Morningstar | Leadership Transition Underway at HCA
HCA Healthcare board chairman and CEO Milton Johnson announced his plan to retire from the company effective Dec. 31, 2018. While we weren't expecting the announcement, HCA's deep management bench should provide for a seamless leadership transition in 2019 and we intend to maintain our narrow moat, stable trend, and standard stewardship ratings.Stepping into the CEO position will be current company president and COO, Sam Hazen. His nearly 36-year career at HCA ensures any friction associated with the transition will be limited, in our view. Hazen has held positions throughout the organization, including Western Group president and CFO, along with overseeing the firm's operations since 2011. As COO, Hazen has been instrumental in guiding the company's operating strategy that has been integral to the development of its economic moat. HCA's hub-and-spoke approach has solidified its position within its core markets, which we believe has given the company a key competitive advantage compared with peers. Given his depth of experience, we think the announced four-month transition period will prove to be ample time to get up to speed. Further, Hazen has been appointed to the firm's board of directors effective immediately.
Interestingly, with Johnson's retirement the firm is planning on separating the roles of CEO and board chairman. While we've had no concerns with governance at HCA since its return to the public markets, we applaud this decision and think it will provide a solid foundation for the ongoing success of the business. Thomas Frist III will be appointed chairman of the board at the 2019 annual shareholders' meeting, when Johnson intends to retire from the firm's board of directors. Frist has been a board member since 2006, is the son of the company's founder Thomas Frist Jr., and has substantial economic interest in the company through the Frist family's near 20% ownership stake.
HCA Healthcare is a holding company. Through its subsidiaries, partnerships and joint ventures, the company owns and operates hospitals and related health care entities. Most of the company's general, acute care hospitals provide medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic services and emergency services. The general, acute care hospitals also provide outpatient services such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology and physical therapy. The company's psychiatric hospitals provide therapeutic programs including child, adolescent and adult psychiatric care, adolescent and adult alcohol and drug abuse treatment and counseling.
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