NJ Hospital Closures May be Offset by Incentives

When community hospitals close, the immediate thought is of the loss of access to healthcare for the people in the service area.

No less important, however, is the economic impact of the closing. Hospitals are economic engines, oftentimes the largest employers in their communities. The ripple effect of a closure is felt almost immediately by the local businesses and municipalities that depend upon the salaries and taxes that hospital employees pump into the local economy.

New Jersey State Assemblyman Jerry Green (D-Middlesex, Somerset, and Union) saw firsthand the effect that the 2008 closing of the 355-bed Muhlenberg Regional Medical Center had on Plainfield, NJ, and the thousands of lives that were disrupted with the shuttering.

"It has had a tremendous impact job-wise," Green says. "At one time we had a little over 1,000 employees, the majority of whom lived in the Plainfield area. Local vendors that offered different services to the hospital were no longer able to do that. We had doctors in the immediate area that used the facility that no longer could afford to do business in the area because the hospital is no longer there, so they have moved out. That was revenue for them. It meant the people who live in the community that worked for them no longer have jobs. These same 1,000 people spent their money in town."

JFK Medical Center now operates Muhlenberg as a satellite emergency room and for outpatient clinical care. JFK's plans to turn the hospital into a shopping and residential development have been criticized by some city residents.

Green is the sponsor of A-3043, also known as the Heath Care Facility Repurposing and Revitalization Tax Credit Act. The bill, which is wending its way through the state legislature, would allow over 10 years, tax credits equal to100% of capital investment for developers who buy former hospitals that have lost their state certificate of need and who repurpose the buildings as medical arts malls.

To qualify, developers will have to demonstrate that:

• They need the tax credits to make project financially viable
• At least 50% of the net leasable space of the repurposed building will be dedicated to non-acute healthcare and support services
• The facility "will not destabilize the supply and delivery of acute care health services in its market"
• The tenants will employ at least 100 people
• The developer will spend at least $10 million on the project
• That it will yield a net positive effect for state and local government

"It's needed because we have a lot of hospitals in New Jersey closing," Green says. "There is no other way of financing someone coming in that might want to reopen it maybe as a scaled-down facility. Without some creative financing that is hopeless."

Green says the bill is carefully drawn so that these repurposed medical arts buildings would not provide in-patient acute care, nor would they compete with nearby hospitals for other services. "We are not competing with other hospitals but we are offering hospital services that are needed," he says.

The bill does not affect the budget, Green says, so he is confident that it will pass the Democrat-controlled Assembly and Senate. He hopes it will have the support of Republican Gov. Chris Christie.

"This could be a role model to save other hospitals that right now are on the bubble, but it's up to the governor," he says. Assemblyman Green and other community boosters should be commended for their efforts to mitigate the effects on a hospital closure on local economies. Opening a medical arts facility where a hospital once stood will no doubt create some new jobs and tax revenues.

To be clear, however, no medical mall can come close to replacing the lost jobs and revenues that vanish when a 24/7/365 hospital closes.