A 2021 law drafted as a compromise between tax-exempt non-profit hospitals and the NJ municipalities in which they’re located is being challenged by a lawsuit. State legislators tried to address the dispute, where billion-dollar hospitals paid little to nothing in property taxes, with the law. A 2015 court ruling found that Morristown Medical Center was liable for taxes as a result of operating in large part as a for-profit organization. This triggered dozens of more suits from frustrated municipalities.
The pain point? Most of the 71 hospitals in New Jersey are non-profit companies. They are therefore tax-exempt despite belonging to large, for-profit healthcare groups. The state infamously has the highest property taxes in the country. Local officials would like to have the hospitals contribute to shared local services like police, firefighting, and waste disposal. Legislation voted on last December requires the facilities to make payments for “community service” to their host municipalities, but maintains their tax-exempt status.
While the legislators hailed the compromise as a victory, towns and cities across NJ sued. The lawsuit states that taxpayers in these municipalities hosting hospitals will be “effectively subsidizing for-profit hospitals that are ‘non-profit’ in name only.” A hearing will take place in November in state Superior Court. Governor Phil Murphy is named as the defendant, and the suit aims to block enforcement and eventually void the law.
The main lobbyist for NJ’s communities opposed the bill and supports the lawsuit. However, the New Jersey State League of Municipalities is not joining the case. The New Jersey Hospital Association declined comment on the lawsuit, as did the Attorney General’s office. Consumer activist organization New Jersey Citizen Action filed a petition to join the suit. The group feels healthcare should be “effective and compassionate” but will be neither when driven by profits. A judge declined Citizen Action’s request.
There are pros and cons to operating as a non-profit or a for-profit healthcare organization. Either way, community services and resources aren’t provided for free.
