Barnabas Health CEO Ostrowsky speaks on tax ruling #8212 and his thoughts may be surprising

Tom Bergeron//July 15, 2015//

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Like all hospital executives, Barnabas Health CEO and President Barry H. Ostrowsky viewed the recent tax court decision that could stick Morristown Medical Center with a $2.5 million tax bill with a discerning eye. His reaction, however, may be surprising.

Health care systems, Ostrowsky said, should give financial help to the communities where they are located.

“I do think there should be some approach, some way for those of us who manage not-for-profit assets, to make sure that we are not only contributing to our community in health care and human services, but contributing to our community financially,” he said.

In the Morristown case, Judge Vito L. Bianco ruled in June that the hospital did not meet the legal test that it operated as a nonprofit, charitable organization in the tax years 2006 through 2008. It is a ruling that could impact every hospital in the state, should it survive what figures to be a lengthy appeal.

Ostrowsky said he’s not sure how hospitals should contribute, but he was clear on one point: He feels the decision should come from the Legislature, not the bench.

“I think it cries out for some level of legislative policymaking, and I suspect you’re going to see that over a short period of time,” he said. “I wouldn’t want the full impact of the Morristown case to prevail statewide because that would mean many dollars of property tax that we’re not used to paying, but I also don’t think that the answer is zero, to be honest.

“How we find an equitable ground, I think, is going to be a challenge for the Legislature more so than the courts.”

Ostrowsky made his comments Tuesday, when Barnabas Health and Robert Wood Johnson Health System announced their boards have approved a merger that will create the largest health system in the state.

The RWJ Barnabas Health system is expected to have an annual revenue of $4.5 billion.

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Ostrowsky said the size and scope of today’s health systems demand they be held to a level of accountability.

“No matter what (type of organization) you are, when you have an organization of our size with facilities at the level of activity that exists on our campuses, you are, to some extent, the user of municipal services,” he said. “You may not use the school system, but you are — and we try to be — good community residents in the towns in which we are located. And so I don’t think it’s inappropriate to find some way for not-for-profit, tax-exempt organizations to help their host communities.”

The rate is the issue.

“If that’s based on a full evaluation of real estate and a full tax burden, I think that could be oppressive,” he said.

Ostrowsky was clear. He is not asking for health systems to lose their not-for-profit status, nor is he saying they should operate with a different mission. But he is concerned about the potential far-reaching impact of the decision.

“It could change the landscape of not-for-profit health care in New Jersey dramatically if, in fact, the conclusion reached by the tax court judge is not only vindicated on appeal but is adopted by all the municipalities that have not-for-profit assets within their boundaries,” he said.

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