AtlantiCare, which is a major health-care provider at the Jersey Shore, wants to separate from Geisinger Health, which acquired the New Jersey nonprofit in 2015.
Geisinger, a central Pennsylvania system known for owning both hospitals and a health insurer, filed a federal lawsuit Thursday seeking a “declaratory judgment that AtlantiCare has no right to terminate its association with Geisinger.”
The 12-page lawsuit, filed in U.S. District Court for the Middle District of Pennsylvania, also names Michael Charlton, AtlantiCare’s chairman and a member of Geisinger’s board, and Lori Herndon, its chief executive.
The lawsuit did not say why AtlantiCare wanted to regain its independence. Geisinger provided notice of the lawsuit to bondholders Friday.
Spokespersons for Geisinger and AtlantiCare said the two sides were discussing ways to resolve the conflict. AtlantiCare did not answer questions about why it wants to part ways with Geisinger.
According to the lawsuit, AtlantiCare is only able to terminate its merger with Geisinger under two circumstances: “If Geisinger becomes controlled by a religious-affiliated entity or a for-profit entity within ten years after the closing.”
Neither of those things has happened. The merger was effective Oct. 1, 2015.
After the merger, AtlantiCare kept its board of directors, though it’s not clear how much power that board has.
When the merger of AtlantiCare into Geisinger was announced in 2014, AtlantiCare’s then-CEO, David P. Tilton, expected a big payoff — despite the 211 miles between the two organizations’ headquarters. Tilton said then that he expected AtlantiCare to be able to learn Geisinger’s techniques for managing the health of a population, which means keeping tabs on them even when they don’t show in a doctor’s office or at the hospital.
The deal also called for Geisinger to spend $62.5 million at AtlantiCare as part of a five-year investment plan.
At the time, AtlantiCare had 589 licensed beds on two campuses, in Atlantic City and in Galloway Township.
Geisinger had operating income of $130 million on revenue of $7 billion in the year ended June 30, 2019. It has 11 hospital campuses and a medical school.
Last February, Moody’s downgraded Geisinger’s credit rating by one notch, to the still very strong Aa3 from Aa2, citing, among other things, modest margins and “continuous capital investment at a time when cashflow is pressured, and markets which are increasingly competitive and fluid.”