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remaining 79 percent of such physician services directly with
independent physician medical groups. In other words,
petitioner’s enrollees received nearly 80 percent of their
physician services from physicians with no direct link to one of
petitioner’s tax-exempt affiliates.
Petitioner contends that its contracts with independent
medical groups are not relevant to the question of whether
petitioner qualifies for tax-exempt status as an integral part of
its tax-exempt IHC affiliates because all such independent
physicians were required to maintain privileges at Health
Services hospitals. We disagree with the basic premise
underlying petitioner’s argument.
Health Services was composed of the hospital division, which
operated a large number of hospitals and clinics, and the
physician division, which employed 245 primary care physicians
and 215 specialist physicians who generally practiced in Health
Services’ clinics and other community-based settings. Health
Services’ status as an organization described in section
501(c)(3) is undoubtedly attributable to its participation in
Medicare, Medicaid, and other governmental programs, and its
willingness to provide charity services. Considering that
petitioner does not provide free or low cost health services, and
given the termination of its Senior Care plan for Medicare
patients, we fail to see how petitioner’s operations, including
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