Here’s the latest in a case we’ve been following.
In Englewood Hospital & Medical Center v. State, No A-16-24 (July 16, 2025), the New Jersey Supreme Court rejected physical and regulatory takings claims made by hospitals which are required to treat nonpaying patients even though the Medicare reimbursements available will not cover the hospitals’ costs.
Here’s the bottom line:
Under the facts as presented in this case, we hold that charity care is not an unconstitutional “per se” physical taking of private property without just compensation. It does not grant an affirmative right of access to occupy hospitals; it does not give away or physically set aside hospital property for the government or a third party; and it does not deprive hospitals of all economically beneficial use of their property. We also hold that charity care is not an unconstitutional “regulatory” taking of private property without just compensation. That is due to the highly regulated nature of the hospital industry and the legislatively declared paramount public interest that the charity care program serves.
Hospitals remain free to challenge their annual subsidy allocations through administrative channels and to lobby the Legislature to make policy changes that would address more broadly the concerns they raise. But the charity care program does not run afoul of the Takings Clause, and we therefore affirm the Appellate Division’s judgment, as modified.
Slip op. at 3-4.
The buried lede in the court’s framing is what the court labels “charity care” is more like forced charity care (we think of “charity” as an action one does voluntarily). This is the case where several hospitals challenged a New Jersey statute which requires hospitals to take all patients regardless of their ability to pay, but does not fully reimburse under Medicaid the hospitals for the costs of treating these patients even where it results in the hospitals losing money.
The Appellate Division held this was not a categorical (Cedar Point/Loretto) or an ad hoc (Penn Central) taking, and the New Jersey Supreme Court affirmed.
The hospitals asserted that the statute required them to suffer a physical invasion, because it prohibits them from excluding nonpaying patients and forces them to use up meds and supplies that they will never recover. The court rejected the arguments, in what reminded us of the Yee rent control and PruneYard commercial benefit approach, where the essential reasoning is that “you let people onto your land and business, so you’ve waived your right to exclude.”
Jump down to page 20 of the slip opinion for where the court gets to the heart of it, rejecting seriatim each of the hospital’s claims. We don’t think this opinion is going to open your eyes or really put a dent into the takings theories and doctrines.
But it is mildly entertaining to see how the court navigates just so, setting ’em up and knocking ’em down, to reach its inevitable outcome. Physical taking of supplies? Nope. Services? Same. Facilities? No again. Penn Central taking? Please.
For example, this isn’t like Horne because there, the government treated the raisins like government raisins, while here, hospitals are not forced to set aside “any portion of their property” for government use. Although a hospital can’t deny admission to a nonpaying patient, the “hospital retains both ownership and control of its own facilities and equipment, and it makes choices about the allocation of those resources based on its assessment of patient needs.” Slip op. at 23. Apples and oranges, but there it is.
And file the next bit under the “have the New Jersey Justices ever seen a hospital bill lately?” department: the court concluded that requiring hospitals to use their medical supplies and medications isn’t a taking because “the provision of such consumables incidental to compelled medical care is, in our view, not the same as the compelled cession of property that retains its economic value and can be sold or disposed of at the transferee’s discretion.” Id. Somehow this is different:
If a hospital provides pain medication or applies a cast on a broken bone, patients have not taken possession or been transferred ownership of those supplies in the same way the government took possession of the raisins in Horne.
Slip op. at 23-24.
Yes, supplies are property, but it would just be too dang expensive to have the public pay for them. Just look how far the court goes to conclude this without quite saying this:
The hospitals argue that the medical supplies they use in treating patients are their property just as the raisins were the property of the growers in Horne, and we do not disagree. But Justice Oliver Wendell Holmes noted that “[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.” Pa. Coal Co. v. Mahon, 260 U.S. 393, 413 (1922); accord Penn Cent., 438 U.S. at 124 (quoting Mahon and explaining that the Court “has accordingly recognized, in a wide variety of contexts, that government may execute laws or programs that adversely affect recognized economic values”).
In our view, that reasoning holds true for the incidental consumption of medical supplies, furnished in accordance with the hospitals’ own determinations of what supplies are needed and how they should be used, while providing care.
Slip op. at 24. (Recall, however, that Justice Holmes in Mahon was referring to incidental decreases in use and value that were caused by otherwise valid police power regulations adjusting the shared burden and benefits of property regulations which we all share.) Not, as here, where the supplies are just gone, not merely diminished in use and value. Maybe the most charitable read of this part of the opinion is that the court was sub silentio determining that the Murr “denominator” is the hospitals and their other paying patients (in the sense that there’s no allegation that these forced losses are putting the hospitals in the red overall, because they simply shift the losses to other patients).
As for the regulatory taking argument, any guesses how the hospitals fared under Penn Central? Here, the court fell back on that old saw: the hospitals should have seen this coming. Providing medical services is a highly regulated industry like video poker, so hospitals do not have a strong claim for reasonable investment-backed expectations of not being forced to provide free services at a loss. Slip op. at 33 (“It is undisputed that healthcare is a highly regulated industry, even beyond the elaborate regulations associated with charity care.”).
And like the court of appeals, the New Jersey Supreme Court screwed up the “character” factor, concluding that this is regulation and promotes the general health and welfare of the public, so all good. But as we noted here, the reasons the government does something is not part of the takings analysis, and has not what the “character” factor asks about. Read this article we wrote a while back for the inquiry this Penn Central factor should focus on is whether the government action looks like it is having the same effect as would a straight-up exercise of eminent domain. If it looks like the property owners is being forced to bear more than its proportionate share of a public benefit, then the “character” factor should weigh in favor of a taking.
Final comment: anyone surprised by this result? To us, this seems like one of those cases where, despite logic and the law, the government action being challenged is just too entrenched in the reviewing court’s DNA that it is practically inconceivable that the court would do anything to upset the apple cart (think rent control in New York City, for example). The bureaucratic and political consequences of anything but an endorsement of the current system is probably imagined to be dramatic, and does anyone believe that a judge would want tomorrow’s headlines in the New Jersey papers and the New York Times to be “New Jersey Justices Deprive the Poor of Healthcare?”
A callback to Justice Holmes’ other famous quote that there’s logic and then there’s law may be in order here to understand the outcome.
But to us, the courts don’t need to go down such a drama-laden path. After all, these type of cases aren’t about whether or not it is a good idea to provide medical care for those unfortunate enough not to be able to afford it. Of course its a good idea, both morally, legally, and as a matter of policy. The question here that courts don’t seem to understand is that the takings issue asks the most essential question: who has to pay the freight for that public good, and that is seems unfair to foist the cost on a single owner.
Englewood Hospital & Medical Center v. State, No. A-16-24 (N.J. July 16, 2025)