The terms of a health-care divorce: Here’s what AtlantiCare will do to split from Geisinger

AtlantiCare and Geisinger announced in March that they would split, but it wasn’t clear what AtlantiCare would have to do to regain its independence from the large central Pennsylvania health system that acquired it in 2015.

A new bond offering statement from Geisinger provided the answer. AtlantiCare will repay or refinance $225 million, the debt as of April 30, which is a combination of Geisinger lending to AtlantiCare, and AtlantiCare borrowing that Geisinger is liable for, the bond document said.

The document did not say what AtlantiCare’s total debt would be after it regains its independence.

When it became part of Geisinger, AtlantiCare was hoping to benefit from Geisinger’s expertise as an integrated provider and insurer that had gained a national profile through programs designed to manage care for large numbers of people, even if they weren’t coming to the doctor. Geisinger was looking for the opportunity to expand its insurance business into New Jersey.

AtlantiCare initiated the split, but hasn’t said why. Geisinger sued in federal court to block the move before the two sides in March reached an agreement to separate. The split might not be final until 2022, the two nonprofits said.

With two hospital campuses, in Atlantic City and Pomona, AtlantiCare Health System Inc. accounted for a quarter of Geisinger’s beds and net patient revenue in the year ended June 30, 2019, but for 45 percent of Geisinger’s operating income for that period, according to the bond statement. In the 10 months ended April 30, a period that includes COVID-19-related losses, Geisinger Health, which is based in Danville, Pa., had close to $80 million in operating losses. Only $1.15 million of that was attributable to AtlantiCare.

Nevertheless, when Standard & Poor’s downgraded Geisinger’s credit rating by one notch in May, to “AA-” from “AA,” the ratings agency said the loss of AtlantiCare would only incrementally hurt Geisinger’s financial condition, which has been weakening for several years as it faces increasing competition from UPMC and others in a slow-growth region.

Geisinger had $7.1 billion in revenue in fiscal 2019, including $3.8 billion from patient care and $3.1 billion from insurance premiums. AtlantiCare, with 512 beds, contributed $923 million of that revenue.

The two organizations said they will continue to collaborate on the Atlantic City campus of the Geisinger Commonwealth School of Medicine.