Issue link: https://beckershealthcare.uberflip.com/i/1383677
20 CFO / FINANCE Mayo Clinic, IRS legal dispute will return to lower court By Alia Paavola A dispute between Rochester, Minn.-based Mayo Clinic and the IRS over $11.5 million in tax refunds will head back to a lower court, the 8th Circuit U.S. Court of Appeals ruled May 13. Mayo Clinic, which filed the lawsuit against the IRS in 2016, argues that it was wrongly forced to pay tax money to the IRS and is seeking to recover the pay- ments. e lawsuit centers on whether Mayo Clinic is primarily an educational organization or a healthcare system. Mayo Clinic claims it should be classified as an educational organization that makes patient care available as a necessary part of its educational activities. However, the IRS considers Mayo Clinic to be a parent company of a health system and that its primary purpose is a health system. Un- der the IRS' classification, more of the in- come generated by Mayo Clinic's invest- ments is taxable. In August 2019, a federal judge sided with Mayo Clinic. In the 2019 opinion and order, the federal judge said Mayo Clinic was entitled to an $11.5 million tax refund because the federal government exceeded its authority by creating extra requirements for organizations to qualify as tax-exempt educational organizations under the Treasury Regulation. e federal government appealed the rul- ing to the Eighth Circuit Court of Appeals in October 2020. In sending the case back to the lower court, the Eighth Circuit said it disagrees with the federal court's invalidation of the Treasury Regulation. "We reverse the district court's invali- dation of Treasury Regulation … to the extent it is not inconsistent with [Internal Revenue Code] … and remand for pro- ceedings consistent with this opinion," the appeals court said. n 5 hospitals seeking to regain independence, split from systems By Alia Paavola S everal hospitals are looking to split from the health system they belong to, regain independence or partner with a different healthcare organization. Below are five instances reported from Jan. 1 to April 30. 1. HaysMed, a single-hospital system in Hays, Kan., and Pawnee Valley Commu- nity Hospital in Larned, Kan., will depart from the University of Kansas Health System in Kansas City. University of Kansas Health System and the two hospitals in April said they decided that working independently "best supports the long- term health and wellness of our communities." 2. Carolinas HealthCare System Blue Ridge, a two-campus system in Morganton, N.C., plans to cut ties with Charlotte, N.C.-based Atrium Health. The hospital sys- tem said on April 22 its board of directors approved a nonbinding letter of in- tent to instead become part of the Chapel Hill, N.C.-based UNC Health network through a management services agreement. 3. Hoag Memorial Hospital Presbyterian in Newport Beach, Calif., is seeking to end its affiliation with Providence, a Catholic health system based in Renton, Wash. Hoag filed a lawsuit in May 2020 to split from the 51-hospital system. 4. Columbia, Mo.-based Boone Hospital Center became independent April 1, separating from St. Louis-based BJC HealthCare. 5. Virginia Mason Memorial in Yakima, Wash., has transitioned back to an inde- pendent hospital and reverted to its old name. The board of Virginia Mason Me- morial voted in late October 2020 to end its affiliation with Seattle-based Virginia Mason Health System. The hospital said it split from Virginia Mason Jan. 1 be- cause of the system's merger with Tacoma, Wash.-based CHI Franciscan. n Retired attorney pitches plan to save 3 Tower Health hospitals By Alia Paavola A retired attorney is pitching a plan to save three hospitals owned by Tower Health, a cash-strapped hospital system based in West Reading, Pa., The Mercury reported May 11. The attorney, Barton Post, said he was working with the Chester County Medical Society and the Pennsylvania Medical Society to develop a model that would incorporate new services into the hospitals under a nonprofit umbrella. The ser- vices being pitched are child care, elder care and wellness programs. Mr. Post argues the services could improve the finances of the three hospitals. "If these hospitals close or staffing is reduced, what would happen would be catastrophic for the communities they serve," Mr. Post told The Mercury. "We would want to get the creditors and bondholders involved in these discussions because they can put pressure on Tower. As it stands now, bond holders and creditors have not taken a public stand in trying to save these hospitals." Mr. Post also said that bond holders and creditors should get publicly involved to help save the hospitals and their investments. The news came a few days after Tower Health announced it would restructure and consolidate its medical group to improve its finances. The move was expect- ed to affect about 200 physicians and staff. n