Non-profit hospitals in New Jersey, which operated for decades without paying property tax, may find that benefit ending.
A bipartisan coalition of legislative leaders in Trenton Monday introduced legislation that would require non-profit hospitals to pay "Community Service Contributions" to their host communities to help cover municipal services from which they benefit.
The groundbreaking legislation is the result of a tax court ruling earlier this year that found Morristown Medical Center operated largely as a for-profit hospital, making it subject to property tax. The two sides settled on an agreement that will have the hospital paying the town $15.5 million over the next 10 years.
"The health care industry has changed substantially over the years with hospitals engaged in a broad range of activities and services," said senate President Steve Sweeney, D-Gloucester. "The business has changed, but the tax laws have not. This legislation will have the hospitals pay their fair share while at the same time preserving their tax-exempt status."
Under the bill, the state's 63 non-profit hospitals would have to pay $2.50 per day for each hospital bed in the prior year and $750 per day for each facility providing "Satellite Emergency Care."
Hospitals that lose money could apply for an exemption from the payments.
The municipal payments would be dedicated to property tax relief and for public safety, such as police, fire and emergency services, the legislators said. Five percent of the payments would be sent to the county where the hospital is located, according to the bill.
Any voluntary contributions by the hospitals would be deducted from the community service payments.
Sen. Joseph F. Vitale, D-Middlesex, said the payment plan would provide a fixed target that hospitals could put in their budgetary planning, although it doesn't say how beds would be counted, since that number fluctuates over a year.
The state's hospitals worked with the legislators to craft the bill, noted Sen. Robert Singer, R-Ocean.
In a statement, New Jersey Hospital Association President and CEO Betsy Ryan said the two sides had a "constructive dialogue" about the bill.
"NJHA has developed a member task force to explore this issue, and our goal is to provide certainty to New Jersey's not-for-profit hospitals, while providing an avenue for hospitals to pay some reasonable amount - along with their community benefit contributions - to offset the costs of local services provided by the municipality," she said.
Ryan said a final bill has to recognize that New Jersey's not-for-profit hospitals are exempt from local property taxes, that they should be protected from additional legal challenges on their tax status, as Morristown Medical Center was, and that "financially challenged" hospitals should be exempt from the payments.
The bill also would create a commission to study the system and make recommendations for improvements.
Tim Darragh may be reached at tdarragh@njadvancemedia.com. Follow him on Twitter @timdarragh. Find NJ.com on Facebook.