Cohen, J.c.c. (temporarily assigned).
This action seeks to establish that Middlesex County is obliged to pay for the inpatient hospital care of certain nonpaying county residents. Plaintiffs are the three major local nonprofit hospitals. The matter is here on cross-motions for summary judgment. There are no factual differences of any consequence.
The claim by the hospitals against the county arises because there are some needy patients for whom the hospitals provide free inpatient care and for whom they are not reimbursed by Medicaid, Medicare or any other form of public assistance. They are only partially reimbursed by the county. The hospitals claim an unrecovered cost greater than $.5 million a year. They assert that the county is obliged fully to repay the hospitals at rates set by the Commissioner of Health and to appropriate enough money to do so. The county argues that its appropriations for the hospitals are voluntary only and that it is not duty-bound to do anything at all.
In 1968 a written agreement was made between plaintiff hospitals, two other hospitals and the county. It set forth procedures for distribution of funds by the county. The agreement had no termination date. Both sides agree that it is now voidable by any party.*fn1 The agreement is currently being treated by the parties as something in the nature of a nonbinding administrative convenience. For the current budget year the county has appropriated some $850,000 for the hospitals and has represented to the court that cancellation of the 1968 agreement either by a party or by this court would not cause it to withdraw those funds.
Some history is necessary. Before 1968 the county annually audited the hospitals and reimbursed them for their claimed losses for free care. The annual cost to the county was reduced by the enactment of Medicare in the early 1960s, but it nevertheless rose gradually until it reached $1 million. The freeholders suspected that full reimbursement relaxed hospital vigilance to collect from reluctant but able families. They felt that providing only partial repayment might make the hospitals more reluctant to accept readily a patient's claim of inability to pay.
Against that background the 1968 agreement was made. It recites statutory authority for county payments to hospitals*fn2 and establishes procedures for application, auditing, apportionment and payment by the county of such sum as it might
appropriate from year to year for the purpose. It gives the county, rather than the hospitals, the right to seek reimbursement from the patient for whose care county funds are paid. See N.J.S.A. 44:5-19.1. Essentially, the procedure established in the agreement is for the hospital to apply for credit for free care of a needy patient. There is a means test that was made up for the purpose and which has no necessary relationship to any test for eligibility for any other form of public assistance. If the county adjuster, who administers the program for the county, is satisfied the care qualifies for credit, it is figured in. Mechanisms are established for the county to apportion the appropriated funds among the hospitals on the basis of the previous year's share of the burden of free care.
During the decade of this agreement the county has knowingly and intentionally appropriated sums that were insufficient to defray the hospitals' claimed costs of free care. The hospitals have nonetheless provided the care and, in partial consequence, say they have incurred substantial and repeated operating deficits.
For years there did not seem to be much that could be done, other than to lobby the freeholders for greater appropriations. The problem was that the statutory language authorizing county aid plainly was permissive only and created no duty on the part of the county to appropriate greater amounts.
There is a series of Poor Law provisions, not all dovetailing very well, that permits a county to make appropriations for charitable hospitals in various ways:
(a) It "may" appropriate $1.5 million a year (if over 300,000 in population) to be "applied to the purpose of supporting and maintaining such patients as may be sent to any [nonprofit] hospital * * *." Such payments are to be apportioned among hospitals according to the number of "free ward day's treatment" each has afforded county residents. N.J.S.A. 44:5-11 and 12.
(b) It "may" appropriate moneys for the construction or enlargement of charitable hospitals, N.J.S.A. 44:5-14, without apparent statutory limit.
(c) It "may," if its population is less than 925,000, appropriate 1/10th of 1% of the total assessed value of property therein, to be used to defray the annual operating deficits of hospitals caring for the poor and indigent. N.J.S.A. 44:5-16 A.
(d) It "may," if its population is less than 925,000, appropriate 1/10th of 1% of the total assessed value of property therein, to be paid to hospitals providing free care to the poor and indigent and at a set daily rate. This provision is expressed to be exclusive with the one ...