Healthcare Business News

CHI finalizes deal with Memorial Health System of East Texas; focus turns to improvement

By Beth Kutscher
Posted: June 1, 2014 - 12:01 am ET

Catholic Health Initiatives has finalized an agreement that will allow it to assume ownership of Memorial Health System of East Texas on June 1.

The agreement comes just days after Moody's Investors Service said it had placed Memorial on review for a credit rating downgrade that would put its bonds below investment grade. The agency cited the system's larger-than-expected financial losses in fiscal 2013 and a deterioration in its performance that has continued into the first quarter of this fiscal year.

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Memorial Health System did not respond to a request for comment. But in a news release, President and CEO Gary Looper said the organization’s mission is “expanded, strengthened and secured” through the ownership transfer. “CHI’s strong commitment and resources, national reach and successful faith-based ministry make this an excellent fit for Memorial,” he added.

Moody’s review will focus on Memorial’s plans to turn around its operating performance and how CHI’s acquisition will affect its outstanding debt.

Earlier this month, Memorial reported a deficiency of $7.5 million in the first quarter of 2014 compared with a deficiency of $1.6 million in the prior-year period. Revenue declined to $44.4 million compared with $46.9 million in the first quarter of 2013.

First quarter admissions declined 9.7% year over year.

"CHI is aware of Moody’s decision to review the rating of Memorial Health System of East Texas," a spokesman for the system said in an e-mail. "A meeting with Moody’s will be held in the near future to discuss the financial position of the hospital system. As an A-rated health system, Catholic Health Initiatives expects the relationship, which will close June 1, 2014, to be a positive contributor to Moody’s formal rating review."

The deal builds on CHI’s growing presence in Texas, where it last year acquired St. Luke’s Episcopal Health System, Houston. The Englewood, Colo.-based system also has formed partnerships with the Baylor College of Medicine and the Texas Heart Institute.

Follow Beth Kutscher on Twitter: @MHbkutscher

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