Me­mo­rial Her­mann faces change at the top amid credit re­view

Modern Healthcare - - NEWS - By Alex Kacik and Dave Barkholz

Ex­ec­u­tives at Me­mo­rial Her­mann Health Sys­tem are con­fi­dent that the Hous­ton-based health sys­tem’s credit rat­ing won’t take a hit fol­low­ing the sur­pris­ing and im­me­di­ate de­par­ture of Dr. Ben­jamin Chu as pres­i­dent and CEO.

Chu re­signed from his post last week to pur­sue a role in craft­ing health and pub­lic pol­icy. Chuck Stokes, ex­ec­u­tive vice pres­i­dent and chief op­er­at­ing of­fi­cer, has taken over as in­terim CEO. Me­mo­rial Her­mann is in a credit re­view process with both Moody’s In­vestors Ser­vice and Stan­dard & Poor’s. Health sys­tem ex­ec­u­tives don’t ex­pect the tran­si­tion to lead to any ma­te­rial credit ac­tion. Moody’s de­clined to comment.

Moody’s as­signed an A1 rat­ing to the sys­tem’s pro­posed $129 mil­lion is­sue of fixed-rate bonds last May, based on its lead­ing mar­ket po­si­tion in the greater Hous­ton area, fa­vor­able de­mo­graph­ics and a his­tory of strong rev­enue growth and op­er­at­ing cash flow mar­gins.

“We’ve re­ceived pos­i­tive bond rat­ings in the past based on our fi­nan­cial strength and the mar­ket’s con­fi­dence in our strate­gic and op­er­a­tional per­for­mance. We have a deep and strong man­age­ment team, and re­main in good hands dur­ing the CEO tran­si­tion,” Chief Fi­nan­cial Of­fi­cer Dennis Lar­away said in a state­ment. “Our greater (credit) con­cerns rest with chang­ing eco­nomic con­di­tions in Hous­ton, a re­sult of the pro­longed en­ergy re­ces­sion.”

Chu landed the top job last June, re­plac­ing ex-CEO Dan Wolter­man. He’s the first physi­cian to have led the or­ga­ni­za­tion and was tasked with bet­ter in­te­grat­ing Me­mo­rial Her­mann’s clin­i­cal op­er­a­tions. Chu pre­vi­ously served as Oak­land, Calif.-based Kaiser Per­ma­nente’s group pres­i­dent for South­ern Cal­i­for­nia and Ge­or­gia and vice presi- dent of Kaiser Foun­da­tion Hos­pi­tals and Health Plan. At Kaiser, Chu im­ple­mented an in­te­grated elec­tronic health record sys­tem and pop­u­la­tion health man­age­ment tools.

“I have ad­mired Me­mo­rial Her­mann from afar for many years, and I was in­cred­i­bly hon­ored to join this pres­ti­gious or­ga­ni­za­tion,” Chu said in a state­ment.

Me­mo­rial Her­mann is neck-and­neck with HCA as the mar­ket-share leader in the Hous­ton area with more than $5 bil­lion in an­nual rev­enue.

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