From a credit perspective, the recent announcement by two Philadelphia-based healthcare systems of their intent to merge is seen as a smart move.
Last week, Standard & Poor's Corp. placed 344-bed Presbyterian Medical Center on CreditWatch with a "positive" outlook. The New York-based credit-rating agency's action reflects the West Philadelphia teaching hospital's plan to merge with the University of Pennsylvania Health System. Because the system maintains a higher rating of AA-, Presbyterian's A- rating stands a good chance of being raised.
Under a letter of intent signed last month, Presbyterian will become part of the university health system. The system comprises three affiliated hospitals, a management service organization, more than 100 primary-care physicians and its flagship, 725-bed Hospital of the University of Pennsylvania.
MODERN HEALTHCARE reported last fall that Presbyterian had dropped plans to join a healthcare delivery network being formed by Independence Blue Cross and was negotiating with the University of Pennsylvania (Nov. 21, 1994, p. 3).
Since the official announcement of their intent to merge, officials of the two systems have been discussing details of the plan.
As part of the agreement, Presbyterian's parent, Presbyterian Medical Foundation, and the University of Pennsylvania will form a joint-venture company to own and manage nursing homes.
I. Donald Snook Jr., president of Presbyterian Medical Center and its foundation, will remain president of Presbyterian's corporate parent. William N. Kelley, M.D., will continue as chief executive officer of the University of Pennsylvania Medical Center and Health System and dean of the university's school of medicine.
According to the latest financial report from the Pennsylvania Health Care Cost Containment Council, the Hospital of the University of Pennsylvania posted the highest profit in the state, with 1993 net income of $119 million on net patient revenues of $483.2 million.
Snook said Presbyterian reported net income of $3 million on revenues of $170 million in 1994.