Iggy is maybe the only school that practices that
Disagree.
Iggy certainly turns away a fair number of kids because they don't have room for everyone who tests there. They set a very high minimum academic achievement standard in order for a kid to be admitted, and they set that standard because they can. What would be interesting to see is if they had far fewer applications, where they would set that minimum academic achievement standard.
However, everything is relative. Other private schools, yours included, do not have programs to handle kids from every percentile. Whereas a kid in the 40th or 50th percentile would quickly drown and be washed down the drain at a school like Iggy, that percentile is lower at your school or mine, but it is there nonetheless. There is a point where it simply does not make sense (and is, indeed, unjust) for a private school to admit a kid if they know s/he would not be able to handle the school's minimum academic expectations.