Medically Underserved Areas and Health Enterprise Zones-New Jersey Legislation

You asked for information on recent New Jersey legislation creating “health enterprise zones” in medically underserved areas.

New Jersey Governor McGreevey signed legislation on September 2, 2004 that offers physicians and dentists financial incentives to set up and maintain practices in state-designated medically underserved areas of the state. The act terms these areas health enterprise zones (HEZs). (see Assembly Bill 2638; Chapter 139 of the 2004 N. J. Laws).

The New Jersey legislation deems state-designated medically underserved areas as Health Enterprise Zones (HEZ) for the purpose of providing access to quality medical and dental primary care by providing financial incentives to encourage primary care physicians and dentists to establish and maintain offices in and near such areas. An area designated by the New Jersey Health and Senior Services commissioner as medically underserved area according to state law (N. J. S. A. 18A: 71C-35) is deemed an HEZ under the legislation. At present, 54 municipalities have been determined to be medically underserved.

Under the law, qualified primary care physicians and dentists who practice in an HEZ can:

1. deduct from their state taxable income an amount of their net income from the practice that is proportional to their gross receipts from providing health care services to eligible recipients of Medicaid, the New Jersey FamilyCare program, and the Children’s Health Care Coverage program at their practices located in an HEZ;

2. apply for low-interest loans, under a new loan program created under the legislation and administered by the NJ Economic Development Authority, for constructing and renovating their office spaces in an HEZ and purchasing medical equipment for use there; and

3. take an exemption from property taxes for their qualified medical and dental offices located in an HEZ in which they provide services, if the municipality in which the HEZ is located adopts a resolution to that effect.

Primary care physicians and dentists who practice within five miles of an HEZ will also be allowed the gross income tax deduction and eligibility for the loan program if (1) at least half of their gross receipts at the practice are from providing health care services to eligible recipients of Medicaid, NJ FamilyCare, and the Children’s Health Care Coverage program and (2) at least half of those eligible recipients are residents of an HEZ. But they are not eligible for the optional property tax exemption, as municipalities outside of an HEZ are not authorized to grant the exemption.

The New Jersey Office of Legislative Services (OLS) projects that about 250 primary care physicians and dentists in state-designated underserved areas qualify for the incentives. OLS also anticipates that no primary care physician or dentist whose practice is located within five miles of an underserved area will qualify for them. Because reimbursements from Medicaid, FamilyCare, and the Children’s coverage program are relatively low, OLS doubts that a practice would be economically viable if it received at least half of its receipts from those programs (see Legislative Fiscal Estimate, Assembly No. 2638, July 2, 2004; and BNA’s Health Law Reporter, September 16, 2004, p. 1354).

OLS also states, “In the absence of precise data. . . OLS expects this bill to decrease State gross income tax collections to be deposited into the Property Tax Relief Fund by roughly $ 570,000 in fiscal year 2005, $ 590,000 in fiscal year 2006, and $ 600,000 in fiscal year 2007” (OLS Legislative Fiscal Estimate on A. 2638, attached).


September 28, 2004		2004-R-0772
MEDICALLY UNDERSERVED AREAS AND HEALTH ENTERPRISE ZONES-NEW JERSEY LEGISLATION

By: John Kasprak, Senior Attorney