Most of New Jersey’s acute care hospitals are nonprofit and therefore aren’t required to pay local property taxes. They typically provide services worth millions of dollars to their communities for which they’re not reimbursed and often have an agreement to pay their municipalities an annual fee in lieu of the tax.
But the status quo has been blown up by broad shifts in health care, court decisions and disparities between hospital-town agreements. Everyone agrees a fairer statewide approach is needed and is being pursued.
Health care is numbingly complex so it’s already taking too long. While nonprofit hospitals are waiting for the state solution, they all should pay municipalities the modest fees their industry association supports.
The state Legislature years ago passed a bill to set fees per hospital bed, but it was vetoed by Gov. Chris Christie. Then a state tax court ruled that profits had become so interconnected with the operation of the nonprofit Morristown Medical Center that it was no longer tax exempt. That prompted a wave of lawsuits by towns seeking tax payments from 41 of the state’s 59 nonprofit hospitals.
Before the fighting and chaos got out of control, Christie proposed a two-year freeze on hospital property-tax liability and named a commission to come up with an equitable solution.
The freeze expired almost two years ago without a solution. Bills languish in legislative committees and fee deals only exist where towns and hospitals have come to terms on their own.
AtlantiCare struck a 10-year agreement with Galloway Township, where it has a hospital. The township dropped its suit seeking tax payments and the health system agreed to pay $320,000 a year, rising to $347,000. In Atlantic City, the location of its other hospital, the city and health system are waiting for state legislation to resolve fee and tax issues.
Shore Medical Center said it has contributed $500,000 directly to host Somers Point the past two years. Inspira Medical Center Vineland pays $250,000 in annual property taxes and the city is disputing its own tax assessment. Hackensack Meridian’s Southern Ocean Medical Center pays $820,000 in taxes on other properties.
Discussions on a statewide solution are ongoing between the New Jersey Hospital Association and the N.J. State League of Municipalities. When the bill cleared the Legislature, the league objected to the fee schedule as being too low.
State leaders should help concentrate the minds of the two organizations and help them agree on a payment approach that’s fair and applied evenly throughout New Jersey.
That’s already taken years, too many years. Until then, nonprofit hospitals should make good-faith payments to their municipal government hosts.