The new chief executive officer of Grady Memorial Hospital, Michael A. Young, faces a daunting challenge trying to nurse the state's oldest and largest charity hospital back to health.

However, he comes to the job with some experience at turning around an ailing public hospital and —- more importantly —- he has the support of a new governing board and a community that desperately want him to succeed, and will try hard to provide the resources he will need.

In 2004, when Young took over as CEO of the Erie County Medical Center in western New York, the hospital was $28.4 million in the red. But by 2007 the 550-bed hospital reported a $17 million operating profit, the second year in a row it was in the black. He apparently performed a similar turnaround at Lancaster General Hospital in Pennsylvania before going to New York.

According to colleagues and state legislators in New York, Young used his managerial skills to reduce costs at the Buffalo hospital while emphasizing profit-making services. He'll need to do all that and more at Grady.

The "more" in Grady's case involves navigating the hospital's always-tricky political currents. On the very day Young's appointment was announced, the hospital's new governing board cut a deal to remove the acting CEO, Pam Stephenson, from her post.

Stephenson, a state legislator and chairwoman of the Fulton-DeKalb Hospital Authority, which formerly ran Grady, is getting $325,000 to leave the CEO job even though she had no real qualifications for the job in the first place.

The new board could have —- and probably should have —- fought Stephenson's specious contract in court. But if this move gets her out of the way and allows Young to quickly establish a new tenor for Grady's management, the $325,000 deal for Stephenson's exit might be worth it. Grady has enough problems without Stephenson's continued presence.

Even though Erie Medical Center and Grady are both large public hospitals that serve the poor and uninsured, there are important differences in the patient mix and public support for services at Grady that make Young's job in Atlanta much more difficult.

Grady's volume of poor patients is huge —- about half its patients are covered by the Georgia Medicaid program, which does not even cover the cost of their services. Relatively speaking, New York's Medicaid program is much kinder to its hospitals than Georgia's.

Young and members of the new Grady board, many of whom have strong reputations in the business world, will need to educate state legislative leaders about how important Medicaid is to Grady's bottom line. Over the years, those legislators haven't trusted Grady to spend Medicaid money wisely, and candidly, at times that distrust was justified.

The Buffalo hospital, like Grady, is also a teaching facility, but its residency program is about a third the size of Grady's. The Atlanta hospital is the primary training ground for the Emory and Morehouse medical schools, and it owes the two schools more than $50 million in unpaid bills for providing the medical staff at the hospital.

That debt is but one facet of the financial mismanagement that has plagued Grady for more than a decade. Income has matched expenses only once in the last dozen years, and that was thanks to a $55 million, one-time bailout by the state in 1999.

Last year, Grady finished $43 million in the red, not counting the debt to the schools.

Despite that bleak financial record, Grady's prospects for recovery have been heightened in recent months because the Fulton-DeKalb Hospital Authority no longer is managing it. A new, 17-member nonprofit board of directors took control of the hospital in May, and the hiring of Young represents its first major decision.

The transfer of responsiblity has prompted Atlanta's philanthropic community to come to Grady's rescue. Already the hospital has received $200 million in pledges to modernize aging medical equipment and information technology systems. Another $100 million is still being raised.

Grady's problems are serious but treatable. Long term, it will always need government assistance because it will never be able to fully compete for well-insured patients with its Atlanta counterparts that don't have the same charitable mission. Its success is directly linked to the public's perception of how well it is run and whether it is using the tax dollars wisely.

Young's task is to take the momentum the hospital has achieved by breaking with the past and see what he can make of it in the future. Success is important.

—- Mike King, for the editorial board (mking@ajc.com)