MANAGED CARE: Aetna’s Leader Steps Down
Responding to "pressure from shareholders frustrated by a 50% decline in the stock since last August," Richard Huber, Aetna U.S. Healthcare's CEO, resigned Friday, the New York Times reports. Huber will be replaced by William Donaldson, former chair of the New York Stock Exchange and Aetna board member, who plans a review of "all aspects of [Aetna's] operations from the most strategic down to day-to-day operations." He also wants to "appraise the management" and "take a good hard look" at the HMO's recent reorganization into financial and health-related divisions, while "improving relations with doctors and patients" in hopes of ending Aetna's troubles. Aetna has come under fire recently for its drop in stock price and faces lawsuits from patients challenging the company's financial incentives for doctors (Freudenheim, 2/26). "The board and I share the frustration with the recent returns received by Aetna shareholders," Donaldson said. Huber, who became CEO in 1997 and chair in 1998, said in a statement, "I am proud of the work we have done. We have created the largest health care benefits company in America, doubled Aetna's revenues and strategically positioned the company for a bright future." Huber helped the giant HMO take over its competitors Prudential and NYLCare, increasing the beneficiary rolls to 47 million (Schneider, Washington Post, 2/26).
"I wish Dick Huber had been given a chance to preside over the successful integration of his many acquisitions, Kenneth Abramowitz, an analyst at Sanford C. Bernstein, said. But others did not share his sentiments (New York Times, 2/26). Lawrence Marsh, senior vice president at Lehman Bros., said, "Aetna, because of its size and its activity has been a lightning rod for what people don't like about HMOs -- big, bureaucratic and caustic." He noted that HMOs want to show the public a "kinder, gentler face ... Huber is not the person who can carry that off very well." Jamie Court of the consumer group Foundation for Taxpayer and Consumer Rights, agreed, saying, "His very arrogance made the case for reform" (Washington Post, 2/26). David Marsh of Prudential Securities said of Donaldson, "He understands shareholder concerns probably more closely and is likely to take a fresh look at everything the company is doing" (AP/Baltimore Sun, 2/26). But Todd Richter of Bank of America argued that Aetna's leadership is not the problem. He said, "They need to stop focusing on being bigger, and start running their business better. This is a company that has performed poorly for 20 years through three management teams" (Philadelphia Inquirer, 2/26). Richter added, "I don't think Dick Huber losing his job solves Aetna's problems. The only thing this does is makes it appear as if the board cares and is doing something" (Galewitz, AP/Miami Herald, 2/26).