Magellan Health Services has hired a new CEO to lead a companywide effort to reduce its staggering debt load and oversee restructuring in a possible Chapter 11 bankruptcy.
Steven Shulman, a veteran managed-care executive, has replaced Daniel Messina as CEO of the Columbia, Md.-based company. Messina resigned in November 2002 as the company's banks signed off on a deal to keep Magellan from defaulting on some $300 million in debt. The country's largest behavioral health managed-care organization is facing a total of nearly $1 billion in debt. The bankruptcy option is outlined in the Magellan's latest filing with the Securities and Exchange Commission.
The company is negotiating with stakeholders, including Aetna, to determine a solution for its capital structure.
Magellan's stock was delisted from the New York Stock Exchange in October 2002, and both Standard & Poor's and Moody's Investors Service downgraded ratings for the company, which covers 68 million people. The company's stock was trading at 7 cents per share last week.
Shulman, former chairman, president and CEO of Prudential HealthCare, most recently founded and served as chairman and CEO of Internet HealthCare Group, an early stage healthcare venture fund. Before joining Prudential in 1997, Shulman co-founded Value Health, a specialty managed-care company that included one of the largest behavioral health managed-care companies at the time-Value Behavioral Health.
Magellan board Chairman Henry Harbin said the board is confident that Shulman will provide "strong and effective leadership" as the company moves with its debt reduction and operational improvement efforts. Shulman said Magellan is a "profitable company with a solid cash flow and excellent reputation" despite its debt load.
Rene Lerer has been named COO of the company, succeeding Jay Levin, who also had previously served as interim president.