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Respondent contends, however, that, inasmuch as petitioners
did not follow the periodic system described in Notice 88-51,
supra, they must use the separate receivable system described in
the Amended Regulations. We do not agree that, under the
circumstances present in the instant case, petitioners should be
denied the use of the periodic system merely because they
challenged the validity of the formulation of the nonaccrual-
experience method formula. Nor do we read Notice 88-51, supra,
as requiring such a result. Based on the foregoing, we conclude
that petitioners may use the periodic system of the nonaccrual-
experience method, but they must calculate the Uncollectible
Amount under the Amended Formula, not under the Original Formula.
Because we conclude that the Black Motor formula is not
mandated under section 448(d)(5), we do not address petitioners'
further argument that they should be allowed to annualize the
actual bad debt writeoff experience of the corporations that were
sold to HealthTrust during 1987 in order to calculate properly
the Uncollectible Amount for 1987 using the Black Motor formula.
To What Income Is the Formula To Be Applied?
Additionally, respondent contends that in substance the
hospitals "sell" medical supplies to their patients. Respondent
maintains that income attributable to such sale of medical
supplies is not eligible for the nonaccrual-experience method.
Respondent asserts further that petitioners' records do not
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