Moody's: CommonSpirit's atypical dual-CEO model is potentially cumbersome

Moody's Investors Service assigned a "Baa1" rating to CommonSpirit Health's approximately $5.8 billion of proposed series 2019 revenue bonds on July 15. The credit rating agency weighed in on CommonSpirit's dual-CEO structure in a press release announcing the rating action.

Chicago-based CommonSpirit was formed through the Feb. 1 merger of San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives. Moody's said the "Baa1" rating reflects the "heightened execution, integration, governance and business risks of the combined organization."

CommonSpirit operates 142 hospitals across the U.S., and Moody's said the health system's broad footprint and diversity of revenue streams somewhat mitigate the challenges related to the complexity and magnitude of the merger. The credit rating agency specifically noted the potential challenges of the health system's leadership structure.

"The announced Office of the CEO structure (whereby each CEO has identified responsibilities and decision-making authority) of CommonSpirit is atypical and could be cumbersome, potentially effecting the rate of organizational and cultural change," Moody's said.

Fitch Ratings assigned a "BBB+" rating to CommonSpirit's bonds on July 15 and also commented on the health system's co-CEO structure. The credit rating agency said it believes "significant operational oversight" is already occurring under the Office of the CEO structure, which supports Fitch's expectation for margin improvement in years to come.

Fitch and Moody's both said CommonSpirit's outlook is stable.

"Lloyd Dean and Kevin Lofton are very gifted leaders, and I'm confident they and CommonSpirit will thrive," said Scott Becker, publisher of Becker's Hospital Review.  

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