Another New Jersey hospital faces tax challenge

A lawsuit filed last month against a New Jersey hospital is one of more than a dozen recent legal challenges to not-for-profit hospitals' tax exemptions in that state, following a court decision last year and a failed legislative fix.

Municipalities are increasingly scrutinizing hospital tax exemptions across the country, saying not-for-profit hospitals that operate more like for-profits should pay their fair share for services.

Some of the lawsuits, such as the one filed by the municipality of North Bergen Township against 206-bed Palisades Medical Center, are challenging not-for-profits' tax-exempt status in general.

The challenges were filed after a New Jersey tax court ruled against Morristown (N.J.) Medical Center in June. The judge in that case said that because the hospital operated in many ways like a for-profit business, it should not be exempt from property taxes. The judge also concluded that if all hospitals operated like Morristown then, “for purposes of property-tax exemption, modern nonprofit hospitals are essentially legal fictions”—opening the door to similar challenges across the state.

In response to that ruling, the New Jersey Legislature passed a bill in January that would have solidified not-for-profit hospitals' tax exemptions in exchange for them paying fees to their municipalities. Gov. Chris Christie, however, didn't sign the bill, resulting in a pocket veto.

Palisades CEO and President Bruce Markowitz said that if the hospital didn't have its tax exemption, “it would have a dramatic effect on Palisades for sure,” although he didn't have an exact financial estimate.

“I think all of us in the state want to follow the legislative process, and it doesn't benefit anybody to have a long and protracted legal challenge,” Markowitz said.

Philip Swibinski, a spokesman for North Bergen, said the township would also like to see a bill passed. Betsy Ryan, CEO of the New Jersey Hospital Association, said the association is still hoping for a statewide solution.

A Rhode Island hospital is closing units and laying off employees a little more than two years after joining Care New England Health System.

Memorial Hospital of Rhode Island in Pawtucket said last week that it is eliminating a number of positions, and closing its birthing center, one of its surgical departments and its intensive-care unit.

Care New England President and CEO Dennis Keefe said a 200-bed surplus in Rhode Island, “flagging inpatient income” and federal payment changes prompted the move.

“On a national level, the Affordable Care Act emphasizes population healthcare, which calls upon healthcare facilities to keep people well through preventative measures, instead of just treating them in hospitals when they are sick,” Keefe said in a statement. “This trend is forcing facilities and systems to redefine themselves to be more streamlined and responsive to the needs of the people we serve.”

Memorial wants to move its obstetrics unit to Kent Hospital in Warwick, R.I., or Women & Infants Hospital of Rhode Island in Providence, both part of Care New England. That change will need to be approved by the state.

“We realize that there is concern about the relocation of the obstetrical service,” Memorial Hospital President Dr. Michael Dacey said. “But we know the state already has sufficient obstetrical beds, and we believe there is already sufficient choice in the community to satisfy the diverse preferences of parents-to-be.”

The hospital will also consolidate its laboratory services and lay off an undisclosed number of staffers.