Magellan Health Services Inc. has named Steven J. Shulman, a managed-care veteran who led the recent turnaround of Prudential HealthCare, as its new chief executive to lead the mental health care provider's struggle to reduce its debt.
Shulman has a long history in the industry, including stints as Prudential chief executive, co-founder of managed-care firm Value Health and a Cigna Corp. executive.
His appointment comes as Columbia-based Magellan faces an uncertain future, punctuated by its struggle to manage its $1 billion debt.
Shulman, 51, said yesterday that Magellan's position as the nation's largest provider of mental-health services and his experience in managed care led him to accept the new role.
"I see a company that's the undisputed leader in this segment," Shulman said yesterday.
"I see a company that needs to reduce its debt. It's an exciting opportunity to participate in that debt reduction and then take advantage of their market position."
Shulman replaces Daniel S. Messina, who resigned last month. Messina, a former Aetna U.S. Healthcare executive, joined Magellan in 2000 and was named chief executive in October 2001.
Prudential hired Shulman in 1997 to head the company's restructuring, which included the appointment of new senior managers, overseeing hundreds of layoffs and administrative cuts, and curbing the firm's losses of up to $1 billion a year, Shulman said.
The Prudential unit was sold to Aetna in 1999.
Magellan has 5,428 employees nationwide, including 866 in Maryland, the majority of whom work in Columbia.
Last month, Magellan's banks granted a temporary reprieve, assuring that the company won't go into technical default on its $300 million in bank debt at least until Dec. 31.
But the firm warned it still expects to violate its bank agreements in January, which would allow its lenders to demand immediate repayment and, some analysts say, could send Magellan into bankruptcy.
Magellan shares lost 1 cent yesterday to close at 19 cents in over-the-counter trading.
Elie J. Radinsky of Jefferies & Co. in New York said Shulman's appointment is an important step in Magellan's turnaround effort.
"The fact that they're able to hire a CEO to replace Dan Messina of the caliber of Mr. Shulman is a positive sign," Radinsky said.
"The company still faces significant challenges and hurdles as it negotiates with its clients, providers and creditors groups."