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Op-Ed: For Nonprofit Hospitals, a Time to Legislate, Not Litigate

It’s important to get the legislation right and arrive at a sound solution that will help municipalities and tax payers without threatening the viability of hospitals

In one year since the Morristown Memorial tax court decision was announced on June 25, 2015, 30 lawsuits representing more than half of the state’s 58 nonprofit hospitals have arisen across the state pitting municipalities against their not-for-profit hospitals. While not particularly surprising, this is an unfortunate response. Over the years, hospitals and municipalities have had a strong history of working together as good partners, and it is a shame that these mounting lawsuits are eating away and placing stress on these otherwise successful and cooperative working relationships.

I applaud the initial response by members of the New Jersey Legislature following the court decision – introducing a bill to provide consistency and certainty for both hospitals and municipalities. The bill was pocket-vetoed by the governor, who offered a fair alternative approach: a two-year freeze on any property-tax liability and a commission to study the 70-year statute that was the basis for the original dispute and offer a solution. Since January, there have been a few bills introduced but no formal action has been taken on any of them.

Instead of endless litigation, what is needed is a thoughtful legislative approach that would create a sound statewide policy allowing hospital contributions to flow to their towns much faster than disjointed, drawn-out legal battles. We urge the Legislature to pass a bill that quells the legal uncertainty for not-for-profit hospitals and ensures a balanced statewide solution.

Make no mistake, hospitals are more than willing to contribute to their towns for the municipal services they use. The hospital community supported the bill in the lame-duck session of the Legislature that would have provided $25 million in hospital financial support to their communities.

Today, hospitals support bill A-3635/S-2329 sponsored by Assemblyman Herb Conaway and Senator Nilsa Cruz-Perez. This bill provides an opportunity for thoughtful discussion while placing a moratorium on the lawsuits that could cost towns and hospitals millions to litigate and years to resolve. Specifically, it would create a Non-Profit Hospital Property Tax Exemption Study Commission that would meet over a two-year period to develop and recommend a sound statewide policy approach. We’ve even offered compromise language that would have hospitals contribute a reasonable amount to their municipality while the study commission does its work.

A second bill, S-2212/A-3888, introduced by Sen. Bob Singer (R-Ocean), would protect the legality of PILOT agreements – or Payments in Lieu of Taxes – between hospitals and their host municipalities. The hospital community also supports that measure.

The Morristown case that initially spurred this issue was seven years in the making. It’s wise to take some time as presented in bill A-3635/S-2329 to get this right and arrive at a sound solution that will help municipalities and tax payers without threatening the viability of hospitals and the healthcare services they provide to our communities.

With time ticking away, it is inevitable that more municipal lawsuits will be added to the already substantial list. This patchwork of litigation offers no guarantee of consistency or equality for individual municipalities or the hospitals, and perpetuates an ongoing cycle of lawsuits that will take years to resolve and cost millions to litigate.

While supporting new legislation and agreeing to pay their fair share, it is important to note that New Jersey’s nonprofit hospitals already contribute significantly to municipalities and the state, as reported by EY (formerly Ernst & Young LLP). These hospitals deliver care 24/7, provide $2.4 billion in community benefit, and serve as prime drivers of economic activity within their communities – employing nearly 144,000 people whose wages and tax contributions ripple through the economy. Free and discounted care to the poor and uninsured totals about $1 billion annually, and our hospitals have been targeted for $348 million in cuts to the Charity Care program in the past two state budgets.

New Jersey’s not-for-profit hospitals, which have been exempt from property taxes since laws were enacted in 1913, have already volunteered in a unified manner many months ago to contribute additional funds to their municipalities to support essential functions and provide local property tax relief. In return, the only thing requested by the hospitals was to preserve their current property tax-exemptions and provide them relief from litigation.

So, I return to my call for legislation versus litigation. We support bills A-3635/S-2329 and S-2212/A-3888, which address the needs of municipalities, while providing certainty to our hospitals. We urge action on this legislation and re-affirm that our members are committed to doing their share to support their municipalities, while continuing to serve as good neighbors and answering the needs of their patients.

Betsy Ryan is the president and CEO of the New Jersey Hospital Association.

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