Many not-for-profit hospitals in New Jersey might have to make payments to their local municipalities for community services.
A bill introduced by three New Jersey senators would impact 63 acute-care hospitals with for-profit operations.
If passed, the Hospital Community Service Contribution Bill would mandate hospitals to pay $2.50 a day for each certified bed and $750 a day for hospitals that provide “satellite emergency care,” or emergency telemedicine services.
Sen. Robert Singer, who co-sponsored the bill with Senate President Steve Sweeney and Sen. Joseph Vitale, said the payments were based on the number of licensed beds so hospitals can predict cost and budget appropriately.
The bill states that 95% of the payments will be used by the local township, and the other 5% will be used by the county. The payments will be used for property tax relief, and public safety services such as the police and fire departments. Any voluntary contributions the hospitals make will be reduced from their payments.
Don Stuart, a partner at law firm Waller Lansden Dortch & Davis, said he predicts that many states are looking to implement similar measures during cash-strapped times. But Stuart warned it could drain some hospitals.
“How much certainty is there with respect to these rates?” Stuart said. “Looking down the road these rates could increase and this could be a further substantial burden on the hospital.”
Financially unstable hospitals and safety net hospitals would be able to apply for exemption. Hospitals could also apply to opt-out of payment if they're losing money.
Six months ago, a New Jersey court ruled not-for-profit Morristown (N.J.) Medical Center would not be exempt from property tax status because it operates like a for-profit business. The hospital agreed to pay $15.5 million over the next 10 years.
After the Morristown ruling, “a great time of uncertainty” befell New Jersey's not-for-profit hospitals as they wondered whether they would lose their tax exempt status, said Betsy Ryan, president and CEO of the New Jersey Hospital Association, which represents the hospitals.
Not-for-profit hospitals across the country saved about $3 billion in 2002 because of exemptions for local property taxes, according to an estimate from the Joint Committee on Taxation, a non-partisan committee that helps Congress with tax legislation.
Ryan said the association is still reviewing the bill and gathering feedback from the hospitals, but it “certainly looks like a good starting point for discussion.”
The legislation also calls for a commission to study the fee's impact and success.
Singer expects the Legislature to vote on the bill on Dec. 17.