WellSpan Health sells bonds for Pennsylvania hospital renovation

WellSpan Health priced $300 million of bonds Tuesday to fund a new surgical tower at its largest hospital. 

The South-Central Pennsylvania-based healthcare network touted its widening reach as it marketed its latest offering. 

The deal priced Tuesday through the General Authority of Southcentral Pennsylvania with BofA Securities and J.P. Morgan as lead managers, Kaufman Hall as municipal advisor and Hawkins as counsel. 

The deal priced with the 2029 maturity yielding 2.7% on a 5% coupon and 5s of 2032 yielding 3%, according to LSEG’s TM3.

A Series C of $100 million of variable rate demand bonds backed by a standby bond purchase agreement from TD Bank was also planned.

Proceeds from the deal will finance the York Hospital Tower project and some other capital projects, and will also refund roughly $144 million of outstanding commercial paper. 

The bonds are rated AA-minus by Fitch Ratings and Aa3 by Moody’s Ratings. 

Fitch’s rating report referenced WellSpan’s “leading market position in central Pennsylvania with a broad, integrated delivery system.”

“Operating performance is improving following recent moderation as operating cost flexibility returns to historical levels,” the report continued, “as pressures from staffing shortages abate and volumes recover contributing to improved margins.”

In an investor presentation, WellSpan Chief Financial Officer Laura Buczkowski touted the company’s recent expansion and plans for continued growth.

WellSpan had two hospitals in 2012, and now has nine, with plans to open three more early next year, Buczkowski said. 

Andrew Walker, the company’s senior vice president of finance and treasury, said WellSpan’s fiscal 2025 performance beat the prior year in virtually every metric. Its revenue and days cash on hand grew, as well as admissions, emergency room and urgent care visits. 

The York Hospital Tower project will expand surgical capacity at WellSpan’s flagship hospital. Upon completion, the hospital will be one of the ten largest in Pennsylvania, according to the presentation. 

The tower, which is projected to cost $430 million, will hold 72 new intensive care unit beds and 21 operating rooms. Construction is underway, Buczkowski said, and the tower is expected to be complete in December 2028.

WellSpan has partnered with Jersey College to create a school of nursing. The first class started last year and will graduate next spring. WellSpan has also partnered with Temple University’s Katz School of Medicine to open a campus in York, which will launch in 2027.

The bondholder risk section of the offering statement references high inflation, cuts from the Department of Government Efficiency, the rollback of federal regulations and scrutinizing diversity, equity and inclusion policies. 

“Implementation of these executive orders may subject the obligated group to increased costs, greater regulatory uncertainty, reduced funding and reimbursement for services provided and additional regulatory scrutiny,” the offering statement said.

The offering statement also referenced the One Big Beautiful Bill Act, which contained cuts to Medicare, Medicaid and the Affordable Care Act. The document said it’s too soon to determine what OBBBA’s impact will be, but it could be “materially adverse” to WellSpan’s operations or financial condition.

Medicare makes up 32% of WellSpan’s payor mix, Walker said, and Medicaid is 7%.