v. :
READINGTON
TOWNSHIP, :
Defendant. :
Decided:
May 11, 2005
Susan
A. Feeney for plaintiff
(McCarter and English,
attorneys).
Martin
Allen for defendant (DiFrancesco,
Bateman, Coley, Yospin, Kunzman, Davis
& Lehrer, attorneys).
KUSKIN,
J.T.C.
Plaintiff Hunterdon Medical Center (“HMC”) operates a
hospital in Flemington, New Jersey (the “Hospital”) and owns the property in
Readington Township that is the subject of this appeal. The property, designated
as Block 34, Lot 31.01 on defendant’s tax map, is located approximately nine and
one-half miles from the Hospital campus, and contains a three-story building
(the “Subject Building”) with approximately 26,000 square feet of floor area.
For each of the tax years under appeal, 2000, 2001, and 2002, the total tax
assessment on the property was $3,300,000, of which $2,000,000 was allocated to
the Subject Building. HMC contends that, during the years under appeal,
*
approximately 21,400 square feet of the Subject Building, occupied by
facilities owned and operated by HMC and staffed by its employees, were used for
hospital purposes and therefore qualified for tax exemption under N.J.S.A.
54:4-3.6. The facilities in issue are a Wellness Center (the “Wellness
Center”), a physical therapy service (the “PT Service”), a cardio-pulmonary
rehabilitation service (the “CP Rehab Service”), and a pediatric practice (the
“Pediatric Practice”). HMC does not seek exemption for the remainder of the
Subject Building, consisting of office space leased to cardiologists in private
practice.
HMC’s appeal was the subject of a plenary trial followed by the
submission of briefs and proposed findings of fact and conclusions of law. Based
on the testimony and documents presented at trial, my evaluation of the
credibility of the witnesses, and the post-trial submissions by the parties, I
hold that, for each of the years 2000, 2001, and 2002, the only portion of the
Subject Building qualifying for exemption was the area used exclusively by the
CP Rehab Service.
[N.J.S.A. 54:4-3.6.]
This statute establishes the following three criteria that must be satisfied
to qualify for exemption: (1) the entity owning the property must be organized
exclusively for the exempt purpose; (2) the property must be actually used for
the exempt purpose; and (3) the operation and use of the property must not be
conducted for profit. Paper Mill Playhouse v. Millburn Tp.,
95
N.J. 503, 506 (1984). See also Mega Care, Inc. v.
Union Tp., 15
N.J. Tax 566, 572 (Tax 1996). In deciding whether these criteria have been
satisfied, a court must apply the principle of statutory interpretation
generally applicable to exemption claims, namely, that “statutes granting
exemptions from taxation are to be strictly construed against those seeking
exemption,” but the statutory language and legislative intent should not be
distorted. Paper Mill Playhouse, supra, 95 N.J. at 506-507.
See also City of Long Branch v. Monmouth Med.
Ctr., 138
N.J. Super. 524, 530-31 (App. Div. 1976), aff’d o.b., 73
N.J. 179 (1977).
I will discuss first the organization of HMC, then
whether the Subject Building was operated for profit during the years under
appeal, and lastly, whether the Subject Building was used for hospital
purposes.
B. Organization for the Exempt Purpose.
In determining whether a
corporate property owner is organized exclusively for an exempt purpose, the
focus is on the owner’s organizational documents, including its articles of
incorporation and by-laws. Black United Fund of
N.J., Inc. v. East Orange City, 17
N.J. Tax 446, 455 (Tax 1998), aff’d, 339
N.J. Super. 462 (App. Div. 2001) (“When determining whether an entity is
organized exclusively for an exempt purpose, the courts look only to the
entity’s organizational documents.”). See also Planned
Parenthood of Bergen County, Inc. v. Hackensack City, 12
N.J. Tax 598, 610
n.6 (Tax 1992), aff’d, 14
N.J. Tax 171 (App. Div. 1993) (holding that “the term ‘organized’ in the
statute refers to the entity’s organizational documents, its corporate
charter”).
During the years under appeal, 2000, 2001 and 2002, and as of the
relevant preceding October 1 assessment dates for each year, HMC’s certificate
of incorporation, provided as follows as to its corporate purpose:
The
purposes for which this corporation is formed are charitable, including the
establishment, erection, operation, support and management of a hospital and a
medical and health center or institution, and related facilities, where medical
and surgical diagnosis, treatment, care, and nursing, and improvement of, and
benefits to, their health, will be rendered to persons of any creed, race,
nationality, or color; and also including as a part thereof, medical research,
the training of physicians and auxiliary personnel.
The certificate of incorporation was amended and restated as of May 3, 2001,
to set forth the following corporate purpose:
(A) Hunterdon Medical Center
(the “corporation”) is organized and shall be operated exclusively for
charitable, scientific or educational purposes, within the meaning of Section
501(c)(3) of the Internal Revenue Code of 1986 and the Regulations thereunder as
they now exist or as they may hereafter be amended . . ., including without
limitation for the purposes more particularly set forth below in this Article
SECOND.
(B) More specifically, the purposes for which this corporation is formed are
charitable, including the establishment, erection, operation, support and
management of a hospital and a medical and health center or institution, and
related facilities, where medical and surgical diagnosis, treatment, care, and
nursing, and improvement of, and benefits to, their health, will be rendered to
persons of any creed, race, nationality, or color; and also including as part
thereof, medical research, the training of physicians and auxiliary
personnel.
Defendant asserts that the foregoing language authorized charitable
activities other than the operation of a hospital and, because HMC’s purposes
were not limited exclusively to hospital purposes, HMC did not satisfy the
organizational requirement of N.J.S.A.
54:4-3.6. A similar argument was asserted by the defendant municipality in
Jersey Shore Medical Center v. Neptune Tp., 14 N.J.
Tax 49 (Tax 1994). In rejecting the argument, the court stated as
follows:
Although the statute requires that an entity be organized
exclusively for hospital purposes, the words should not be construed literally
with the result that Jersey Shore’s ancillary purposes of operating a nursing
school and providing complementary educational, scientific and charitable
services destroy its exemption. Statutes are to be read sensibly rather than
literally and the controlling legislative interest is to be presumed as
consonant to reason and good discretion. Statutory interpretation that would
lead to an absurd or unreasonable result is to be avoided. Thus, although it is
generally said that tax exemptions are strictly construed against the taxpayer,
the basic inquiry always is the legislative intent as expressed in the statute.
[Id. at 56 (citations and internal quotation marks omitted).]
HMC’s certificate of incorporation, as in effect during the years in issue,
when read literally, could be construed to authorize activities other than the
operation of a hospital. However, when read sensibly and reasonably, the
certificate satisfies the statutory requirement that HMC be organized
exclusively for hospital purposes. Although other activities are possible under
the term “charitable,” the totality of the language of the purpose clause in
effect for tax years 2000 and 2001, and as amended for tax year 2002, makes
abundantly clear that HMC was organized to operate a hospital and ancillary
facilities and services. Accordingly, I reject defendant’s contention that HMC
does not qualify for exemption because it was not organized exclusively for
hospital purposes.
C. Not-For-Profit Purpose.
The statutory requirement
that an entity claiming an exemption not be operated for a profit-making purpose
relates both to the owner of the property and to the operations conducted in the
property. That HMC, in general, is not operated for profit is established by its
organizational documents and its use of the revenues it receives to operate and
improve the Hospital. The issue remains, however, as to whether HMC’s operations
in the Subject Building were conducted for a profit-making purpose. Defendant
contends that two of the facilities at the Subject Building, the Wellness Center
and the Pediatric Practice, were conducted for profit. As to the Wellness
Center, defendant argues that the fee structure was comparable to, and
competitive with, the fee structures of private health clubs in the area, and
cites the participation of the Center in a percentage of fees received from the
karate classes offered at the facility. As to the Pediatric Practice, defendant
relies on the provisions of the employment agreements with the physicians, under
which they split with HMC the net revenues of the Practice in addition to
receiving the base compensation specified in the agreements. Defendant asserts
that, by providing for this split, the employment agreements encouraged the
physicians to generate profits in which they and HMC had a percentage interest.
In Paper Mill Playhouse v. Millburn Tp., supra, our Supreme
Court held that an entity’s realization of net income from its operations does
not necessarily mean that the entity is conducted for profit.
Our cases
require a pragmatic inquiry into profitability. The decisions reveal a realistic
common sense analysis of the actual operation of the taxpayer; mechanical
centering on income and expense figures is to be avoided.
. . . .
A crucial factor is where the profit goes. As the Appellate Division stated
[in Trenton v. N.J. Div. of Tax Appeals, 65
N.J. Super. 1, 12 (App. Div. 1960)], “[i]f the college does show operational
surpluses for some years, the crucial inquiry is, ‘Who gets the money?’ If we
can trace it into someone’s personal pocket * * * the college is not entitled to
tax exemption * * *.”
[95 N.J. at 521-22 (citation omitted).]
The Tax Court in Jersey Shore Medical Center v. Neptune Tp.,
supra, found that a 60/40 profit split between the hospital and the
operator of the coffee shop
makes clear that both parties contemplate making
a profit, and there is nothing in the other terms of the agreement to suggest
that a profit is impossible. The use of the property is thus commercial in
nature and not exempt.
. . . While competitive prices and actual profits or
losses may constitute evidence of a particular purpose, they are not
conclusive.
. . . The decisive fact in this case is the profit-making purpose
as evidenced by the sharing of any pecuniary profits between the hospital and
the coffee shop
operator.
[14 N.J.
Tax at 62-63.]
The proofs presented by HMC demonstrate that all revenues from the Wellness
Center were revenues of HMC and were used for HMC’s purchases of equipment and
other improvements necessary at the Hospital. I conclude, therefore, that the
Wellness Center was not conducted with the intention of making a profit. That
the Center generated revenue in excess of expenses, does not demonstrate, in
itself, a profit-making purpose. That the fee structure of the Wellness Center
was competitive with similar facilities in the area also does not demonstrate,
in itself, a profit-making purpose.
The proofs as to profit-making purpose
were different for the Pediatric Practice, where revenues were divided between
HMC and the physicians. Under their employment agreements, the physicians
received a specified base compensation coupled with a short term incentive plan
and a separate long term incentive plan. The short term incentive plan provided
that the physicians would receive “actual net revenue” in excess of specified
amounts for each of the years under appeal, with an overall annual cap of
$200,000. The cap amount equaled approximately ten percent of aggregate base
compensation for each year under appeal. The long term incentive plan provided
that fifty percent of the “Debt Free Net Cash Flow” in excess of specified
annual amounts, ranging from $172,778 in 1999 to $348,528 in 2002, would be
added to the base compensation for the physicians.
The parties did not
establish the total compensation of the physicians in the Pediatric Practice for
each year under appeal. However, because the short term incentive plan
contemplated “net revenue” in excess of approximately $5,000,000, I infer that
the dollar amounts involved in the long term incentive plan could be
substantial. Consequently, for the Pediatric Practice, a portion of surplus
revenues can be traced to “someone’s personal pocket.” Paper Mill
Playhouse, supra, 95 N.J. at 522. Under the principles
articulated in Paper Mill Playhouse and in Jersey Shore Medical
Center discussed above, this diversion of part of the surplus revenues to
the physicians characterized the Practice as operated for a profit-making
purpose. That all revenues from the Pediatric Practice were transmitted to HMC
does not neutralize the significance of the Practice’s profit-making
orientation. See Princeton Univ. Press v. Princeton
Bor., 35
N.J. 209, 216 (1961) (holding that publication of books other than scholarly
books, in order to realize profits used to offset losses incurred in publishing
scholarly books, caused the operation of the Princeton University Press to
“take[ ] on the nature of a commercial enterprise”).
Based on the preceding
analysis, I conclude that the portion of the Subject Building occupied by the
Pediatric Practice did not qualify for exemption because of the profit-making
purpose in the operation of the Practice. As discussed below, this portion of
the Building also failed to qualify because the Practice primarily served
members of the public and not Hospital patients.
D. Use For The Exempt
Purpose.
The issue remaining is that of whether HMC’s use of the Subject
Building was for hospital purposes as required under the second item of the
three-part test articulated in Paper Mill Playhouse. HMC contends that it
satisfied the use requirement because its facilities and services in the Subject
Building constituted part of the continuum of care HMC provided, including
services at the Hospital and at the Wellness Center, PT Service, CP Rehab
Service, and Pediatric Practice. In support of this contention, HMC presented
fact witnesses who testified as to the integration of the subject facilities and
services with the Hospital in the following respects:
A. all facilities were
operated as members of departments of the Hospital;
B. all monies collected
for any services provided at these facilities were transferred to HMC’s bank
account, even if deposited in separate accounts on an interim basis;
C. all
budgeting and financial planning for each of the facilities was done by HMC as
part of its general hospital planning, and HMC was responsible for any financial
shortfalls or losses;
D. because each of the facilities constituted a member
of a Hospital department, medical information could be transferred from and to
the Hospital and between and among the facilities without requiring separate
consent; and
E. all of the facilities were used to enable HMC to fulfill its
mission as a hospital.
HMC also presented the testimony of an expert who
opined that the Wellness Center constituted a medically based fitness center and
was an integral part of the continuum of care model appropriate for hospitals
during the years under appeal. This witness described medically based fitness
centers as having the following characteristics:
Medically based fitness
centers identify and utilize an individual’s personal and unique health profile
to design a dynamic, safe and medically supervised fitness program to improve
the health status of each individual, and thereby improve the health status of
the population served. This program is used to help the individual achieve the
desired level of health, prevent disease, or to integrate the inclusion of
exercise as an adjunct treatment for his/her chronic disease based on
recommendations of health professionals. The availability of seamless referrals
across the continuum of care assists in creating a clinically integrated system
of care that serves an entire population including the apparently healthy,
asymptomatic person through the patient recovering from a major acute disease or
injury to managing chronic conditions.
The witness explained that the Wellness Center is
part of the new model of a medical care system. Under the traditional model,
hospital care was primarily related to birth and then “sick care,” including
ambulatory care, acute care, post-acute care (otherwise known as
rehabilitation), and palliative care. The new model recognizes “sick care” as
representing only approximately twenty percent of a hospital’s continuum of care
responsibilities. The remaining eighty percent relates to “managing the
population’s health or its health status.” This includes health education,
disease management, on-going health screenings, monitoring of health risks, and
lifestyle management to encourage and facilitate healthy lifestyle choices.
Medically based fitness centers are part of this new model. The witness
described the Wellness Center as satisfying the following criteria for a
medically based fitness center: ownership by a hospital; a medical director and
medical advisory board; evidence of extension of the health care delivery
system; a mission to serve as part of a comprehensive approach to medical care;
the presence of educational programs; free or discounted services offered to
member patients; a hospital-qualified staff; the presence of integrated clinical
departments; and an appropriate level of service.
HMC
offered extensive proofs as to the frequency of communications between the
director of the Wellness Center and personnel at the Hospital and with the
Center’s medical director, and as to the Center’s integration into the financial
and administrative services of the Hospital. HMC asserts that having the PT
Service and CP Rehab Service located in the Wellness Center contributed to the
Center’s integration with the Hospital because these services used not only
specific areas of the Center but also much of the equipment and the facilities
available to members.
Defendant describes the integration of the Wellness
Center with the operations of the Hospital and the medical orientation of the
Wellness Center as more hypothetical than real and asserts that, in reality, the
Wellness Center, PT Service, CP Rehab Service, and Pediatric Practice simply
competed in the marketplace for business with commercially owned and operated
health clubs, therapy and rehabilitation providers, and pediatricians,
respectively, in the vicinity. Defendant notes that the PT Service and CP Rehab
Service occupied very limited areas in the Wellness Center devoted exclusively
to their use, and that any equipment they used was also available to general
members of the Center who constituted the primary users of all of its equipment
and facilities.
N.J.S.A.
54:4-3.6 does not require that, in order to qualify for exemption, a
facility must be used as a hospital. The statute requires that the facility be
used for “hospital purposes.” In City of Long Branch v. Monmouth Medical
Center, supra, 138
N.J. Super. 524, the court applied this standard to several hospital-owned
buildings. One building contained apartments used exclusively by medical
residents, interns and nurses on the hospital staff. Another was a three-story
office building, approximately one-half of which was occupied and used as
private physicians’ offices, a third building was an office building, most of
which was rented to physicians for conduct of their private practices, and a
fourth building was used as a psychiatric, medical, and surgical clinic by the
hospital with a portion of the building area leased to a retail pharmacy. The
court articulated the test to be employed in determining whether each facility
was used for hospital purposes as “whether the property is ‘reasonably
necessary’ for such purposes.” Id. at 532. In holding that the apartment
building qualified for exemption, the court stated:
The furnishing of housing
facilities to resident physicians, interns and nurses on the hospital staff is
reasonably necessary for the proper and efficient operation of the hospital. . .
. The evidence established that the substantially lower rentals charged by the
Center to the resident physicians, interns and nurses served as a subsidy to
attract qualified people to [the hospital’s] staff. Furthermore, it is obvious
that by providing housing facilities for its resident physicians, interns and
nurses in or near the hospital, the Center is better able to function properly
and efficiently on a 24-hour basis.
[Id. at 533.]
In denying the exemption to the office buildings, the court
stated:
[E]xemption from taxation for these buildings cannot be granted
because it may be convenient for the Center to have staff physicians maintain
their private offices in close proximity to the hospital, or because these
physicians may perform some of their hospital duties in their private offices.
Convenience is not the test; the test is reasonable necessity for hospital
purposes, and the use of these buildings for private professional offices is not
reasonably necessary for the Center’s hospital purposes.
[Id. at 535.]
The Appellate Division denied the exemption to the
clinic building because N.J.S.A.
54:4-3.6, as then in effect, required that the entire building be used
exclusively for hospital purposes. Because a portion of the building was rented
to a retail pharmacy, the building was not used exclusively for hospital
purposes.
The “reasonably necessary” standard
articulated in Monmouth Medical Center was adopted and applied by the Tax
Court in Jersey Shore Medical Center v. Neptune Tp., supra, 14
N.J. Tax 49, in determining whether a hospital-owned coffee shop, cafeteria,
and child care center were entitled to exemption as being used for hospital
purposes. The court stated that “the accepted test in New Jersey for determining
whether property is used in the work of an entity organized for an exempt
purpose is whether the property is ‘reasonably necessary’ for such purpose.”
Id. at 60 (citations omitted). In granting an exemption to the child care
center, the court noted that “[t]he essence of a hospital is 24-hour continuous
medical and nursing care. Jersey Shore’s child care center furthers that
essential function.” Id. at 68 (citations omitted).
The combination of
these factors--limitation of enrollment to children of hospital employees,
location on the hospital premises, lengthy hours of operation, willingness to
admit infants as young as eight weeks, and existence of [a] mildly-ill
room--establish that the child care center exists to further the hospital’s
staffing needs and its 24-hour continuous care operation. The presence of three
children of non-hospital employees on a grandfathered basis out of approximately
250 enrolled children is de minimis and does not indicate a use for
non-hospital purposes.
[Id. at 69.]
The court further noted that, if the child care center had been operated by a
for-
profit corporation, it might have been taxable, while the same operation
when conducted on a non-profit basis qualified for tax exemption. “The same is
true of laundry services, accounting services, residential facilities for
essential staff, and parking garages. If operated in conjunction with a
functioning hospital, all these services may become exempt uses.” Ibid.
A building can be reasonably necessary for the
operation of a hospital even if located a distance from the hospital. In
Perth Amboy General Hospital v. City of Perth Amboy, 176
N.J. Super. 307 (App. Div. 1980), the Appellate Division held that
condominium units located a one and one-half miles from a hospital, and occupied
by hospital medical residents and interns and their families, were entitled to
exemption as being used for a hospital purpose. The court specifically noted
that “the distance separating the condominium from the hospital is not
sufficient by itself to deprive the condominium of a ‘hospital purpose.’ ”
Id. at 311.
In City of New Brunswick v.
Rutgers Community Health Plan, Inc. 7
N.J. Tax 491 (Tax 1985), the issue was not whether a facility ancillary to
and supportive of a hospital’s medical services qualified for a hospital
purposes exemption, but whether a health center owned by a not-for-profit health
maintenance organization qualified for the exemption. The facility had equipment
sufficient to provide “a full range of diagnostic services including x-rays and
laboratory testing in conjunction with medical examinations in all specialty
areas. . . .” Id. at 497. It was open “from 8:30 a.m. to 9:30 p.m. every
weekday, all day Saturday and Sunday afternoon.” Ibid. Rutgers Community
Health Plan (“RCHP”) argued that the facility provided services equivalent to
those reasonably necessary for the functioning of a hospital and, therefore, it
qualified for a hospital purposes exemption.
The Tax Court denied the
exemption because RCHP did not provide its services for purposes of furthering
the goals of a hospital and was not sufficiently integrated with the hospitals
with which it was affiliated, or to which it referred patients, to support a
conclusion that the health center facilitated the goals and purposes of those
hospitals. In reaching this conclusion, the court found that “implicit within
the cited definition of the word ‘hospital’ is the requirement for continuous
ongoing care,” id. at 500, and described “24-hour continuous care”
as a “distinguishing feature” of a hospital. Id. at 504. The essence of
the court’s analysis in denying the exemption was the following:
The focus in
cases applying the hospital purposes exemption to nonhospital facilities is on
the extent of the integration of the tax exempt hospital with the facility for
which exemption is sought or on the association between the two.
. . . .
. . . [E]ven where the function of the facility involved is to provide
hospital-type medical or health care services, the facility cannot exist for
hospital purposes unless its services are reasonably necessary to and thereby
fulfill the purposes of a hospital.
[Id. at 505-06.]
The court in Intercare Health
Systems, Inc. v. Cedar Grove Tp., 11
N.J. Tax 423 (Tax 1990), aff’d, 12
N.J. Tax 273 (App. Div. 1991), certif. denied,
127
N.J. 558 (1992), adopted an approach similar to that in Rutgers Community
Health Plan. The issue was whether a nursing home qualified for a hospital
purposes exemption. The nursing home was not owned or operated by a hospital but
had transfer agreements with ten community hospitals, one of which was owned by
the same non-profit corporation that owned the operator of the nursing home. The
transfer agreements provided for “the efficient and expeditious transfer of
patients and information” between the nursing home and the hospitals. Id.
at 426. The defendant did not dispute that the nursing home provided “a medical
service to patients who are transferred from hospitals and that an expeditious
patient discharge permits a hospital to make more efficient use of its
facilities.” Id. at 427. The court articulated the test used to determine
whether the nursing home qualified for exemption as whether the operation “was
sufficiently integrated with a hospital so that [the] building’s use was an
integral part of operating a functioning hospital,” id. at 431,
and concluded that the relationships between the nursing home and the various
hospitals were “cooperative, rather than integral.” Id. at 432.
Therefore, the nursing home facility did not qualify for exemption.
Hillcrest Health Service System, Inc. v. Hackensack
City, 18
N.J. Tax 38 (Tax 1998), involved a claim of a hospital purposes exemption by
the owner of a building used in connection with the operations of a hospital
owned by a different corporation. The Tax Court held that, because the
certificate of incorporation of the entity owning the building did not restrict
its operations to support of the hospital, the property did not qualify for
exemption. The court also discussed briefly whether a fitness center located in
the building would qualify for exemption, if the building were owned by the
hospital. The fitness center occupied approximately 4850 square feet and
contained a variety of exercise equipment. It was used by members of the medical
and management staffs of the hospital, employees of the hospital, and certain
outpatients participating in a cardiac rehabilitation program housed in the same
building.
In addition, however, the record discloses that persons having no
relation to the hospital may for a fee use the fitness center. The intensity of
use by members of the public is not developed on the record. It would not
appear, however, that use statistics are essential to demonstrate that an
exercise facility open to the general public is used more than incidentally for
purposes other than the operation of the hospital. The portion of the building
used for the fitness center would not therefore be qualified for exemption.
[Id. at 49.]
The foregoing decisions granted hospital purposes
exemptions to facilities owned by hospitals and used for purposes ancillary to
and supportive of the hospitals’ core function of 24-hour continuous acute care,
but denied exemptions to facilities not owned by hospitals and claiming that
their independent operations served a hospital purpose. None of the decisions
addressed whether the hospital purposes exemption applies to a facility with the
following characteristics: (1) ownership and operation by a hospital; (2) a
location distant from the main hospital campus; (3) not used for a purpose
ancillary to and supportive of the hospital’s core function; and (4) used as
part of the hospital’s continuum of care and its mission to enhance and improve
the general health status of the population in the local area.
The
“continuum of care” concept is relatively new in the operation of hospitals and
involves a material expansion of hospital services from the 24-hour continuous
acute care described in Rutgers Community Health Plan, supra, 7
N.J. Tax at 504, and in Jersey Shore Medical Center, supra,
14 N.J. Tax at 68. The expanded services comprise educational programs,
“wellness” programs addressing fitness and dietary concerns, and other
“lifestyle” services and programs provided at the hospital or in other
locations. Here, those services include the Wellness Center, the PT Service, the
CP Rehab Service, and the Pediatric Practice at the Subject Building.
Accompanying hospitals’ expansion of services has been an expansion of their
definition of their mission and of what is “reasonably necessary” to fulfill
that mission. HMC’s president and chief executive officer described its concept
of its mission as follows:
[T]o create an integrated model of healthcare to
attempt to develop a comprehensive range of services from preventive to home
that would provide a seamless delivery system, an easy way for accessing care
and an easy way of delivering care to the patient. The focus is primarily a
patient focused agenda one where an attempt to provide convenience as well as --
as a cure and compassion [are] part of our philosophy.
HMC’s expert witness defined a hospital as “a site of care that provides, at
a minimum 24 hour inpatient care and outpatient programs and services that meet
the needs of the population served by that particular entity.” He defined a
hospital purpose as “any activity or service that furthers the mission of that
hospital.” Both witnesses acknowledged that the definition of a hospital and,
therefore, the definition of hospital purposes have been evolving and that, in
general, the direction and extent of the evolution have been determined by the
hospitals themselves.
The effort by hospitals to
self-define their mission is reminiscent of the following conversation included
in Lewis Carroll’s Through the Looking
Glass.
I don’t know what
you mean by “glory,” Alice said.
Humpty Dumpty smiled contemptuously. “Of course you don’t-- till I tell you.”
. . . “When I use a word,” Humpty Dumpty said in rather a scornful tone,
“it means just what I choose it to mean--neither more nor less.”
[Lewis Carroll, Through the Looking Glass 58 (Whittlesey House ed.).]
In an attempt to explore what limits, if any, applied to what hospitals
choose the terms hospital and hospital purposes to mean, I asked several of
HMC’s witnesses to describe the distinction between the Wellness Center and a
hypothetical gourmet restaurant owned by HMC at which a Hospital nutritionist or
dietitian was present to give advice as to appropriate menu selections. The
witnesses agreed that food and diet contributed to health, as did exercise, but
sought to distinguish the gourmet restaurant example from the Wellness Center on
the basis that the restaurant patron would not be a regular diner at the
restaurant and would not be bound by the recommendations of the nutritionist or
dietitian. However, a member of the Wellness Center could exercise regularly or
only sporadically, just as a person could be a regular or sporadic patron of the
gourmet restaurant. Similarly, if the exercise physiologist or a fitness trainer
at the Wellness Center suggested to a member that certain exercise levels should
not be exceeded or that certain exercises should not be undertaken, the member
could ignore that advice, just as the gourmet restaurant patron could ignore the
advice of HMC’s nutritionist or dietitian. The attempts by HMC’s witnesses to
distinguish the gourmet restaurant from the Wellness Center were unconvincing.
The gourmet restaurant example suggests the
open-ended nature of the concept of hospital purposes asserted by HMC in these
proceedings. For example, the concept possibly could include a supermarket owned
and operated by a hospital and selling only food products approved by its
dietitian or nutritionist See footnote 1 or
a hospital-owned massage parlor providing services only to those working at high
levels of stress. These examples may seem fanciful at this time, but, as HMC’s expert witness acknowledged, the concept of a wellness
center as a hospital purpose was equally fanciful not too many years ago.
The expansion of hospitals’ definition of their role
in health care and the expansion of their health-related activities affect the
analysis of a hospital purposes exemption claim under N.J.S.A.
54:4-3.6 in two respects. First, for purposes of that analysis, the
definition of a hospital as a 24-hour continuous acute care facility set forth
in Rutgers Community Health Plan, supra, 7 N.J. Tax at 504,
and Jersey Shore Medical Center, supra, 14 N.J. Tax at 68,
no longer is accurate or adequate. Second, the “reasonably necessary” standard
no longer provides a workable basis for determining qualification for the
exemption because, under that standard, a hospital can argue, as does HMC, that
any off-campus facility used for continuum of care health-related purposes is
reasonably necessary to its operations, and a taxing district can argue, as does
defendant, that no off-campus facility is reasonably necessary because the
hospital can continue to function and provide its core acute care services
without the facility. The testimony of HMC’s Vice President for Physician
Practice Management illustrated the difficulty of resolving these arguments
under the reasonably necessary test. He described the portion of the Subject
Building occupied by the Pediatric Practice as part of the Hospital and
fulfilling a Hospital purpose, but conceded that, if the Practice were not
located in the Subject Building, the impact on patients in the area would be
greater than the impact on the Hospital’s operations.
The preceding discussion demonstrates the necessity
for modification of the reasonably necessary standard and use of a new
analytical approach in order to distinguish facilities serving hospital purposes
from facilities merely housing health-related activities. Decisions in Tennessee
and Indiana suggest some considerations relevant to a new approach. In Middle
Tennessee Medical Center v. Assessment Appeals Commission, 1 994
WL 32584 at *1 (Tenn. Ct. App. 1994), the plaintiff hospital claimed a
property tax exemption with respect to a wellness center owned by it and located
in a building separate from the hospital. The center was quite similar in its
operations and facilities to the Wellness Center, and the arguments made in
support of the exemption claim were quite similar to those advanced by HMC.
Counsel for the Medical Center argues that the entire menu of programs
offered by the PACE Center is expressive of a growing trend in healthcare to
look towards prevention rather than waiting until a patient requires treatment.
We are told that this “holistic” approach justifies the extension of the
charitable tax exemption to the entire property occupied by the PACE Center.
[Id. at *4.]
The court held that the PACE Center qualified for
exemption only to the extent (fifteen percent of total usage) that its
facilities were used, at the direction of hospital physicians, by hospital
cardiac patients, hospital sports medicine patients, and individuals enrolled in
hospital chemical dependency programs, id. at *5, and rejected the
remaining eighty-five percent of the exemption claim, which related to use of
the facility by persons not under a doctor’s care and exercising for their own
purposes. The court noted that competition with for-profit businesses, although
not dispositive, was a relevant consideration, and concluded as
follows:
We feel it would be a misuse of the tax
exemption granted to charitable hospitals if every revenue-generating venture
they embarked upon automatically benefited from the exemption, so long as that
venture could be characterized as in some way promoting health. We are
conscious, however, that medicine is a rapidly changing discipline, and that
hospitals must be responsive to new developments in medical practice. We
therefore will not attempt to create some hard and fast rule to fix forever the
tax status of wellness centers owned by charitable hospitals. Each case must
stand on its own facts.
[Id. at *5.]
The Tax Court of Indiana, in Indianapolis
Osteopathic Hospital, Inc. v. Department of Local Government Finance, 818
N.E.2d 1009 (Ind. Tax Ct. 2004), quoted and adopted the Tennessee court’s
approach in denying exemption to a fitness center. The center occupied
approximately three quarters of a building located on a hospital campus, and the
balance of the building was a medical pavilion used in part by hospital
departments. The hospital had a 70% ownership interest in the owner of the
fitness center (itself a not-for-profit corporation) and owned the land on which
the center was located. The fitness center was used 41% of the time to provide
“outpatient rehabilitation services, research, and community education,” and 59%
of the time as “a community-oriented fitness facility.” Id. at 1012. The
court held that the center failed to satisfy the Indiana statutory requirement
that, in order to qualify for exemption, property must be “predominantly used or
occupied” for the exempt purpose. Id. at
1015.
The foregoing decisions interpreted Tennessee
and Indiana statutes providing tax exemptions for “charitable” uses. Neither
state permitted a specific “hospital purposes” exemption. Although the statutory
basis for the decisions differs significantly from the statutory basis for HMC’s
exemption claim, the facts before the courts were similar to those presented by
HMC. Consequently, the Tennessee and Indiana decisions, particularly in their
focus on the significance of usage by members of the general public, are useful
in analyzing the hospital purposes exemption under N.J.S.A.
54:4-3.6. See footnote 2 The
New Jersey Tax Court incorporated the same focus in its comment in Hillcrest
Health Service System, Inc. v. Hackensack City,
supra, 18 N.J. Tax at 49, that the availability of a fitness
center for use by the general public precluded qualification for a hospital
purposes exemption.
Hillcrest Health
Service System and the other New Jersey decisions discussed above, together
with the Tennessee and Indiana decisions, suggest an analytical framework for
isolating off-campus hospital facilities qualifying for a hospital purposes
exemption under N.J.S.A.
54:4-3.6 from the wide variety of facilities that HMC and other hospitals
operated during the years under appeal and will continue to operate in the
future. This framework (the “Analytical Framework”) consists of the following
three components:
the nature and
extent of the integration between the hospital and the subject facility. The
greater the integration the more likely it is that a facility is serving a
hospital purpose. In applying this component, the distance of the facility from
the hospital campus must be considered. In Perth Amboy General Hospital v.
City of Perth Amboy, supra, 176 N.J. Super. 307, the
location of the condominium units in issue, one and one-half miles from the
hospital, did not preclude exemption. However, distance alone may suggest a lack
of integration with a hospital;
the extent to which the
activity conducted in the facility is under the control or supervision of the
hospital medical staff. The lesser the amount of supervision, the more likely it
is that the activity is not serving a hospital purpose; and
whether the facility serves
primarily hospital patients or primarily members of the general public. For
purposes of this determination, a person generally should not be deemed a
hospital patient merely as a result of using the facility. For example, as
acknowledged by HMC’s president, a member of the general public did not become a
patient of the Hospital by enrolling as a Wellness Center member, and an
individual using the Pediatric Practice became a patient of the Practice but not
a patient of the Hospital. Under some circumstances, however, a person using a
hospital-owned and operated off-campus facility could become a hospital patient
by virtue of that use (see the discussion below concerning the CP Rehab
Service). See footnote 3
Two
additional considerations should be taken into account in applying this third
component of the Analytical Framework. The first relates to the extent to which
the hospital facility competes with commercial or privately owned-facilities in
the area. Competition in itself does not provide a basis to deny an exemption.
However, the existence of competition with private facilities should not be
totally ignored.
The second additional consideration relates to whether an
exemption can be granted in proportion to the percentage of use by hospital
patients of a specific facility within a building. As discussed above, the
Tennessee court granted an exemption in proportion to the use by hospital
patients of the hospital-owned wellness center in issue. The Indiana court,
however, analyzed usage by hospital patients only to determine the predominant
use of a hospital-owned wellness center, and held that predominant use by
members of the general public disqualified the entire center from exemption. Our
Appellate Division used the “predominant use” standard in determining whether a
hospital-owned apartment building, used primarily to house hospital medical
personnel, qualified for a hospital purposes exemption, City of Long Branch
v. Monmouth Medical Center, supra, 138 N.J. Super. at 533, and
the Tax Court used the standard in discussing the significance of public use of
a hospital-owned fitness center. Hillcrest Health Service System,
supra, 18 N.J. Tax at 49. See also Pingry Corp. v.
Hillside Tp., 46
N.J. 457, 463-64 (1966) (granting an exemption to faculty housing where the
landlord-tenant relationship between the school and the faculty members was
secondary to “the primary purpose of providing the housing for the faculty”).
I conclude that the predominant use standard should
be incorporated into the third component of the Analytical Framework, not in
order to apportion the tax exemption for a particular facility, such as the
Wellness Center, based on percentage of use for hospital purposes, but in order
to determine whether or not the facility, in its entirety, qualifies for
exemption. Under the express language of N.J.S.A. 54:4-3.6, the
hospital purposes exemption may be granted to a portion of a building, but the
statute has not been, and should not be, interpreted to permit the granting of
an exemption in proportion to the frequency of use of a particular space for
hospital purposes. Three practical considerations support this conclusion.
First, a taxpayer may not maintain reliable records as to usage percentages.
Second, assessors have no means to require taxpayers to produce records as to
usage. Under N.J.S.A.
54:4-34, assessors may request financial information as to income-producing
properties, but the statute limits the request to income information. Third,
assessors have no adequate means to make independent determinations of frequency
of use based on information from the market.
I now
will apply the Analytical Framework to resolve HMC’s hospital purposes exemption
claim as to the areas of the Subject Building used by the Wellness Center, PT
Service, CP Rehab Service, and Pediatric Practice,
respectively.
HMC contends that the Wellness Center
qualified for exemption because it was a medically based facility, was
integrated with the Hospital, performed an important function in the continuum
of care offered by HMC, and fulfilled part of the Hospital’s mission to promote
wellness as well as to treat illness. I reject this claim for exemption for the
following reasons. I conclude that, as to components one (integration with the
Hospital) and two (supervision by the Hospital medical staff) of the Analytical
Framework, the Center was owned by, and integrated administratively with, the
Hospital, but there was no integration of the care provided at the Hospital with
the activities and programs at the Center, and the Center and its operations
received virtually no supervision by the medical staff at the Hospital. As to
component three (extent of use by the general public), HMC did not dispute that
the vast majority of the members at the Wellness Center were from the general
public simply seeking an exercise facility and not seeking a continuation of
either inpatient or outpatient care or services provided at the Hospital.
The Wellness Center had a medical director, but,
under the express provisions of his employment contract, he was obligated to
“devote an average of three and one half hours per week” to the Center.
Fulfillment of this obligation did not require his physical presence at the
Center and was accomplished almost exclusively by telephone conversations. The
contract specified, as one of the medical director’s responsibilities, the
offering of “ ‘Ask the Doctor’ or other lecture/educational program forums on a
monthly basis for the members and patients of the Center.” The proofs
established that the medical director offered only one or two such programs
during the years under appeal. The contract also provided that “the [medical
director] shall at all times be and remain in an independent contractor
relationship with the Hospital, and the Physician shall not hold himself out as
an employee of the Hospital or the Center.”
Testimony by the medical director demonstrated that,
although he had some involvement in the initial set up of the Wellness Center
preceding the years under appeal, his participation and involvement was minimal
after operations commenced. He was rarely, if ever, physically present at the
Center except for sporadic meetings of the medical advisory panel, even though
his office was less than one-half mile away. During the three years under
appeal, he reviewed approximately ten PARQ forms of persons not having a private
physician who were seeking membership in the Wellness Center. Although the
medical director described himself as an advocate for the Center and its
function as part of a continuum of care for Hospital patients, minutes of
meetings of the Hospital board of trustees reflected that he attended only one
of five trustee meetings during 1995 through 1997, when planning for the
Wellness Center was discussed.
The Wellness Center’s
medical advisory panel had similarly infrequent involvement in operations and
programs and provided minimal medical input. Minutes of the meetings of the
panel indicated that, as early as October of 1998, attendance “has been quite
scarse [sic] lately.” The November 1998 minutes reflected that members of the
panel would be contacted by telephone to attempt to ensure their attendance at
meetings. Only two of the six or seven panel members attended the September 1999
and April 2001 meetings. An agenda item for the May 2, 2000, meeting (for which
attendance was not recorded) was the changing of meeting times in order to
“encourage better attendance or get new members who make commitment [sic] to
come to meetings.” The topics discussed at the medical advisory panel meetings,
as shown in the minutes, rarely involved medical issues but generally dealt with
membership retention, usage, and scheduling of programs having only a tangential
relationship to the services provided at the
Hospital.
The preceding discussion demonstrates that
no member of the Hospital medical staff, including the medical director and
medical advisory panel, supervised or meaningfully participated in the operation
of the Wellness Center. As a result, integration of the Wellness Center into the
medical operations of the Hospital was minimal.
The
divergence between the operations of the Hospital and the Wellness Center was
reflected in the medical consent form sent to physicians by the Wellness Center
when their consent was required for exercise by a prospective member. The form
contained the following statement: “Please be advised that this is not a
medically monitored facility, however, degreed and certified fitness trainers
are readily available.” The Hospital surely would not describe itself as “not a
medically monitored facility.” The divergence also was reflected in notes to
HMC’s financial statements for the years under appeal that described the
Hospital as a “not-for-profit acute care medical center. The Medical Center
provides inpatient, outpatient, and emergency care services for the residents of
Hunterdon County and surrounding areas.” The operations at the Wellness Center
did not fit this definition.
A comparison of (1) the
article in the Spring 2001 issue of “Advances,” the Hunterdon Healthcare
System’s periodical magazine, concerning the Hospital’s emergency care services,
with (2) the discussions of the Center’s medical advisory panel concerning
purchase of an automatic external defibrillator provides additional insight into
the operational distinction between the Hospital and the Wellness Center. The
article extolled the “advanced technology” available at the Hospital’s Emergency
Department to treat persons suffering heart attacks. The discussions at the
Wellness Center’s medical advisory panel meetings in April 2001 and September
2001, as recorded in the minutes, reflected a very different level of concern
about cardiac emergencies. The panel recognized that Wellness Center members
assumed that, as a hospital based facility, “we are current [with] latest
technology” and “would have the lates [sic] strategies for emergency care
available at our site,” but, surprisingly, decided to postpone acquisition of a
defibrillator and possibly wait until acquisition was required by law. By the
September 2001 meeting, legislation was “in the works,” but the panel elected to
speak with its attorney “to see if we should act now or wait.” No defibrillator
had been acquired as of the end of 2002.
As
described above, HMC presented the testimony of an expert witness relating to
the criteria for establishing a medically based fitness center. HMC argues that
the Wellness Center conformed to the witness’s definition. Even the witness,
however, did not conclude unequivocally that the Center had satisfied all of the
requirements for a medically based fitness center. When asked whether the
Wellness Center was such a facility, he stated: “They are still working on it,
but . . . they are pretty close.” Even that testimony related to a date after
the relevant assessing dates in this appeal.
The
witness acknowledged that commercial health clubs could satisfy the definition
of a medically based fitness center, thus suggesting that satisfying the
definition is not equivalent to functioning for hospital purposes. Consequently,
even if the Center constituted a medically based fitness center, this factor
alone would be insufficient to establish qualification for exemption under the
Analytical Framework.
HMC’s argument that, because
the services provided at the Wellness Center promoted health, they fulfilled a
hospital purpose improperly conflates the concept of hospital purpose with any
service or activity which has a health benefit. The exemption under N.J.S.A.
54:4-3.6 is available not to any facility providing health care or in
which health-promoting activity takes place, but only to a facility used for
hospital purposes. The term “health care facility” is defined in N.J.S.A.
26:2H-2, a provision of the Health Care Facilities Planning Act, as
follows:
[T]he facility or institution whether public or private, engaged
principally in providing services for health maintenance organizations,
diagnosis or treatment of human disease, pain, injury, deformity or physical
condition, including, but not limited to, a general hospital, special hospital,
mental hospital, public health center, diagnostic center, treatment center,
rehabilitation center, extended care facility, skill nursing home, nursing home,
intermediate care facility, tuberculosis hospital, chronic disease hospital,
maternity hospital, outpatient clinic, dispensary, home health care agency,
residential health care facility and bioanalytic laboratory . . . or central
services facility serving one or more such institutions . . . .
[N.J.S.A. 26:2H-2(a).]
Under this definition, a hospital is only one type of health care facility.
N.J.S.A.
54:4-3.6 and its predecessors have included a hospital purposes exemption
since the nineteenth century. In enacting the above definition of a health care
facility in 1971, L. 1971, c. 136, § 2, the Legislature did not
substitute “health care purposes” for “hospital purposes” in N.J.S.A.
54:4-3.6. Because the Legislature is deemed “thoroughly conversant with its
own legislation,” Brewer v. Porch, 53
N.J. 167, 174 (1969), this failure to modify the hospital purposes exemption
indicates a legislative intent that “hospital purposes” should be interpreted as
a more limited concept than “health care purposes.” The distinction between
hospital purposes and health care purposes is confirmed by N.J.S.A.
26:2H-12.8, which sets forth a bill of rights applicable only to anyone
“admitted to a general hospital as licensed by the State Department of Health
and Senior Services.” The rights do not apply to other health care
facilities.
Based on the preceding discussion, I
conclude that the Wellness Center did not qualify for a hospital purposes
exemption under N.J.S.A.
54:4-3.6.
I turn now to the PT Service located
within the Wellness Center. During the years under appeal, a small portion of
the second floor area of the Center was used exclusively as a physical therapy
treatment room. Four items of equipment outside this area were intended to be
used primarily by those receiving physical therapy, but also were available for
use by all members of the Wellness Center. All other areas and equipment in the
Wellness Center used by the PT Service were used primarily by the general
members of the Center, with usage by people receiving physical therapy
constituting a very small percentage of total usage. Anyone from the general
public having an appropriate prescription from a physician could obtain therapy
from the PT Service. The prescription could simply instruct the therapist to
treat the condition without specifying or recommending a particular form or type
of therapy. No member of the Hospital’s medical staff reviewed or supervised the
therapy provided. The therapy staff consisted exclusively of non–physicians.
Under the Analytical Framework, the area of the
Subject Building used exclusively by the PT Service did not qualify for
exemption during the years under appeal. As to the first two components of the
Framework, the Service was integrated administratively with the Hospital and
operated as part of the Hospital’s physical therapy department, but was not
integrated medically and received no meaningful supervision by the Hospital
medical staff. As to the third component, HMC failed to establish that the PT
Service served primarily Hospital patients who were referred to the Service for
continuation of treatment.
Because the area used
exclusively by the PT Service did not qualify for exemption, and because usage
by the Service of Wellness Center facilities and equipment constituted a small
percentage of total usage, the presence of the PT Service in the Wellness Center
did not transform the Center into an exempt
facility.
The CP Rehab Service office was located on
the first floor of the Wellness Center. None of the equipment used for the
rehabilitation services was dedicated to those services, but was generally
available to all members of the Center. Usage of the Wellness Center equipment
and swimming pool by persons undergoing rehabilitation constituted only a very
small proportion of overall usage.
The Service was
integrated administratively and medically with the Hospital and was supervised
by members of the Hospital medical staff, thereby establishing qualification for
exemption under components one and two of the Analytical Framework.
Rehabilitation services were offered only to persons referred by a physician. An
initial appointment at the admissions office in the Hospital was required. A
person referred from the admissions office to the CP Rehab Service was evaluated
by the Service, which prepared a treatment plan sent to the person’s referring
physician for review and approval. No services were provided until the plan
received approval by the physician. The CP Rehab Service had two medical
directors with offices at the Hospital. These physicians established guidelines,
policies, and procedures for the Service, reviewed the records of all persons
seeking rehabilitation services who were referred by physicians not on the
Hospital medical staff, and oversaw the emergency protocol of the rehabilitation
services department of the Hospital, including the CP Rehab Service. The
services at the CP Rehab Service were provided by a registered nurse from the
Hospital who was trained in the use of the defibrillator and other emergency
equipment located in the Service office.
Because of
the extensive involvement of the Hospital medical staff in the CP Rehab Service,
a person undergoing rehabilitation at the Service was, in a very real sense, an
outpatient of the Hospital, whether or not he or she had been an inpatient in
connection with a heart attack or other cardiac or pulmonary problems. Thus, the
CP Rehab Service was serving primarily hospital patients and thereby qualified
for exemption under the third component of the Analytical Framework.
Based on the preceding discussion, the area of the
Subject Building devoted exclusively to the CP Rehab Service qualified for
exemption. Because the usage of other areas and equipment at the Wellness Center
by people receiving rehabilitation services was minimal compared to usage by the
general membership, the presence of the CP Rehab Service in the Wellness Center
did not convert the Center into an exempt facility in the Subject Building.
The Pediatric Practice was integrated
administratively and medically with the operations of the Hospital. It was a
member of a department of the Hospital, was under the administrative supervision
of a Hospital physician who was in charge of all Hospital-owned medical
practices, and was staffed by Hospital physicians. As a result, the Practice
satisfied the first two components of the Analytical Framework.
With respect to the third component, the proofs
demonstrated that the Practice primarily served members of the public as
distinguished from Hospital patients, and was in direct competition with
pediatric practices owned and operated by private physicians in the vicinity.
The president and chief executive officer of the Hospital acknowledged that a
patient of the Practice was not thereby a patient of the Hospital. The
competition with private pediatric practices was confirmed by HMC’s
Vice-President of Professional Services who noted, in a certification submitted
in connection with a summary judgment motion in this matter, that the Pediatric
Practice “provided pediatric services located in the northern part of the
county, thereby obviating the need for northern county residents and patients to
travel to the main hospital campus in Raritin [sic] Township or seek private,
for profit-care.” HMC’s Vice-President for Physician Practice Management agreed
that the Pediatric Practice competed with private pediatricians in the
area.
Under the foregoing application of the
Analytical Framework to the Pediatric Practice, the area of the Subject Building
occupied by the Practice did not qualify for exemption. As discussed above, this
area of the Building also failed to qualify as a result
of the Practice’s
profit-making purpose. See footnote 4
In
summary, I conclude that the areas at the Subject Building occupied by the
Wellness Center, PT Service, and Pediatric Practice did not qualify for
exemption during the years under appeal. Only the CP Rehab Service office on the
first floor of the Wellness Center so qualified. Judgment will be entered
accordingly. Counsel are directed to calculate the appropriate assessment on the
Subject Building and the land on which the Building is located and submit the
proposed assessments within thirty days. In the event counsel are unable to
agree as to the assessments, a further hearing will be held to resolve the
issue. See R. 8:9-4.