IHC Care, Inc. - Page 35




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          living in Davis County, Utah, where Health Services lacked a                
          hospital.  Because the circumstances under which petitioner’s               
          enrollees received hospital services from independent hospitals             
          were limited to situations where Health Services was unable to              
          provide specialized hospital services or were due to geographical           
          expediency, or both, we are satisfied that petitioner’s method              
          for arranging for its enrollees to receive hospital services was            
          substantially related to Health Services’ tax-exempt function.              
               However, we do not end our analysis here.  In particular,              
          the administrative record reveals that petitioner’s enrollees               
          received a substantial portion of their physician services from             
          independent physicians.                                                     
          In Geisinger III, we did not discuss the provision of                       
          physician services to Geisinger enrollees inasmuch as Geisinger             
          HMO arranged for its enrollees to receive all their physician               
          services from Clinic–-a tax-exempt affiliate of Geisinger HMO.              
          Clinic in turn arranged to provide physician services to                    
          Geisinger enrollees through its approximately 400                           
          physician/employees (approximately 84 percent of services) and              
          through contracts with independent physicians (approximately 16             
          percent of services).  In contrast, in the instant case,                    
          petitioner’s enrollees received only 21 percent of their                    
          physician services from physicians employed by or contracting               
          with Health Services, while petitioner contracted for the                   






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