Wednesday, December 16, 2015
“Nonprofit hospitals – When a nonprofit organization pays its CEO $5 million a year, it’s pretty obvious someone is profiting a lot, and that something is wrong. That was the situation in a court case in New Jersey this summer where the supposedly nonprofit Morristown Medical Center (owned by the Atlantic Health System) lost its tax-exempt status as it was operating like a for-profit hospital on almost every level.
In his decision, the judge pointed out that the medical center has various relationships with for-profit subsidiaries and owns several for-profit physician practices and other businesses The court was “unable to discern between non-profit activities carried out by the Hospital on the Subject Property, and the for-profit activities carried out by private physicians.”
In revoking the medical center’s property tax exemption, the judge noted: “By entangling and co-mingling its activities with for-profit entities, the Hospital allowed its property to be used for forbidden for-profit activities.”
The judge also emphasized that Morristown Medical Center paid its executives unreasonably high salaries for a nonprofit, including a completely unconscionable $5 million to its CEO in 2005.
Healthcare industry analysts immediately highlighted that this decision in New Jersey had major implications for other nonprofit hospitals across the country, and the judge was apparently quite aware of the stakes involved in his decision.”
“If it is true that all non-profit hospitals operate like the Hospital in this case, as was the testimony here, then for purposes of the property-tax exemption, modern non-profit hospitals are essentially legal fictions,” Judge Vito Bianco noted in his decision.”
Many of us have argued for years that due to its many money making enterprises, including renting space for the dialysis unit, JFK should be liable for property taxes on the Muhlenberg campus. Will our leaders seek redress?