Standard and Poor's Global Ratings confirmed its ratings on Washington's Providence Health and Services and California-based St. Joseph Health System will not be affected by the California Attorney General's approval for a merger to proceed.
Currently both Providence's and St. Joseph's long-term, unenhanced ratings are AA-. Standard and Poor's expects there are likely benefits to the combination, which over time, it said, could help improve the rating on the surviving organization. But the group is not yet taking any rating action, given the ratings are already aligned with each other. Standard and Poor's expects to complete a review after it has met with management and reviewed the plan of consolidation in detail.
Earlier this week the California Attorney General released its report announcing that the proposed merger between Providence and St. Joseph could go forward. The announcement included numerous conditions that the AG expected would be met over the years ahead. Those conditions include requirements to maintain operations, levels of charity care spending and seismic compliance, and continued participation in the state's Medi-Cal program. The approval also requires numerous reporting requirements.
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Providence's senior management indicated it is reviewing the conditions to confirm its understanding of the requirements and potential implications. Assuming there are no snags, they would move ahead with finalizing the consolidation, perhaps as early as July 1.
Standard and Poor's expects to meet with senior management in early August, and will complete a review of the consolidation plan, including possible changes to the table of organization and the existing obligated group debt structures. Management has indicated that a combination of the existing two obligated groups is likely, although the exact timing and details are not yet available.
Published reports say that Providence's annual revenue will grow from $14 billion to $20 billion under the new entity, which is expected to be the third-largest nonprofit health system in the United States, behind only Kaiser Permanente and Ascension Health.