Benjamin Chu resigns after less than a year as CEO of Memorial Hermann

Story updated June 23.

Memorial Hermann Health System President and CEO Dr. Benjamin Chu resigned to pursue a role in crafting health and public policy, the health system announced Monday. The resignation was effective immediately. Chuck Stokes, executive vice president and chief operating officer, has taken over as interim CEO.

Chu landed the top office at the Houston-based health system last June, replacing former CEO Dan Wolterman, who retired after about 15 years at the helm. Chu previously served as Oakland, Calif.-based Kaiser Permanente's group president for Southern California and Georgia and vice president of Kaiser Foundation Hospitals and Health Plan.

Memorial is currently in the credit review process with both Moody's Investors Service and Standard & Poor's. Memorial does not expect the transition to lead to any material credit action, executives said. Moody's declined to comment.

Chu was tasked with better integrating the system's clinical operations when he joined Memorial Hermann, marking the first time a physician led the organization. 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. "It has been a privilege to have led one of the nation's largest and most successful health systems—one that advocates for improved access to safe, high-quality care."

Chu continues to be board chair for the Commonwealth Fund in New York and a member of the advisory committee to the director of the Centers for Disease Control and Prevention. Chu most recently served as chair of the American Hospital Association's board of trustees. He also was president of New York City Health & Hospitals Corp. and was the acting commissioner of health for the New York City Health Department.

"As a physician and longtime public policy advocate, Chu plans to continue his mission to enhance access to high-quality care and improve the overall health of our population," Memorial Hermann Board Chair Deborah Cannon said in a statement. "With the current state of the healthcare industry, I can think of no better time for a champion like Chu to help lead public policy efforts. We thank him for his service and wish him the very best in his future endeavors. In the interim, we are confident Chuck will fill the role seamlessly."

Moody's assigned an A1 rating to Memorial Hermann'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, the report said.

"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," Dennis Laraway, executive vice president and chief financial officer, said in a statement. "Our greater (credit) concerns rest with changing economic conditions in Houston, a result of the prolonged energy recession."

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

In an interview last month, Stokes said Memorial Hermann plans to spend $2 billion in 2017, mostly for hospital expansions and upgrades. The system has run short of capacity at its main campus and has been moving into the Houston suburbs to make care convenient and less costly for patients who don't need to be seen in a tertiary setting, he said.

"Over the past several years, we've put our capital in growth, because we had to turn down almost 2,000 admissions last year because of capacity issues," Stokes said.

In its Katy, Texas, market, Memorial Hermann is adding a new patient tower and medical office building. That follows a similar expansion at its Sugar Land campus a year ago.

Memorial Hermann also is building a new patient tower at its flagship Texas Medical Center, which is set to open in 2019, Stokes said.

HCA, based in Nashville, recently agreed to buy three hospitals in Houston from Dallas-based Tenet Healthcare Corp. The additional hospitals will give HCA 13 in that market and put it on a par with Memorial Hermann, Jefferies & Co. analyst Brian Tanquilut said last month.

An​ edited​ version​ of​ this​ story​ appears​ in​ Modern​ Healthcare's​ June​ 26​ issue.