NEWARK, NJ — Hospitals in Newark will be able to keep their non-profit status as long as they make a yearly contribution to their municipalities, under a new law signed by Gov. Phil Murphy recently.

It comes after a Tax Court of New Jersey ruling in 2015 subjected Morristown Medical Center to pay property taxes, operating as a for-profit hospital. The ruling ended with both sides settling on an agreement that will require the hospital to pay its community more than $15 million over a 10-year span.

The new legislation will establish annual community service contributions to offset the costs of public safety, such as local police and fire departments in the municipalities.

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The bill signed into law overturns prior legislation that exempted non-profit hospitals. Critics, especially in dense cities, have long said contributions made by hospital networks should be made mandatory.

The tax revenue forgone due to the tax-exempt status of non-profit hospitals in 2016 was $9 billion, according to Ernst & Young

The new law, which applies to Newark Beth Israel Medical Center, impacts non-profit hospitals and certain satellite emergency care facilities statewide.

“We believe the newly enacted [New Jersey] property tax exemption law is a good outcome for the hospital and the city of Newark," Linda Kamateh, a spokesperson for the Newark hospital, told TAPinto Newark. "It provides each with financial predictability from year to year, and enables the hospital to continue to focus on our commitment to the health and well-being of the communities we serve." 

As the only state-owned public hospital in New Jersey, the new legislation doesn't affect University Hospital in Newark, a spokesperson for the medical center told TAPinto Newark. 

The new law requires non-profit hospitals to pay the municipality in which they are located $3 per day for each hospital bed and $300 per day for each satellite emergency care facility, based on the prior year’s tally of beds and facilities. Fees would rise 2% annually to cover inflationary costs. The municipality would be required to share 5% of the payment with the county government.

Following the bill’s passing, New Jersey Hospital Association President and CEO Cathy Bennett thanked the sponsors of the legislation for addressing a longstanding issue that resulted in litigation and uncertainty for the state's nonprofit hospitals and their host municipalities. 

“This law is the right solution to allow our hospitals and municipalities to move forward together in pursuit of good health for New Jersey communities,” Bennett said. “Thank you to Gov. Murphy, Speaker Coughlin, Sen. Sarlo, Sen. Cryan and Sen. Vitale for their leadership in creating a resolution to more than five years of litigation and uncertainty for the state’s nonprofit hospitals and their host municipalities.”

The law also establishes a permanent commission known as the “Nonprofit Hospital Community Service Contribution Study Commission” to study the system created under the law. The commission will issue reports every three years to the governor and legislature.

Pre-existing financial agreements between hospitals and municipalities will remain in force until expiration of those agreements.

The law was sponsored by Senator Paul Sarlo, Senator Joe Cryan, Senator Joe Vitale and Senator Troy Singleton.

“Hospitals offer a substantial economic benefit to their communities through health care jobs and services. Equally as important, they are a significant presence in the community from donating to local charities and organizations to sponsoring local events,” noted Singleton (D-Burlington). “This community presence and generosity is bolstered by their non-profit status. Continuing to protect this status, as laid out in the bill, will ensure these hospitals remain major civic benefactors.”