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surgery centers, it seems most likely that one purpose and effect
of the containment and contraction of Redlands Hospital’s
outpatient surgery activities is to eliminate a competitive
constraint for setting Surgery Center fees (a matter delegated to
SCA Management under the management contract, excluding charges
for physicians’ services). Moreover, market consolidation
provided petitioner and SCA Centers mutual advantages by
eliminating pressures to compete in spending for expensive
equipment.22
There is no per se proscription against a nonprofit
organization's entering into contracts with private parties to
further its charitable purposes on mutually beneficial terms, so
long as the nonprofit organization does not thereby impermissibly
serve private interests. Cf. Plumstead Theatre Socy. v.
Commissioner, 75 F.2d 244 (9th Cir. 1982); Broadway Theatre
League v. United States, 293 F. Supp. 346 (W.D. Va. 1968). In
the instant case, however, RHS relied on the established
relationship between Redlands Hospital and Redlands physicians to
enable RHS and SCA affiliates jointly to gain foothold, on
favorable terms, in the Redlands ambulatory surgery market.
Then, by virtue of their effective control over the Surgery
22 As stated in a letter in the administrative record
written on behalf of petitioner from Ernst & Young LLP to
respondent, dated Nov. 23, 1994, “The Hospital and * * * [the
Surgery Center] also share surgical equipment so as to avoid a
‘medical arms race’ in the Redlands health care community.”
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