimbursement rates.

The Medicare law requires the Centers for Medicare and Medicaid Services (CMS) to adjust the Physician Fee Schedule payment rates
annually based on an update formula which includes application of the Sustainable Growth Rate (SGR) that was adopted in the Balanced Budget Act of 1997. This formula has yielded negative updates every year beginning in 2002, although CMS was able to
take administrative steps to avoid a reduction in 2003, and Congress has repeatedly taken legislative actions to prevent reductions each year from 2004 through 2010. In December 2010, Congress passed the Medicare and Medicaid Extenders Act of 2010,
which halted a 25 percent reduction in Medicare physician payments otherwise mandated by the SGR as of January 1, 2011. This legislation extended the stay of the SGR reductions for a full year, through the end of 2011. While Congress has
repeatedly intervened to mitigate the negative reimbursement impact associated with the SGR formula, there is no guarantee that Congress will continue to do so in the future. Moreover, the existing methodology may result in significant yearly
fluctuations in the Physician Fee Schedule amounts, which may be unrelated to changes in the actual costs of providing physician services. Unless there is a change in the SGR methodology, the uncertainty regarding reimbursement rates and fluctuation
will continue to exist.



15



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##### Table of Contents

Another provision of the Medicare and Medicaid Extenders Act of 2010 extends through the end
of 2011 the floor of 1.0 for the work component of the Geographic Practice Cost Indices (GPCI). The GPCI adjusts Medicare payments to physicians to reflect the geographic variation in the cost of delivering physician
services, by comparing those costs to the national average. In the absence of the floor specified by the legislation, payments would be decreased for any geographic area with an index of less than 1.0. Although Congress has extended the work GPCI
floor several times, and has done so for the calendar year 2011, there is no guarantee that Congress will take legislative action to halt future expirations of the floor, which could result in a decrease in payments we receive for physician
services.

In March 2010, the Patient Protection and Affordable Care Act (The Healthcare Reform Act) was enacted.
The Healthcare Reform Act includes a number of provisions that may affect our Company, although the impact of many of the changes will be unknown until they are implemented, which in some cases will not occur for several years. The impact of some of
these provisions may be positive, such as the expansion in the number of individuals with health insurance, the 10% Medicare bonus payment for certain outpatient and nursing home visits from 2011 through 2015 for primary care practitioners for whom
primary care services represented a minimum of 60% of Medicare allowed charges in a prior period, and the increase in Medicaid rates in 2013 and 2014. The impact of other provisions is unknown at this time, such as the establishment of an
Independent Medicare Advisory Board that could recommend changes in payment for physicians under certain circumstances not earlier than January 15, 2014, which the Secretary of Health and Human Services generally would be required to implement
unless Congress enacts superseding legislation. Fraud and abuse penalty increases and the expansion in the scope of the reach of the Federal Civil False Claims Act and government enforcement tools may adversely impact entities in the healthcare
industry, including our Company.

There are a number of initiatives, both judicial and legislative, that may result in a
partial or complete repeal of The Healthcare Reform Act. The constitutionality of The Healthcare Reform Act is currently being challenged through the courts. Several federal district courts have considered, along with other issues, the question of
whether The Healthcare Reform Acts requirement that individuals purchase health insurance violates the commerce clause of the Constitution. Some of these courts have determined it is constitutional while others have ruled it unconstitutional,
and the Supreme Court is widely expected to hear the case eventually. The Supreme Court could strike down the individual mandate only, or it could strike down the entire law, including the payment increases and eligibility expansion. Congress has
also taken up several measures to repeal all or parts of The Healthcare Reform Act. Although the key parts of The Healthcare Reform Act have not been repealed as of yet, the impact of the Supreme Courts judgment on The Healthcare Reform Act or
legislative repeal of key provisions on our Company cannot be determined at this time.

Seasonality and Quarterly
Fluctuations

We have historically experienced and expect to continue to experience quarterly fluctuations in net revenue
and income from operations. Absent the impact and timing of acquisitions, our net revenue has historically been higher in the first and fourth quarters of the year primarily due to the following factors:



| |  |  | the number of physicians we have on staff during the quarter, which may fluctuate based upon the timing of hires due to the end of the academic year
for graduating resident physicians, the schedule of the Internal Medicine Board exams and terminations in our existing practices; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fluctuations in patient encounters, which are impacted by hospital census, which can be volatile, and physician productivity and often reflect
seasonality due to the higher occurrence of illnesses such as flu and pneumonia in patient populations in the first quarter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have significant fixed operating costs, including physician practice salaries and benefits and, as a result, are highly dependent on patient encounters and the productivity of our affiliated
hospitalists to sustain profitability. Additionally, quarterly results may be affected by the timing of practice acquisitions and the hiring and termination of our affiliated hospitalists.



16



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##### Table of Contents

Results of Operations and Operating Data

The following table sets forth operating data and selected consolidated statements of income information stated as a percentage of net
revenue:



|                                                                 |  |                             |           |   |      |  |         |  
|---------------------------------------------------------------- |  | --------------------------- | --------- | - | ---- |  | ------- | -
|                                                                 |  | Three Months EndedMarch 31, |          
|                                                                 |  | 2011                        |           |   | 2010 | 
|Operating data  patient encounters                              |  |                             | 1,186,000 |   |      |  | 927,000 |  
|                                                                 |  |                             |           |   |      |  |         |  
|Net revenue                                                      |  |                             | 100.0     | % |      |  | 100.0   | %
|Operating expenses:                                              |  |                             |           |   |      |  |         |  
|Cost of servicesphysician practice salaries, benefits and other |  |                             | 72.4      | % |      |  | 72.6    | %
|General and administrative                                       |  |                             | 15.7      | % |      |  | 16.0    | %
|Net change in fair value of contingent consideration             |  |                             | 0.3       | % |      |  |        | %
|Depreciation and amortization                                    |  |                             | 0.6       | % |      |  | 0.7     | %
|                                                                 |  |                             |           |   |      |  |         |  
|Total operating expenses                                         |  |                             | 89.0      | % |      |  | 89.3    | %
|                                                                 |  |                             |           |   |      |  |         |  
|Income from operations                                           |  |                             | 11.0      | % |      |  | 10.7    | %
|Investment income                                                |  |                             |          | % |      |  |        | %
|Interest expense                                                 |  |                             |          | % |      |  |        | %
|                                                                 |  |                             |           |   |      |  |         |  
|Income before income taxes                                       |  |                             | 11.0      | % |      |  | 10.7    | %
|Income tax provision                                             |  |                             | 4.2       | % |      |  | 4.2     | %
|                                                                 |  |                             |           |   |      |  |         |  
|Net income                                                       |  |                             | 6.8       | % |      |  | 6.5     | %
|                                                                 |  |                             |           |   |      |  |         |  

Three months ended March 31, 2011 compared to three months ended March 31, 2010

Our patient encounters for the three months ended March 31, 2011 increased by 259,000 encounters or 27.9% to 1,186,000, compared to
927,000 for the same period in the prior year. Net revenue for the three months ended March 31, 2011 was $113.4 million, an increase of $25.7 million, or 29.3%, from $87.7 million for the three months ended March 31, 2010. Of this $25.7
million increase, 76.3% was attributable to same-market area growth and 23.7% was attributable to revenue generated from four new markets, three of which were entered through acquisitions in 2010 and one in 2011. Same-market revenue increased 22.4%,
same-market encounters increased 21.1% and patient revenue per encounter increased 1.2%. The remaining increase in same-market revenue was attributable to an increase in hospital contract and other revenue. Same-market areas are those geographic
areas in which we have had operations for the entire current period and the entire comparable prior period. Because in-market area acquisitions are often small practice groups which become subsumed within our existing practice groups and are managed
by our existing regional management staff, we consider these as part of our same-market area growth.

Physician practice
salaries, benefits and other expenses for the three months ended March 31, 2011 were $82.1 million or 72.4% of net revenue compared to $63.7 million or 72.6% of net revenue for the three months ended March 31, 2010. These costs increased
by $18.4 million or 29.0%. The increase in practice costs is largely related to the increase in the number of hospitalists added through hiring and acquisitions during the period and to continued investment in physician leadership initiatives.
Same-market area physician costs increased a total of $14.1 million, of which $12.7 million was primarily the result of increased costs related to our new hires or acquired physician practices and $1.4 million was due to increase in existing
physician costs. In addition, $4.3 million of the $18.4 million overall cost increase is attributable to physician costs associated with our four new markets.

General and administrative expenses include all salaries, benefits and operating expenses not specifically related to the day-to-day operations of our physician group practices, including billing and
collections functions, our regional and market-area administrative offices and our corporate management and overhead. General and administrative expenses increased $3.8 million, or 27.1%, to $17.8 million, or 15.7% of net revenue, for the three
months ended March 31, 2011, as compared to $14.0 million, or 16.0% of net revenue, for the three months ended March 31, 2010. The increase in expense is primarily the result of increased costs to support the continuing growth of our
operations, including new regional office costs and increases in corporate development and other expenses to support our acquisitions. General and administrative expenses decreased as a percentage of net revenue as we continue to leverage these
costs over a larger revenue base. Excluding stock based compensation, which increased as a result of the increase in our stock price at the date of various grants, general and administrative expense decreased by 40 basis points to 14.8% of revenue,
compared to 15.2% of revenue for the same period of 2010.



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Income from operations increased $3.0 million, or 32.2%, to $12.5 million, as compared to
$9.4 million for the same period in the prior year. Our operating margin increased to 11.0% for the three months ended March 31, 2011 from 10.7% for the three months ended March 31, 2010.

Our effective tax rate for the three months ended March 31, 2011 was 38.0% compared to 39.0% for the three months ended
March 31, 2010. The decrease in the effective tax rate reflects a reduction in our effective state rate. The effective tax rate differs from the statutory U.S. federal rate of 35.0% due primarily to state income taxes.

Net income increased to $7.7 million for the three months ended March 31, 2011, as compared to $5.7 million for the three months
ended March 31, 2010, and our net income margin increased to 6.8% from 6.5% for the same period in the prior year.

Liquidity and Capital Resources

As of March 31, 2011, we had no debt outstanding, and approximately $48.2 million in liquidity, composed of $18.3 million in cash and cash equivalents, and an available line of credit of $29.9
million.

Net cash provided by operating activities for the three months ended March 31, 2011was $3.7 million compared to
$11.4 million for the same period of 2010. The primary changes in working capital during the three months ended March 31, 2011 consisted of (i) an increase in accounts receivable of $15.2 million, (ii) a decrease of prepaid expenses
and other current assets of $1.9 million; (iii) an increase in accounts and accrued liabilities of $2.7 million, (iv) an increase in accrued compensation of $3.6 million primarily related to timing of payrolls and physician bonus payments,
and (v) a net increase in medical malpractice and self-insurance reserves of $1.0 million.

The $15.2 million increase in
accounts receivable is largely attributable to an increase in Medicare and Medicaid accounts receivable related to acquisitions which we completed in late 2010 and early 2011, as there is a time lag for Medicare contractors to issue new physician
provider numbers for the acquired practices. Our days sales outstanding (DSO), which we use to measure the effectiveness of our collections, increased to 54 DSO as of March 31, 2011, compared to 51 DSO as of December 31, 2010. We calculate
our DSO using a three-month rolling average of net revenues. The increase in DSO is largely related to the acquisitions in late 2010 and early 2011.

Net cash used in investing activities was $5.5 million for the three months ended March 31, 2011, compared to $3.4 million for the same period in 2010. Cash of $5.0 million was used in 2011 for
physician practice acquisitions and earn-out payments on prior acquisitions compared to $2.6 million in the same period of the prior year. The remainder of cash used in investing activities was for purchases of computer hardware and software, and
office furnishings.

Credit Facility and Liquidity

Our Credit Facility provides a revolving line of credit of $30.0 million, with a sublimit of $5.0 million for the issuance of letters of
credit. The Credit Facility has a maturity date of September 15, 2011. We use the Credit Facility for working capital, practice acquisitions and capital expenditures. At March 31, 2011, we had no borrowings under the term loan portion of
the Credit Facility, and a letter of credit of $100,000 outstanding and $29.9 million available under the revolving line of credit.

The revolving line of credit is limited by a formula based on a certain multiple times the trailing twelve months of earnings before interest, taxes, depreciation, amortization and certain non-cash items.
Borrowings under the Credit Facility bear interest at a rate, based on either LIBOR plus 1.5% to 2.0%, or the lenders prime rate, as selected by us for each advance. We pay an unused commitment fee equal to 0.25% per annum on the
difference between the revolving line capacity and the average balance outstanding during the year. Outstanding amounts advanced to us under the revolving line of credit are repayable on or before the maturity date.

The Credit Facility is secured by all of our current and future personal and intellectual property assets, except those held subject to
purchase money loans and capital leases. The Credit Facility includes various customary financial covenants and restrictions, as well as customary remedies for our lenders following an event of default. As of March 31, 2011, we were in
compliance with such financial covenants and restrictions.



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We anticipate that funds generated from operations, together with our current cash on hand
and funds available under our revolving credit agreement will be sufficient to finance our working capital requirements and fund anticipated acquisitions, contingent acquisition consideration and capital expenditures.

Off Balance Sheet Arrangements

As of March 31, 2011, we had no off-balance sheet arrangements.

Recently Adopted Accounting Principles

See Note 2 to the Consolidated Financial Statements for information regarding recently adopted accounting principles.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We had no outstanding borrowings under our Credit Facility at March 31, 2011.

Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities
may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities with shorter maturities may produce less income if interest rates fall. As of March 31, 2011, all of our short-term investments
were invested in money market funds with less than 90-day maturities and are classified as cash equivalents.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the Securities and Exchange Commission (SEC), and
to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has conducted an evaluation of the
design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that
our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms.

Changes in Internal
Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the
three months ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

Legal

In
the ordinary course of our business, we become involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services provided by our affiliated physicians. We may also
become subject to other lawsuits, which could involve significant claims and/or significant defense costs.

We believe, based
upon our review of pending actions and proceedings that the outcome of such legal actions and proceedings will not have a material adverse effect on our business, financial condition, results of operations, or cash flows. The outcome of such actions
and proceedings, however, cannot be predicted with certainty and an unfavorable resolution of one or more of them could have a material adverse effect on our business, financial condition, results of operations, or cash flows in a future period.

Government Inquiry

On June 7, 2010, we received a civil investigative demand (CID) issued by the Department of Justice, U.S. Attorneys Office for the Northern District of Illinois. The CID
requests information concerning claims that we have submitted to Medicare and Medicaid. The CID covers the period from January 1, 2003, through June 4, 2010, and seeks production of a range of documents relating to our Medicare and
Medicaid participation, physician arrangements, operations, billings and compliance programs. We believe we have a strong compliance focus, and that we operate with appropriate billing policies, procedures, provider training, and compliance
programs and controls. We continue to discuss with representatives of the government the scope of the CID and continue to respond to discovery requests. To our knowledge, no proceedings have been initiated against us at this time, although
it is not possible to predict whether or when proceedings might be initiated, when this matter may be resolved or what impact, if any, the outcome of this matter might have on our consolidated financial position, results of operations, or cash
flows.



|ITEMS 1A, | 2, 3, 4 AND 5 ARE NOT APPLICABLE
|--------- | --------------------------------



|ITEM 6. | EXHIBITS
|------- | --------

(a) Exhibits

Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index on page 22 of this report.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized on the 27thday of April, 2011.



IPC THE HOSPITALIST COMPANY, INC.By:

/S/    ADAM D.
SINGER, M.D.Adam D. Singer, M.D.Chief Executive OfficerBy:

/S/    DEVRA G.
SHAPIRODevra G. ShapiroChief Financial Officer




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EXHIBIT INDEX



|              |  |                                                                                                                                                                                               
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                       
|              | 
|10.1         |  | Employment Agreement, effective March 31, 2011, between Kerry E. Weiner, M.D. and IPC The Hospitalist Company, Inc.                                                                           
|              | 
|10.2         |  | IPC The Hospitalist Company, Inc. Executive Change in Control Plan, effective March 3, 2011.                                                                                                  
|              | 
|31.1          |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes
Oxley Act.
|              | 
|31.2          |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes
Oxley Act.
|              | 
|32.1          |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.                                                 
|              | 
|32.2          |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.                                                 



| | Management contracts or compensation plans, contracts or arrangements
|- | ---------------------------------------------------------------------



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