When is a Nonprofit Hospital a for Profit Hospital?
by Abbott Brown and Erin Bedell
This article was originally published in the June 2016 issue of New Jersey Lawyer magazine, a publication of the New Jersey State Bar Association, and is reprinted here with permission.
One of the hottest issues in medical mal- practice litigation is the attack on the limitation of liability provided by N.J.S.A. 2A:53A-8 to ‘nonprofit’ hospitals. The plaintiff’s medical malpractice bar is con- testing whether many of the large hospital systems in New Jersey are entitled to nonprofit status. The authors provide both sides of the argument below.
Point: Arguments Why Some Hospitals Aren’t Entitled to the Limited Liability Provided by N.J.S.A. 2A:53A-8
The term nonprofit is defined as “not existing or done for the purpose of making a profit.”1 This definition is critical to defining the liability of a hospital, because N.J.S.A. 2A:53A-8 states:
Notwithstanding the provisions of the foregoing paragraph, any non- profit corporation…organized exclusively for hospital purposes shall be liable to respond in damages to such beneficiary who shall suffer damage from the negligence of such corporation…to an amount not exceeding $250,000, together with interest and costs of suit, as the result of any one accident and to the extent to which such damage, together with interest and costs of suit. (emphasis added.)
However, modern hospital systems are no longer operating as the small, community hospitals from which they originated. These hospital systems own and operate many hospitals, as well as physical therapy, pharmacy, food services, captive insurance companies, and numerous related operations. Many of these large hospital systems earn revenue well in excess of a billion dollars annually.
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