Dive Brief:
- In a case that has been followed across the country, a New Jersey hospital has settled on a deal to pay $26 million to the city where it's located to end an ongoing legal dispute regarding its property tax exemption.
- The deal was reached between Atlantic Health System, owner of Morristown Medical Center, and Morristown, N.J.
- The hospital agreed to settle after a judge's previous ruling it should not be exempt from property taxes as it "failed to satisfy the legal test that it operated as a nonprofit, charitable organization for tax years 2006 through 2008," Becker's Hospital Review reported.
Dive Insight:
The case highlights growing nationwide scrutiny of the tax-exempt status of nonprofit hospitals. Experts say hospitals everywhere should be aware more municipalities are challenging them, and in New Jersey, hospitals are expected to seek solutions to avoiding the same fate as Morristown Medical Center.
The hospital's agreement is to pay Morristown $15.5 million over the next 10 years and to begin paying $1 million annually in taxes for the next 10 years.
Experts say the settlement between the health system and city wasn't surprising in light of the previous ruling, Modern Healthcare reports. That ruling noted the hospital's tangled relationships with for-profit subsidiaries and physician practices, as well as its high executive salaries.