Marcus Welby Hospital has decided to form an HMO

Marcus Welby Hospital has decided to form an HMO in which it wants to give physicians a major stake, in order to foster allegiance and encourage cost-effective treatment. You are consulted as a legal and management expert to advise the hospital on the consequences of forming the HMO as a nonprofit versus a for-profit entity. What are the relevant considerations with respect to tax exemption, the ability to raise capital, the role of physicians, and operational constraints?

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