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The tax-exempt status of an HMO arose again in Geisinger
Health Plan v. Commissioner, T.C. Memo. 1991-649 (Geisinger I),
revd. and remanded 985 F.2d 1210 (3d Cir. 1993) (Geisinger II),
opinion on remand 100 T.C. 394 (1993) (Geisinger III), affd. 30
F.3d 494 (3d Cir. 1994) (Geisinger IV). Geisinger HMO, like
petitioner in the instant case, was part of a group of related
organizations forming a large health care network (the Geisinger
system).
Geisinger HMO arranged for its enrollees to receive hospital
services by contracting for such services with other Geisinger
entities (Geisinger hospitals and outpatient clinics that were
recognized as exempt organizations) and independent hospitals.
Geisinger HMO arranged for its enrollees to receive physician
services by contracting for such services with Clinic--a tax-
exempt Geisinger affiliate. Clinic provided physician services
through a combination of 400 staff physicians and by contracting
with independent physicians for their services. Geisinger HMO
was organized as a separate entity to avoid regulatory
difficulties and to simplify operations from an organizational
and managerial standpoint.
Geisinger HMO offered enrollment to groups (with a minimum
of 100 eligible enrollees) and individuals (and certain
dependents) residing in 17 of the 27 counties in which the
Geisinger system operated. Individual enrollees were required to
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