The needler in the haystack.

Monday, June 29, 2015

Could Morristown Hospital tax ruling affect Muhelnberg?


A NJ Tax Court has ruled against the hospital's non-profit status.
 

Could Plainfield's Muhlenberg Hospital property be affected by the tax ruling on Morristown Hospital that came down on Friday?


Hospitals and communities across New Jersey have been watching with great interest the suit by Morristown against its longtime non-profit hospital (the largest in the Atlantic Health System), alleging that the hospital does not meet the criteria of a non-profit hospital and owes the municipality property taxes for several years. Morristown did not dispute the hospital's IRS 501(c)(3) status.

Hospital official say the decision could cost it $2.5 to $3 million per year. You can read details of the case in the NJ Spotlight story (here) and the Ledger (here).

New Jersey Tax Court Judge Vito Bianco ruled the hospital failed to meet the legal test for operating as a charitable non-profit.

Among the issues Biano raised are --
  • The hospital appears 'functionally similar' to for-profit hospitals, with both non-profit and for-profit subsidiaries intertwined;

  • The hospital failed to show where its non-profit activity ends and its for-profit relations with physician groups begins;

  • Private physicians and medical practices both earn and retain income on the hospital's property;

  • 'Non-profit' hospitals generate significant revenues and pay salaries competitive with for-profit institutions; and

  • The hospital had 'intermingled' interests with other for-profit operations.
Plainfield has pressedn JFK in the past about its non-profit status.

Since JFK's predecessor, Solaris, closed Muhlenberg in 2008, the main building was stripped of its equipment and converted primarily into records storage. Although outpatient imaging is done on the premises, it is not clear if this is private, for-profit medical practice using the Muhlenberg facility.

Complicating matters even more for JFK are the subdivisions of its property that it sought and won. The Snyder School of Nursing is now a standalone property, and activity there cannot count toward the main campus use.

The same goes for the former Kenyon House, which houses the DaVita unit and is the site of the to-be-built new Satellite Emergency Department (SED).

It may be that the Morristown case fits Muhlenberg less than it does JFK proper, since the primary issue in Plainfield is the abandonment of provision of hospital services, not the blending of non-profit and for-profit activities.

At any rate, it must be an anxious time for JFK's board of directors.

And perhaps an opportune moment for Plainfield to apply a little squeeze.


  -- Dan Damon [follow]

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