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How Will This IRS Ruling Affect You?

by Robert Pear

The New York Times

Article excerpt

I.R.S. Ruling Is Obstacle to Health Care Networks Promoted by Obama

In its recent ruling, the I.R.S. denied a tax exemption sought by an accountable care organization that coordinates care for people with commercial insurance. The tax agency said the organization did not meet the test for tax-exempt status because it was not operated exclusively for charitable purposes and it provided private benefits to some doctors in its network.

Our take

Will Your ACO Stand Up to IRS Scrutiny?

In what may be a blow to the continued formation of ACOs between health organizations and other entities, the IRS recently ruled against providing a tax exemption to an organization that was not entirely charitably positioned. The IRS indicated that, because this ACO worked for a commercial health plan, its purpose extended beyond the charitable. Will your ACOs stand up to scrutiny?

What this ruling clearly stresses is that simply delivering healthcare services is not enough to support a tax exemption. As new partnerships and collaborations continue to emerge between traditional and non-traditional providers and insurers, this is not the last of what we’re likely to hear about this issue.