CHICAGO - Rating agency officials are taking a close look at a proposed merger of two large Chicago-area health care systems that are among the latest institutions to join a wave of consolidations occurring across the nation.

EHS Health Care, based in Oak Brook, Ill., and Lutheran General HealthSystem, based in Park Ridge, Ill., yesterday announced they have signed a letter of intent to merge, which would make the combined entity one of the largest health systems in northeastern Illinois.

Though mergers in various parts of the country have resulted in rating downgrades for some institutions and upgrades for others, rating agency officials said it is too early to tell what impact the merger of EHS and Lutheran General will have on the outstanding debt of each institution.

EHS has $85 million of debt rated AA-minus with a stable outlook by Standard & Poor's Corp. and A-1 by Moody's Investors Service. Lutheran General has $192 million of debt rated A-plus with a stable outlook by Standard & Poor's and A by Moody's.

Ken Rodgers, a director at Standard & Poor's, said the ratings of each institution will be under review in light of the announcement.

Rodgers said Standard & Poor's believes that the joining of the two "strong" institutions would be "viewed positively" by the rating agency in lights of increasing competition in the Chicago health care market.

If the merger is successful, he noted, the two institutions could pursue the option of guaranteeing each other's debt in recognition of the "collective benefit that both [institutions] would bring such a merger."

Christine Ballantyne, an assistant vice president at Moody's Investors Service, said Moody's will be closely watching developments in the approval process for the proposed merger. She said both institutions will have to reconcile differences in their corporate cultures, besides having to seek approval from governmental agencies such as the U.S. Department of Justice, which handles antitrust issues.

Ballantyne said that if the EHS and Lutheran General merger is approved, the combined entity would be a major player in the Chicago market along with health care networks associated with Northwestern Memorial Hospital and Rush-Presbyterian-St. Luke's Medical Center.

In a press release, officials of both institutions said the combined organization will enhance their ability to attract buyers of health care, such as health maintenance organizations and large employers.

The merger of EHS and Lutheran General could take effect by Jan. 1, 1995, if a due diligence process proceeds smoothly and the proposed merger receives formal approval from religious sponsors and governmental bodies.

The merger would result in an organization of more than $1.2 billion of annual net revenues, over 19,000 employees, and 3,550 physicians, according to officials at both institutions.

The current chief executive officers of each institutions will become co-chief executive officers under the merged organization.

Under the proposed terms of the merger, both the United Church of Christ and the Evangelical Lutheran Church in America would be co-sponsors of the combined entity, which would be directed by an 18-person board of directors.

The new organization would be one of the largest religiously sponsored health care entities in the nation, according to officials of both institutions.

The announcement yesterday marked the second round of merger talks between the two organizations. Seven years ago discussions between the two companies broke down because of religious differences, according to John Kessler Jr., senior vice president of Lutheran General.

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