Former board member says Memorial's finances shaky
A former member of Memorial Health System’s board of trustees warns that the system’s finances are on shaky ground and that selling it off might be the best way the city can preserve it.
Allan Roth is a local financial planner and accountant who served on Memorial’s board in 2007 and 2008 before resigning to protest the hospital system’s financial management.
Since that time, Roth said, Memorial’s CEO, Dr. Larry McEvoy, and its chief financial officer, Mike Scialdone, have made strides to right the ship. However, he said, Memorial has little maneuvering room and any significant setback could force the city, and its taxpayers, to step in to prop up the hospital system.
“I don’t think we can afford another major bump in the road,” Roth said.
Jeff Murrell, who heads the finance committee for Memorial’s board, disagreed with Roth’s conclusions.
“We are satisfied with the financial condition of the system,” Murrell said. “I am confident that we are well positioned to deal with whatever economic circumstances may come our way.”
Roth said he spoke with McEvoy and Scialdone and looked at Memorial’s current financial statements before coming to that conclusion, which he outlined in a letter he sent on Tuesday to them and to the Citizens’ Commission on Ownership and Governance of Memorial Health System which is considering whether to sell or change the governance of the city-owned hospital system.
You can read his analysis, and Memorial's position, under "related multimedia" next to this story.
“I’m not criticizing for the sake of criticizing,” he said. “I would be thrilled to be wrong.”
Roth said he raised his concerns now because the citizens’ commission’s recommendation could determine the fate of the hospital system. He applied to serve on the commission, but wasn’t selected by the city council.
McEvoy and Scialdone could not be reached for this story.
In a statement, Memorial spokeswoman Cari Davis said that “Memorial believes that its financial status is sound. Our financial statements are audited annually by an outside, third-party accounting firm and are scrutinized by bond rating agencies such as Moody’s and Standard & Poor.”
Roth said he’s not criticizing the steps Memorial’s leadership has taken to turn the system around after it lost nearly $32 million in 2008. The hospital returned to profitability in 2009.
However, he said he thinks Memorial’s board needs to be more focused and disciplined and that bringing in new oversight through a sale, a management company, or getting a new board would dramatically improve the system’s financial performance.
“In my opinion, the citizens’ commission must understand the current financial condition of (Memorial) as part of making recommendations,” he said.
Larry Singer, a Chicago lawyer the commission hired as a consultant, said the commission will look at Memorial’s financial situation and consider what possible ownership would best guarantee the system’s viability.
“You can’t not do that and be responsible,” Singer said.
The root of Memorial’s problem, as Roth sees it, is that the system added nearly $250 million in debt over the past decade. That limits the system’s financial options and flexibility, Roth said.
“Memorial has used up nearly every ‘bullet’ it has in its financial arsenal,” Roth wrote in his analysis.
In a statement, Davis said that Memorial’s debt has grown as the hospital has grown, adding Memorial North and the East Tower at Memorial Central, and that the additions have increased the system’s assets and revenue.
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