By Kevin Coughlin
In the wake of Morristown’s victory this week in an epic and potentially precedent-setting tax battle with Morristown Medical Center, Mayor Tim Dougherty took exception to hospital statements that it may respond by cutting back on charity services.
Decrying such “scare tactics,” the Mayor called it “disingenuous” for the hospital to claim financial hardship at a time when it’s buying two office buildings on Madison Avenue.
“Clearly, you don’t have financial issues when you’re able to purchase $22.5 million of real estate,” Dougherty said on Saturday.
At the same time, to avert possibly protracted appeals by the hospital, he left the door open for settlement talks with the medical center’s new CEO and president, who both came aboard within the last few weeks.
In an 88-page decision, Tax Court Judge Vito Bianco ruled on Thursday that Morristown Medical Center, which is classified as a nonprofit, should pay property taxes on nearly all of its 40-acre holdings in town for the tax years 2006-2008.
For-profit and nonprofit activities are so intermingled at the hospital that it no longer meets the legal definition for a nonprofit entity, said the judge, who only exempted the auditorium, parking garage and fitness center from tax liability.
A statement from the hospital’s parent company, Atlantic Health, said Bianco’s decision “disappointing” decision poses “serious consequences for both Morristown Medical Center as well as other healthcare systems in the state.”
As for appealing the ruling, Atlantic Health said “we will evaluate our options and make a decision that is in the best long-term interest of the hospital, the patients we serve, and the greater community. This decision is limited to the issue of property tax, and does not call into question the charitable status of the hospital. We remain a not-for-profit organization.”
But the mayor’s beef was with remarks attributed to hospital attorney Kenneth Norcross during the hospital’s tax appeal trial.
If required to pay property taxes — estimated at $2.5 million to $3.5 million per year by hospital lawyers– the hospital would be forced to cut back on such “community benefits” as charity care, Medicare services, training for future doctors and operations at the Goryeb Children’s Hospital, NJ Advance Media quoted Norcross as saying.”Now we have to re-evaluate where that stands,” Atlantic Health spokeswoman Janina Hecht told Morristown Green on Saturday. “It’s a new day, and we’re going to re-evaluate.”
Atlantic Health backed away from a tax settlement with the town about 18 months ago, according to Mayor Dougherty.
He said his administration remains open to renewed talks with the hospital’s new CEO, Brian Gragnolati, and its new president, Robert Toohey.
The hospital made overtures to the town in the days preceding the ruling, Dougherty said, but Judge Bianco was not inclined to delay his decision any longer.
Morristown Medical Center is the town’s largest employer, with about 5,500 employees. It is involved in numerous programs and events within the community, which the Mayor was quick to note.
“It’s a great hospital, we’ve had great experiences with the hospital,” Dougherty said. “This is strictly a legal matter.”
The case dates to the prior administration of Mayor Donald Cresitello. Town Administrator Michael Rogers, who was there at the time, said red flags were raised when new buildings at the hospital started housing private medical practices.
“You would see doctor groups that were not employees of Morristown Medical Center, who were operating in ways very similar to what was going on in other medical groups” in taxable buildings across the street, Rogers said.
The town attempted to tax the hospital in 2008, triggering tax appeals by the hospital that culminated in Bianco’s ruling. Rogers said it’s too soon to say how the town would allocate the additional tax revenues, if the ruling stands.
Over the years Mayor Dougherty made “countless efforts” to settle the case, Rogers said. During last fall’s trial, the judge even gave both sides a week to hammer out a deal.
“There was no real effort on the hospital side to settle on some reasonable terms,” Rogers said. He expressed optimism that progress may be made with the new CEO, Brian Gragnolati.
“There’s always the opportunity to sit down and come to some settlement, despite this opinion. But the decision is there. And it’s real,” Rogers said.
Rogers acknowledged that hospitals everywhere are consolidating — Atlantic Health now includes hospitals in Pompton Plains, Newton and Summit — and he said Morristown is happy to have such a strong system in town.
“It’s just unfortunate that now they’re going to talk about cutting free programs for people who really need them,” Rogers said.
