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activities would have constituted an unrelated business if
conducted by its affiliate, we noted that section 513(a) defines
“unrelated trade or business” by reference to conduct that is
“not substantially related” to the organization’s exempt
functions. We stated that the determination whether conduct is
“substantially related” in this context “considers the degree to
which income is earned from services rendered or sales made to
persons who are not patients of the exempt affiliated entity.”
Id. at 405. Noting that entities related to the HMO provided 80
percent of the hospital services rendered to the HMO’s patients,
we held that the record in Geisinger did not justify a conclusion
as to whether the instances in which the HMO’s subscribers were
served by unrelated entities were substantial or insubstantial.
See id. at 406. Accordingly, we held that the HMO failed to
establish that its activities comprised an integral part of its
affiliate’s exempt activities.
Similarly, in the instant case, petitioner has failed to
establish that the Surgery Center’s patient population overlaps
substantially with that of Redlands Hospital. The record does
not reveal what percentage of persons served at the Surgery
Center are patients of Redlands Hospital. Clearly, however, the
Surgery Center was performing ambulatory surgery on a for-profit
basis for its own patients before petitioner was ever involved
and presumably continued to do so afterward.
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