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separate corporation rather than having a separate corporation
for each hospital in that State. In a few instances, HCA
acquired a group of hospitals that, for various business reasons,
were placed in a single corporation or were allowed to remain in
the acquired corporation.
During the years ended 1981 through 1988, as of yearend HCA
owned the following number of subsidiaries and hospitals, and had
the following number of patient beds:
Number of Hospitals Patient
Year Subsidiaries Owned Beds
1981 124 188 29,298
1982 124 186 29,720
1983 126 196 31,393
1984 123 200 32,515
1985 135 230 37,423
1986 122 227 37,490
1987 174 1132 124,087
1988 74 131 23,849
1During 1987, pursuant to a plan of reorganization, petitioners divested 104
hospitals from the HCA organization by selling the stock of the subsidiaries
owning those hospitals to HealthTrust, Inc.--The Hospital Co. See Hospital
Corp. of Am. v. Commissioner, T.C. Memo. 1996-559, for a detailed description
of that transaction.
Prior to calendar year 1977, petitioners purchased general
and professional liability insurance from Continental Insurance
Co. (Continental). The hospitals owned by petitioners were not
permitted to purchase insurance individually from other sources.
Every State regulates the insurance companies licensed to do
business within its borders. Insurance companies that are fully
licensed in a particular jurisdiction often are referred to as
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