A bill sits on New Jersey Governor Chris Christie's desk that would set a new precedent for the state: having nonprofit hospitals paying tax-like "community service contributions" to the towns and cities that host them to help cover the costs of the municipal services they offer, such as police and fire department assistance.
The bill, co-sponsored by State Senators Stephen Sweeney, Robert Singer and Joseph Vitale, passed successfully through the legislature last week and has a little more than 24 hours before its January 19 midnight deadline. If it is not signed into law (or vetoed) it will die on Governor Christie's desk due to inaction.
The bill was created to stem what many saw as an inevitable domino effect of crippling tax assessments on New Jersey's 60 non-profit hospitals after the Morristown Hospital decision last June, after a judge decided the hospital was no longer operating as a true non-profit. Morristown will now pay more than $15 million in property taxes over the next decade.
[Also: New Jersey nonprofit hospitals could face new community tax]
The new bill, which the New Jersey Hospital Association fully endorses, would assess nonprofit hospitals based on a $2.50 per active bed fee, and $750 for each satellite care facility. The bill also stipulates a 2 percent yearly increase in the fees to cover the cost of inflation.
Betsy Ryan, president and CEO of NJHA says the bill is the "best solution for hospitals, municipalities, and New Jersey taxpayers." She said it alleviates the uncertainty created for hospitals by the Morristown decision, shooing away the spectre of possible tax assessments and replacing it with a predictable budget item they can work with. She says it also gives proper consideration to nonprofit hospitals who are financially strapped.
"It's something that is known to us and that we can budget for. And the final bill has an exemption process whereby a financially challenged hospital can go to the state of New Jersey and say 'we are distressed. This measure will be problematic for us to meet. So we think it's got protections in it for hospitals that might be still struggling. We're very pleased with the final product," said Ryan.
Co-sponsor Senator Robert Singer clarified the exception to this new rule isn't a guarantee, but comes at the discretion of the State Health Commissioner. He said exceptions for stand-alone non-profit hospitals that are not part of a system can qualify for special exemption. However non-profit hospitals that are part of a bigger system that does make money could have a tougher road. They will have to prove the overall system isn't making enough money to cover the new fees. It would be the Commissioner's call in both scenarios. Either way, Singer insists the bill is the best way to protect NJ non-profit hospitals from closing because the fees are known well in advance. "The overall system can afford this kind of a tax, as opposed to being able to afford a full property tax. They couldn't afford that. They couldn't afford to keep it going at that rate. They can afford this rate," said Singer.
But critics of the bill say it isn't the boon for hospitals and their communities that it's made out to be. Newark City Councilwoman Gayle Chaneyfield Jenkins calls the bill a "giveaway to the hospital lobby". She said communities should have the ability to look at their nonprofits first, and determine what's for profit and nonprofit activity.
"Unfortunately in Newark, we don't have the benefit of knowing exactly how much nonprofit activity occurs on these hospital campuses. The legislation thwarts our ability to learn more about the for profit activity of these hospitals." She said in the end, the bill will shortchange communities like Newark. "This one size fits all solution assumes that the costs of providing municipal services are the same in densely populated cities like Newark as rural communities like Salem," said Councilwoman Chaneyfield Jenkins.
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But proponents said there was no time to waste in getting the bill on the books. The deadline for Governor Christie to take action on the bill is January 19th. Singer said if it dies on his desk or is vetoed, legislators must start all over again, giving tax assessors time to mobilize and start assessing hospitals. He believes if that were to happen, the consequences could be dire, especially for safety net facilities caring for the uninsured, undocumented, and poor.
"To appeal the assessment, you have to pay it. That's state law. We're talking about millions of dollars that hospitals would have to come up with to even fight it. You have to pay it and you have to keep it current. Where do you get the money from? Do you start borrowing money to pay taxes? It's a frightening scenario," Singer said.
Twitter: @BethJSanborn