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Bill

A 5204

Expands certificate of need requirement to certain sale or lease agreements involving hospitals.

2026-2027 Regular Session

Requires DOH Certificate of Need for hospital-REIT deals on real property to protect patient care and hospital financial stability, with a standardized form and annual reporting.

Introduced, Referred to Assembly Health Infrastructure Committee
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Bill Summary · A 5204

Overview

A5204, introduced in the New Jersey Assembly (Session 222) by Assemblywoman Katie Brennan, expands the state’s certificate of need (CON) regime to include certain sale and lease arrangements involving hospitals and real estate investment trusts (REITs). The bill aims to ensure that hospital real property transactions with REITs do not jeopardize public health or the hospital’s long-term financial stability.

Main purpose and intent

  • Require a CON from the New Jersey Department of Health (DOH) before a hospital engagement with a REIT for an interest in the hospital’s real property can proceed, if the terms threaten public health or the hospital’s long-term financial viability.
  • Enhance DOH oversight of hospital real estate transactions to protect patient care and hospital stability.

Key provisions and changes

  • Definitions:
    • “Hospital” = an acute care general hospital licensed under New Jersey law.
    • “Real estate investment trust” (REIT) = as defined in the federal Internal Revenue Code.
  • Prohibition and CON requirement:
    • Entities or individuals with ownership interests in a hospital may not enter into a sale or lease with a REIT for hospital real property if the terms would risk public health or weaken the hospital’s long-term financial status, unless a CON is obtained.
    • DOH determines whether the terms place health or financial stability at risk.
    • DOH may consider the ownership interests and related work experience in deciding whether to issue a CON.
  • Standardized sale/lease form:
    • Any such sale or lease must use a DOH-developed standard form.
    • Required provisions in the form include:
    • A clause allowing the buyer/lessee to reclaim part of the price or distributed funds if predefined performance metrics (e.g., revenue targets, profitability) are not met.
    • A priority provision requiring the hospital owner to consider the lessee’s (or buyer’s) offer to purchase if the hospital is for sale.
    • An option for reduced rental payments during periods when the hospital faces financial instability, if agreed by both parties.
  • Annual reporting:
    • Entities with an ownership interest in a hospital that enters into a lease with a REIT must file an annual financial statement with DOH detailing lease costs, as determined by the department.
  • Administrative rulemaking:
    • DOH Commissioner to adopt rules and regulations under the Administrative Procedure Act to implement the act.

Who and what would be affected

  • Affects hospitals with ownership interest holders who engage in sale or lease transactions with REITs for the hospital’s real property.
  • REITs involved in such hospital real estate deals.
  • DOH, which would assess CON applications and oversee standardized form compliance and annual financial disclosures.
  • Prospective buyers/lessees (REITs) and hospital owners negotiating the terms of sale/lease.

Timetable and procedural aspects

  • Effective date: The act would take effect on the first day of the first taxable year following enactment.
  • Implementation steps:
    • DOH to develop the standard sale/lease form with required provisions.
    • DOH to adopt implementing rules and regulations via the Administrative Procedure Act process.
    • Hospitals and REITs to submit CON applications for qualifying transactions and, if required, annual financial statements.

Potential impact and considerations

  • Strengthens regulatory oversight of hospital real estate transactions to mitigate risks to patient care and financial stability.
  • Introduces standardized contract terms intended to preserve continuity of care and provide remedies if performance metrics are not met.
  • Increases administrative requirements for hospital owners and REITs, including CON review and annual reporting.
  • Could affect the speed and structure of hospital real estate deals, possibly influencing market dynamics between hospitals and REITs in New Jersey.

Compiled from official sources — confirm details with the bill’s official record.

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