S&P blesses Pa. hospital chain's Shore deal

Geisinger Health System's planned absorption of AtlantiCare Regional Medical Center, the 600-bed Shore hospital system with offices across South Jersey, has won a "Positive" credit outlook report from Cynthia Keller, credit analyst at Standard & Poor's Ratings Services. "We could raise the rating once AtlantiCare's affiliation with Geisinger is consummated," Keller told S&P clients in a report today.

Geisinger, based in the upstate Pennsylvania town of Danville, signed an agreement to take over AtlantiCare in May 2014. S&P rates Geisinger 'AA', and ranks AtlantiCare (including $147 million in 2007 and 2012 series hospital revenue bonds) a notch below at 'A+'.

Typically, the higher the rating, the more likely a borrower is expected to pay back investors who buy its bonds to fund new buildings and other capital projects, and the less interest the borrower has to pay investors to buy its bonds. AtlantiCare "hopes to receive regulatory approvals later this year" for the Geisinger combination, Keller noted. Failure to close the deal would leave AtlantiCare with the current rating, she added.

The analyst praised, not only Geisinger's superior credit profile -- the system operates hospitals in small-town and rural sections of Pennsylvania, West Virginia, and Maine where elderly and low-paid patients qualify for federal healthcare subsidies -- operates with relatively limited competition in its scattered markets -- but also AtlantiCare's recent "strong financial performance" through 2014 and early 2015.