The Internal Revenue Service has granted tax-exempt status to a hospital-acquired clinic in Kansas City, Mo.
The favorable tax ruling is at least the sixth since February 1993 for the development of an integrated delivery system by a not-for-profit hospital or hospital system. The other rulings addressed deals in La Habra, Calif.; Mission Hills, Calif.; Long Beach, Calif.; Billings, Mont.; and Rockford, Ill.
The latest ruling addresses the acquisition of a 15-member primary-care practice by 498-bed St. Luke's Hospital in Kansas City. Under the plan submitted to the IRS for review, the hospital would buy only the tangible assets and accounts receivable of the practice. The hospital wouldn't pay the physicians for intangible assets, such as goodwill.
The 15 physicians would become employees of St. Luke's Medical Associates, a new hospital subsidiary that would be governed by a 10-person board of directors, of which no more than two seats would be held by the physicians.
The physicians would accept Medicare and Medicaid patients, provide charity care to patients unable to pay and participate in the medical education program of the University of Missouri medical school at Kansas City.
Because of these conditions, the IRS in a Dec. 30, 1994, determination letter said St. Luke's Medical Associates qualified as a tax-exempt public charity under 501(c)(3) of the tax code. The agency didn't release the letter publicly until late January.
A hospital spokeswoman said the acquisition has been completed, but she declined to disclose the price.