IHC Care, Inc. - Page 25




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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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