Geisinger Health, AtlantiCare merger deal officially unraveled
AtlantiCare is officially out from under the umbrella of Geisinger Health, taking with it one-quarter of the health system’s discharges. The news comes after Geisinger agreed in March to drop its legal challenge to AtlantiCare’s departure because the two sides had reached a deal. At the time, the systems said it would still take up to 18 months to finalize the transaction, a process that ultimately took just seven months. They merged in 2014.
Geisinger and AtlantiCare said in a joint statement the separation isn’t expected to affect patients, employees, facilities or the communities they serve. “We are grateful to all who have supported this mutual agreement, which preserves both organizations’ long-term success and allows for the most appropriate use of our nonprofit, charitable resources for many years to come,” they said.
But the loss of AtlantiCare, headquartered in Egg Harbor Township, N.J., means Geisinger is noticeably smaller and financially slightly weaker. Including AtlantiCare’s results, Danville, Pa.-based Geisinger lost $38 million on operations in its fiscal 2020, which ended June 30, with an asset impairment loss, generating a 0.5% loss margin. Without AtlantiCare, that loss grows to $42.6 million, or a 0.7% loss margin. Geisinger’s 2020 revenue was $7.1 billion including AtlantiCare and $6.2 billion without the New Jersey system.
S&P Global Ratings wrote in its latest assessment of Geisinger in May that losing AtlantiCare will “incrementally weaken financial metrics and the enterprise profile,” although it probably won’t trigger a downgrade on its own. However, S&P said Geisinger’s market will now be focused entirely in Pennsylvania, including in a central Pennsylvania market that’s become increasingly challenging due to its rural nature, limited growth and social issues.
AtlantiCare accounted for roughly one-quarter of Geisinger’s discharges in fiscal 2020, or about 24,100 out of about 94,000 total.
The agreement the systems reached in March required AtlantiCare to repay or refinance all of the outstanding debt Geisinger had lent AtlantiCare and that Geisinger had borrowed on AtlantiCare’s behalf as of the deal’s close, according to a bond document. That debt stood at $227 million as of March 31.
Geisinger’s fiscal 2020 revenue included $153 million in federal coronavirus relief grants, which helped offset a revenue slump from lower admissions. The system said its clinic visits fell 4.5% year-over-year because of the pandemic,
● and adjusted discharges decreased 4%.