California Code, Revenue and Taxation Code - RTC § 214.7

In the case of a hospital, neither the use of hospital property nor the receipt of fees or other lawful compensation by a licensed physician for the practice of his profession therein, shall be grounds for denial of the exemption provided by Sections 214 and 254.5. This section does not apply to such portions of a hospital as may be leased or rented to a physician for his office for the general practice of medicine.