A tax-court ruling in Morris County last year could have a major impact on South Jersey nonprofit hospitals.

AtlantiCare Regional Medical Center has had its nonprofit status challenged by its host municipalities in an attempt to get the hospital to pay property taxes. The challenges stem from a ruling last year that Morristown Medical Center did not meet the standards of being a nonprofit and thus had to pay property taxes.

In his opinion, the judge questioned all nonprofit hospitals and their tax exemptions, saying modern nonprofits do not meet the current criteria for the exemptions under the law.

The ruling sparked lawsuits between municipalities and nonprofit hospitals across New Jersey. So far, 37 of the state’s nonprofit hospitals have had their tax-exempt status challenged, said Kerry McKean Kelly, spokeswoman for the New Jersey Hospital Association.

The lawsuits created complicated situations between municipalities and hospitals, she said. In March, Gov. Chris Christie called for a two-year freeze of all litigation while a state commission creates a solution that preserves the tax-exempt status but requires the 58 nonprofit hospitals to make yearly contributions to their municipality instead of paying property taxes.

Assemblyman Chris Brown, R-Atlantic, said the Assembly passed a bill during the last session to address the issue, but it was vetoed by Christie. Now, the Assembly is reintroducing the bill and working to make it something the governor is willing to sign, he said.

“We need to come up with a resolution quickly. Otherwise, the only winners will be the lawyers,” he said.

McKean Kelly said the New Jersey Hospital Association supports the approach of keeping the tax-exempt status while making yearly monetary contributions to the municipalities.

“We believe a much better path is a statewide solution (instead of dozens of individual lawsuits),” she said. “I don’t think anyone wants to see hospitals and municipalities at odds.”

In South Jersey, AtlantiCare has been challenged by Galloway Township and Atlantic City, where AtlantiCare’s two campuses are located.

A spokesman for AtlantiCare said the hospital supports the two-year freeze on litigation Christie called for.

“It is our hope that there will be a legislative solution that recognizes the challenges many hospitals face in providing care and services 24 hours a day, seven days a week, regardless of a patient’s ability to pay for services, while they also contribute in many other ways to the well-being of the communities they serve,” spokesman Frank Blee said in a statement.

A representative from Galloway Township said he could not comment on pending litigation, while efforts to get a comment from an Atlantic City representative were unsuccessful.

Somers Point Administrator Wes Swain said the city, where Shore Medical Center is located, is waiting to see how the matter plays out in the Legislature.

“The city will analyze what’s going on and do what it has to do to protect its rights,” Swain said.

The chief financial officer for Shore Medical Center said in a statement the hospital has been paying taxes on its affiliated entities that are deemed for profit. He also said Shore has been giving voluntary payments, bought a police vehicle for the Somers Point Police Department and has provided ambulance service for the area at a cost exceeding $230,000.

“Given the economic meltdown in Atlantic County and the closure of thousands of hospitals across the country, the last thing we need to do is destroy more communities and take away health care from those in need and put thousands of more people out of work,” said David Hughes, chief financial officer of Shore Medical Center.

Meanwhile, the individual lawsuits around the state could take years to sort out, McKean Kelly said. The litigation in Morristown lingered for five years before the judge made his ruling.

“We’ve had good conversations with legislators,” McKean Kelly said, reiterating the Hospital Association’s hope of a statewide solution. “If that doesn’t happen, we’re looking at years of lawsuits and millions in legal fees.”

Contact:

609-272-7260 jderosier@pressofac.com

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