Hospital Corporation of America and Subsidiaries - Page 44

                                       - 44 -                                         
          hospitals is the quintessential service business.  They argue               
          that this Court recognized that principle in St. Luke's Hosp. v.            
          Commissioner, 35 T.C. 236 (1960), as did the Supreme Court in               
          Abbott Labs. v. Portland Retail Druggists Association, Inc., 425            
          U.S. 1 (1976), and the Commissioner in the regulations.                     
          Petitioners maintain that hospitals do not sell merchandise but             
          rather acquire medical supplies for use in performing medical               
          services.                                                                   
               In the instant case there is no dispute that the hospitals             
          engage in service activities within the meaning of section                  
          448(d)(5).  Rather, the issue we must resolve is whether income             
          attributable to medical supplies used in the course of performing           
          those activities is ineligible for the nonaccrual-experience                
          method of accounting merely because some part of the accounts               
          receivable attributable to those medical supplies does not                  
          constitute income earned from the performance of services.                  
               We find inapposite to the issue involved here the State law            
          cases relied on by respondent.  The focus of those cases is on              
          whether strict tort liability principles should be applied to               
          hospitals.  Those cases are concerned with public policy                    
          considerations as to who should bear the loss from defective,               
          though not negligent, services and/or products.  See McDaniel v.            
          Baptist Memorial Hosp., 469 F.2d 230 (6th Cir. 1972); Johnson v.            
          Sears, Roebuck & Co., 355 F. Supp. 1065 (E.D. Wis. 1973); cf.               






Page:  Previous  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  Next

Last modified: May 25, 2011