The recent Morristown Memorial tax court decision in June created a great deal of uncertainty for hospitals, municipalities and, in fact, for nonprofit entities all across New Jersey. While not binding statewide, the ruling for the first time stated that part of a not-for-profit hospital was subject to local property taxes. Perhaps anticipating the hubbub his ruling would spark, Judge Vito Bianco acknowledged the issue might require a statewide legislative solution.
A solution – and we believe a very good one – is progressing through the New Jersey Legislature. S-3299/A-4903, introduced by Senate President Stephen Sweeney and Sens. Robert Singer and Joe Vitale, along with Assemblyman John Burzichelli, would establish a community contribution fee from not-for-profit hospitals that would flow to their host municipalities. The proposal provides an equitable statewide solution. Without it, the tax court ruling is likely to lead to a flurry of lawsuits involving lengthy and expensive litigation throughout the state.
To be clear, not-for-profit hospitals are entities that do not have owners or shareholders. They are led by a board of community volunteers, where any positive margins from their operations are reinvested back into the organization to serve the healthcare mission. Not-for-profit hospitals have been exempt from property taxes in New Jersey since laws were enacted in 1913. Our member hospitals are valued parts of their communities, always there to provide healthcare services to all who need them, as well as providing jobs and added community benefits that help keep local economies healthy. Recognizing this, NJHA convened a task force comprised of members of New Jersey’s not-for-profit hospitals who agreed to support legislation that contributed a reasonable amount of money, along with their existing community benefit contributions, to offset the costs of local services provided by their host municipalities.
S-3299/A-4903, which received unanimous support from the NJHA task force and our Board of Trustees, reaffirms the property tax exemption of New Jersey’s not-for-profit hospitals while creating a way for these hospitals to provide even greater support to their host municipalities. The legislation extends not-for-profit hospitals’ contributions by providing host municipalities with a community contribution fee that will raise roughly $20 to $25 million annually statewide – in addition to the local property taxes that not-for-profit hospitals already pay when leasing space like medical office buildings and other retail space. The new money is earmarked for municipalities’ public safety expenditures.
For hospitals, the commitment to community goes well beyond healthcare services. The accounting firm EY (formerly Ernst & Young) recently completed a study for NJHA, calculating that our hospitals provide more than $2.4 billion in community benefits annually. These contributions include free and discounted care for the poor, uninsured and senior citizens; community health offerings like immunization clinics and other wellness programs; education for future healthcare professionals; medical research; and a wide array of additional community programs. In one community I know, the local hospital has donated parcels of land for public use; others have donated Narcan to their local police departments to help prevent opioid overdoses. Charity care services alone – delivered to New Jersey residents who have no health insurance – total about $1 billion annually. And that charity care will continue uninterrupted, no matter what happens with this bill. That’s an obligation already written in state law – not to mention a key part of the mission of not-for profit hospitals.
This bill represents an extension of our hospitals’ longstanding commitments to the communities they serve, while providing certainty and predictability during one of the most dynamic periods of change ever experienced in our nation’s healthcare sector.
In addition to community benefits, not-for-profit hospitals are also prime drivers of economic activity within their communities, employing nearly 144,000 people whose wages and tax contributions ripple throughout the economy.
New Jersey’s hospitals are committed to doing their share to support their municipalities, while continuing to serve as good neighbors and answering the needs of their patients. We urge the Legislature to pass S-3299/A-4903 and ask Governor Christie to sign this bill which will quell the legal uncertainty and ensure a balanced statewide solution.