Now that Atlantic Health System has agreed to pay Morristown $15.5 million to cover tax liabilities and other costs, hospitals and communities across New Jersey are considering their financial relationships.
With a hefty windfall coming to Morristown following its property tax settlement with Morristown Medical Center, institutional non-profits throughout New Jersey likely are looking at a future in which they too will be asked to pay more into their municipalities' bank accounts.
State officials have been talking to municipalities, representatives of non-profits like the medical center and other stakeholders to develop legislation requiring non-profits to pay a fair share to their host communities. The issue is complicated by the changed nature of non-profits, which are exempt from property taxes but have evolved far from their purely charitable origins.
"The settlement between Morristown Medical Center and Morristown is a byproduct of the changes occurring in the healthcare industry, the way hospitals operate and their role in their home communities," said Richard McGrath, a spokesman for one of those legislative leaders, Senate President Stephen M. Sweeney, (D-Gloucester).
Many observers expect that a bill will be introduced in the coming lame duck legislative session, said Kerry McKean Kelly, vice president of communications for the New Jersey Hospital Association.
Meanwhile, Newark Councilwoman Gayle Chaneyfield Jenkins Friday said she wants a task force to review the tax-exempt status of Barnabas Health, which operates Beth Israel Medical Center in the city's South Ward.
"While every hospital is a case-by-case basis, the Atlantic Health tax case provides us with a roadmap for collecting property taxes at non-profit hospitals, like Beth Israel," Chaneyfield Jenkins said. "We would be negligent to the taxpayers of Newark if we did not pursue this."
http://www.nj.com/morris/index.ssf/2015/11/atlantic_health_to_pay_morristown_155m_to_settle_t.html
The settlement signed Nov. 10 by Morristown council provides that Atlantic Health System, parent of the medical center, will pay $15.5 million over 10 years to the town. The two sides had been in court since 2008 over parts of the hospital's operations, which the town said were indistinguishable from for-profit businesses -- and therefore subject to taxation.
The discussion shifted to settlement discussions this summer after Tax Court Judge Vito Bianco ruled strongly in the town's favor, saying the hospital "clearly" did not meet the criteria to qualify for a non-profit property tax exemption.
The ruling does not affect the hospital's or its parent company's federal non-profit tax status.
McGrath said the issue now is balancing non-profit hospitals' mission with their responsibility to their communities.
"We believe that hospitals should pay their fair share but we are aware that any legislative response could be significant for non-profit hospitals, the people they serve, their home communities and the taxpayers," he said. "Many of our hospitals are the largest employers in their towns and cities, so their role as health care providers and employers is important. We are working with everyone involved to get it right."
Some may not wait for the state to act.
Atlantic Health is in discussion with its other host communities to resolve tax issues, spokeswoman Elaine Andrecovich said.
Besides Morristown medical, the health system's hospitals include Overlook Medical Center in Summit, Newton Medical Center and Chilton Medical Center in Pompton Plains. Its Goryeb Childrens Hospital is adjacent to the medical center in Morristown.
Municipal representatives agreed that the settlement sets the discussion but is not an exact roadmap for other hospitals and communities.
"Their ability to reach a local agreement may indicate a useful path for other parties to follow," said Michael J. Darcy, executive director of the New Jersey State League of Municipalities, "but we know each circumstance will have its own set of facts and hurdles."
Martin Allen, the Warren lawyer who represented the town in the court case and settlement, noted the wide gap between operations such as Atlantic Health, a $2 billion-a-year system, and small non-profits struggling to survive. Indeed, Allen pointed to non-profit hospitals in East Orange and Newark that were in bankruptcy in the past week and seeking rescues from for-profit hospital operators.
"We'll discover that a lot of the facts that we saw on the ground (in the Morristown case) ... will apply to similar systems," he said. "The question then becomes, will some of those facts apply to smaller hospitals?"
One issue unique to Morristown and the medical center, Allen added, was their long-running feud, now in repair.
"You're dealing with a municipality," he said, "that was at war with Atlantic Health since 2008."
Tim Darragh may be reached at tdarragh@njadvancemedia.com. Follow him on Twitter @timdarragh. Find NJ.com on Facebook.