Credit rating agencies Moody’s and S&P recently reaffirmed Atlantic Health System with some of the agencies’ highest marks for independent health care systems in New Jersey, highlighting Atlantic Health System’s continued strong financial performance.
Moody’s reaffirmed Atlantic Health System’s Aa3 rating in New Jersey, making it the highest-rated health system based in New Jersey that is rated by the agency. Atlantic Health System received an upgrade to this rating last year, the first time Moody’s had granted it to a New Jersey-based health care organization in the agency’s history. S&P affirmed its “AA-“ rating for Atlantic Health System for the third year in a row. Both agencies granted the organization an outlook of “stable.”
The reaffirmations of the strong ratings come as other non-profit hospitals and health systems experienced rating affirmations at lower levels than Atlantic Health System, as well as credit downgrades as a result of expense increases outpacing revenues and increasing market uncertainty, as noted by both Moody’s, S&P and other financial organizations.
Moody’s noted that Atlantic Health System is prepared for these challenges, with its focus on the strengthening of key services, financial stability and growth in liquidity.
In its rating, Moody’s noted that Atlantic Health System “will continue to generate strong and consistent operating performance and maintain balance sheet ratios. Consistent operating performance will be driven by the system’s strong market position as a leading provider of a wide array of tertiary and quaternary services within New Jersey.”
S&P echoed these positive aspects, noting that Atlantic Health System “is characterized by leading market positions in demographically favorable regions [and plans to expand its] market through a greater portion of Northern New Jersey as AHS diversifies and increases its clinical sites of service.” These include expanding service lines into the urgent care space, physician recruitment, and enhancements to services through infrastructure development.
Atlantic Health System’s financial performance in 2019 is also expected to improve after passing one-time costs incurred during 2018 following the implementation of the Epic electronic medical record system, continued efforts in reducing expenses combined with revenue growth that will include advances toward value-based-care contracts, according to the agency.
The high ratings actions by both agencies put Atlantic Health System in a favorable position to leverage its credit strength and allow the system to issue or refinance its debt at more favorable interest rates. Atlantic Health System may pay less on interest on its bonds and allow the organization to invest more of its money in patient care initiatives, including technology, skilled staff and infrastructure.
“Quality and value guide everything we do, especially when it comes to investment and finance,” said Kevin Lenahan, senior vice president and Chief Financial and Administrative Officer for Atlantic Health System. “These ratings show that investing in the right care, at the right cost, expanding access and pursuing innovation is not only the right thing to do for patients, but has positioned us to lead through challenging times in the health care field.”
How Atlantic Health System stayed strong
In addition to having one of the lowest debts among health systems in New Jersey, Lenahan explained a few key factors that helped Atlantic Health System remain financially strong in the challenging climate facing the health care field:
Proactive disclosure – 2018 marked the organization’s year-long drive to implement and go-live on a new electronic medical record system, Epic. This endeavor not only fully connects all of Atlantic Health System’s facilities and providers on one system, but enhances patients’ ability to access their health care information and take control of their care. The multimillion dollar investment of the system was relayed to Moody’s and S&P in 2017, long before the go-live, which Lenahan said helped offset any concerns about the large capital investment, and additional one-time operating costs tied mostly to training staff and de-provisioning legacy systems.
Investment in health care providers – In recent years, Atlantic Health System has greatly expanded its network of physicians and other health care providers throughout the communities it serves. Not only has it bolstered Atlantic Medical Group, its network of employed providers, but the organization in December 2017 created Atlantic Alliance, a clinically integrated network (CIN), which allows non-employed providers to collaborate with the organization while remaining independent. The result is more than 2,500 health care providers blanketing northern and central New Jersey, all networked to the organization.
Smart growth – While many systems remain solely focused on hospital mergers and acquisitions, Atlantic Health System has shifted focus to adding different, smaller sites of care that enhance access to the System, and streamlining the continuum of care for patients. In addition to its six hospitals – Morristown Medical Center, Overlook Medical Center, Newton Medical Center, Chilton Medical Center, Hackettstown Medical Center and Goryeb Children’s Hospital – the organization’s more than 450 sites also include physician offices in the aforementioned provider network, as well as 11 MedExpress urgent care centers that Atlantic Health System agreed to partner with earlier this year. Atlantic Health System is also currently pursuing opportunities involving more ambulatory care centers in new markets and is enacting plans to enhance the physical therapy footprint and working to acquire new CNs for Atlantic Home Care & Hospice.
Focus on value-based care – Atlantic Health System continues to expand the efforts of its accountable care organizations – Atlantic Accountable Care Organization, Optimus Healthcare Partners, and Healthcare Quality Partners – streamlining and enhancing care among participating doctors and providers and collectively scoring tens of millions of dollars in shared savings since 2012, which illustrates that the ACOs have been effective incubators for adapting to the reimbursement landscape change from volume to value.
Research and Education – Atlantic Health System is engaged with Jefferson University’s Sidney Kimmel Medical College to supplement an already strong medical resident and fellowship program, including the SKMC regional campus which opened earlier this year. A strategy has also been developed with the Atlantic Center for Research, and will grow grant and clinical trials, and altogether support a culture of continuous learning and discovery, and enhance the lives of patients.