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Analysts upgrade Barnabas Health credit rating

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Wall Street analysts upgraded Barnabas Health’s credit rating earlier this week, citing the health care system’s plans to grow its presence in the state. But while the organization’s chief executive said the rating improvement will support that strategy, he said it won’t accelerate the execution of any transactions Barnabas has in the works.

“I think when we’re speaking to providers that may become part of our system, having this ratings boost will be helpful in our discussions and in attracting other folks in becoming a part of our system,” said Barry H. Ostrowsky, president and CEO of Barnabas Health. “But a good rating is not, per se, a top priority, since we would be executing our growth strategy with or without it.”

On Sept. 25, Fitch Ratings upgraded the ratings of Barnabas’ approximately $917 million of outstanding debt from BBB to BBB-plus on the system’s report of increased patient revenues, robust liquidity and commitment to growing its footprint in New Jersey.

Though Barnabas ended a nearly two-year alignment discussion with Atlantic Health System in June, the Fitch report sustained the improved rating by noting the system is still “open to exploring other potential relationships.”

One of those potential relationships could be a management contract for Barnabas to operate University Hospital, in Newark, which will be state-owned following the planned dismantling of the University of Medicine and Dentistry of New Jersey on July 1, 2013.

“The legislation regarding the restructuring clearly gives us the opportunity we’ve sought all along — a closer affiliation with University Hospital and the medical school,” Ostrowsky said. “But there are still a great number of details and a whole process to be implemented before that happens. It will take a lot of time for us to flesh it out and negotiate the details, but part of the problem is no one really knows — myself included — what those details of are. It’s complicated and could be time consuming, but it’s not impossible.”

Since the system would not be liable for operating losses or capital investment needs if it operated University Hospital, Ostrowsky said he believes “the rating agencies would be happy with such a transaction” and further maintain or improve Barnabas’ rating on its completion.

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