IRS Denies Tax-Exempt Status for Lancaster General Ambulatory Surgical Services

The IRS has denied tax-exempt status for an organization formed by Lancaster (Pa.) General Health to run the new Physicians' Surgery Center, according to a Lancaster Online report.

Lancaster General is challenging the determination, which was handed down by the IRS in May. If the decision is upheld, the healthcare system could owe taxes.

The entity involved is Lancaster General Ambulatory Surgical Services, which runs the surgery center. Lancaster General Health created the entity in 2006 and owns 50 percent stake in the entity; a group of surgeons owns the other half of the surgery center.

In 2008, Lancaster General Health asked the IRS to recognize the entity as a charitable organization. But in financial statements filed earlier this year, the system said the IRS had determined that the entity does not meet charitable organization criteria because it has insufficient control over its joint venture organization to ensure that the organization is operated in a charitable manner.

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