On April 20, the IRS released a new Private Letter Ruling (PLR 200716034, Jan. 26, 2007) that likely will come as a surprise to those in the exempt healthcare sector who closely followed the integrated delivery system rulings issued in the mid-1990s and since.

The new PLR involves an integrated healthcare delivery system, which includes a parent entity (“Parent”), a hospital (“Hospital”), and a number of controlled taxable professional corporations (“PCs”). The stock of the PCs is held by licensed physicians employed by the Hospital. This structure was necessitated by state law, which provides that only licensed physicians may hold the stock of professional corporations engaged in the practice of medicine. As with typical “captive PC” models, the Hospital, the PCs and the physician-shareholders had entered into employment agreements, shareholder agreements, and affiliation agreements that collectively resulted in the Hospital having effective control over, and beneficial interest in, the PCs.

Click on the PDF link above to read the full memorandum.
Source: Health Law Client Memorandum
Leave Drinker Biddle to Learn More