For generations, most community hospitals have operated as charities, providing health care for the area surrounding them and ensuring that even the poorest received top quality treatment.
One of the benefits for Bristol Hospital of holding nonprofit status since 1925 has been that it hasn’t had to pay any property taxes. Charities and churches are, in almost every case, exempt in Connecticut.
But with Bristol Hospital’s announcement last week that it plans to sell the hospital to a Tennessee-based, for-profit company opens the door to at least the possibility that it might soon no longer quality for a special tax break under the law.
For City Hall, the change could represent a bonanza. Bristol Hospital could overnight become the city’s second largest taxpayer, hiking municipal revenue by more than $1.5 million annually at a time when the city is scrounging for every dime.
City Assessor Tom DeNoto, who’s been scrambling to figure out the implications of the deal, said the still-secret details are going to prove crucial.
Even so, he said, the announcement itself is “like a pea that has been dropped in the ocean and the ripples of a hurricane are just beginning.”
Bristol Hospital owns more than $75 million worth of property in the city, according to tax records, and that doesn’t even include the value of its medical equipment, vehicles and other potentially taxable items.
At present, the hospital doesn’t generally pay taxes. But the state has a payment-in-lieu of tax program that helps cities and towns compensate somewhat for hosting nonprofits and state government buildings.
Bristol collects about $570,000 annually from the program to make up a bit of what the hospital would have to pay if it were not exempt. That’s only a fraction of the hospital’s potential tax liability, but officials have always been happy to cash the state checks.
If the hospital winds up as part of Vanguard Health Systems, as planned, officials presume the state won’t pay anything anymore. Office of Policy and Management experts could not, however, be reached to explain their role.
The experience of other communities, though, may show what’s coming in Bristol if the sale goes through.
The 154-bed Morton Hospital in Taunton, Mass., for example, was sold in 2011 to a private for-profit company for $170 million in cash and debt. It is going to pay property taxes for the first time next year, about $1.5 million in all.
St. Vincent Hospital in Worcester, Mass., purchased by Vanguard in 2005, now pays more than $1 million in property taxes and another $1.3 million in sales taxes. It didn’t use to pay any taxes.
All of this comes at a time when the tax-exempt status of nonprofit hospitals has been questioned across the country because the distinction between charity hospitals and for-profit ones has gradually blurred.
Illinois, for instance, began taxing some nonprofit community hospitals because it ruled they performed so little charity that there was no reason to treat them differently.
DeNoto said there can be “a very fine line” between a charitable hospital and one that’s not.
As they wait for details of the agreement between Bristol Hospital and Vanguard, city officials admit they are more than eager to grab some additional tax dollars that would help ease a growing fiscal crunch.
Still, DeNoto said, “We’re not counting on anything or locked in.”
“None of the dominos have even begun to fall yet,” he added.