Challenge by Hospitals to N.J. Charity Care Mandate Rejected; Future Court Date Beckons

A challenge to the state’s charity care mandate brought by eight New Jersey hospitals was rejected on jurisdictional grounds by a three-judge panel of the New Jersey Appellate Division in a May 20 opinion described in a recent article in the New Jersey Law Journal (NJLJ). The panel declined to rule on the merits of the case and instead noted issues with the forum in which the case was brought, specifically that since there had not been any findings of fact and since no record had been developed, the appellate division did not have proper jurisdiction for the case. The hospitals appealed to the appellate division after the state Department of Health declined to rule on the challenge, citing its own inability to rule on a constitutional challenge. The panel noted that the trial court would be the proper venue for the hospitals’ claims.

The substance of the claim brought by the hospitals is that the requirement by the state that hospitals provide charity care is an unjust taking of property without compensation. The NJLJ noted, “The hospitals claim that the charity care mandate in the New Jersey Cost Reduction Act … is unconstitutional because it amounts to a taking of property without just compensation, even though they are subsidized by annual legislative appropriations. The relevant portion of the statute says ‘no hospital shall deny any admission or appropriate service to a patient on the basis of that patient’s ability to pay or source of payment.’” The article notes that while the legislature appropriated $675 million for charity care in 2014 and $650 million in 2015, the hospitals bringing the action all noted that, despite the state funding, they would be losing between $980,000 and $16.8 million based on the requirements under the act. While the NJLJ did not state when the hospitals would be bringing suit at the trial court level, the case will merit attention when it eventually comes before a trial court because of the potential impact it will have on the structure of charity care in New Jersey.