Affiliated Service Group

[Guest L TURNER]

I have 2 medecal groups, A & B. Both are LLP's with MD, PA's as partners. No partner is a partner of both. Another LLP exists, C, which handles all medical billings and collections for A & B, remitting each one their respective collections. A & B each own 50% of C. Except for billing and collecting, A & B are autonomous and unrelated to each other. One more exception though....C also holds the provider contracts for both A & B in it's name so physicians from A & B can participate in all contracts. All other resources for providing medical services to the public are provided by A & B including salaries, rent, management, etc. Question, is A, B & C a controlled group? If C provided only billing and collection services, I would say definitely no. However, I am not certain since C holds the contracts for the doctors.

Thanks for any help.

[Ervin Barham]

Your post seemed to be using the terms "controlled group" and "affiliated service group" interchangeably. While the definitions are different, the result is the same in that if they are considered affiliated service groups, you have to treat them as 1 entity for coverage purposes.

You need to take a good look at Section 414(m), the associated proposed Treasury Regs,and Rev Ruling 81-105 on this.

[This message has been edited by Ervin Barham (edited 11-10-1999).]

[Richard Anderson]

L Turner, here is my analysis of your post.

LLP A and the PA's that own LLP A form an ASG with LLP A as the First Service Organization (FSO) and the PA's as A-ORG's.

An A-ORG must meet both of the following:

1. The A-ORG is a shareholder or partner in the FSO.

2. The A-ORG regularly performs services for the FSO or is regularly associated with the FSO in performing services for others.

LLP C is also part of the ASG as a B-ORG.

A B-ORG must meet the following requirements:

1. A significant part of the B-ORG's business is performing services for the FSO.

2. At least 10% of the B-ORG is owned by highly compensated employees of the FSO or one of its A-ORG's.

Thru attribution the HCE MD owners of the PA's are also owners of LLP C, therfore 2 above is met.

The above analysis of course also applies to LLP B and the PA's that own it.

Therefore, the ASG consists of LLP A as FSO with PA's as A-ORG's and LLP C as a B-ORG.

The same analysis applies to LLP B and its PA owners and LLP C.

Thus there are two Affiliated Service Groups:

1. LLP C, LLP A, and the PA owners of LLP A

2. LLP C, LLP B, and the PA owners of LLP B

If LLP C provides management functions for LLP A and LLP B then there will be a management ASG of LLP A, LLP B, and LLP C.

I hope this helps.