BRUCE ROCKED HERE

Long Branch has filed a tax appeal to challenge Monmouth Medical Center's tax exempt status. (Andrew Mills | The Star-Ledger)

TRENTON -- A dozen municipalities across the state are challenging the tax-exempt status of the non-profit hospitals in their communities, sparked by Morristown winning a $15.5 million settlement against a hospital last year.

Martin Allen, who represents Morristown against Atlantic Health System, owners of the Morristown Medical Center, said he has filed tax appeals on behalf of Belleville, Freehold, Long Branch, New Brunswick, Rahway, Raritan Township and Summit.

A spokeswoman for the New Jersey Hospital Association said she is aware that municipalities have filed tax appeals against another five hospitals, although she could not confirm them Wednesday night.

"We know of 12 hospitals that received notice that the municipality planned to pursue 'omitted assessments' from prior years," said hospital association spokeswoman Kerry McKean Kelly.

"But we're in a period from now through April 1 where municipalities can file tax appeals. We don't have a count on those because it's so fluid. It seems like every day we're hearing of a new one," she said.

Allen said he didn't know whether these seven nonprofit hospitals have structured their organizations the same way Morristown Medical did, which troubled Tax Court Judge Vito Bianco in June.

Examining issues such as executive pay, revenue sharing between physicians and hospitals, Bianco ruled the hospital would be responsible for paying taxes on most of its 40-acre campus for the years 2006 through 2008.

"Non-profit hospitals have changed significantly, from their early origins as charitable alms houses providing free basic medical treatment to the infirm poor," according to Bianco's 88-page precedent-setting decision. "Today they are sophisticated centers of medical care, and in some cases, education, providing a litany of medical services regardless of a patient's ability to pay."

Tax battle at Morristown Medical Center could bring financial pain to hospitals



The hospital in Morristown created "labyrinthine corporate structures, intertwined with both non-profit and for-profit subsidiaries and unaffiliated corporate entities," the decision said.

The hospital is paying the settlement over 10 years.

The disputes include:

New Brunswick challenging Robert Wood Johnson University Hospital;

Freehold challenging Centrastate Medical Center;

Summit challenging Overlook;

Belleville challenging Clara Maass Medical Center

Raritan Township challenging Hunterdon Medical Center;

Long Branch challenging Monmouth Medical Center;

Rahway challenging Robert Wood Johnson University Hospital.

"Municipalities are saying on one hand, it would be really nice to have additional taxes spread out among more taxpayers," Allen said. "But on the other hand the municipalities are saying if you are doing what you are supposed to do ... then you should not be taxed."

In anticipation of more tax appeal cases, state lawmakers passed a bill last session that would have imposed a per-bed fee paid to the host community in lieu of property taxes. Gov. Chris Christie took no action on the bill, letting it die.

"What we're seeing now is exactly what we have been concerned about -- a flurry of tax appeals that could lead to lengthy and expensive litigation," Kelly said. "We're committed to working with legislative leaders and the governor's office on a bill this session that would provide a statewide solution. That was in fact what Judge Bianco wrote in his tax court ruling, calling on lawmakers to explore a legislative approach to this issue."

Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.