By Todd Wallack, Globe Staff | March 16, 2010
The chief executive of Blue Cross and Blue Shield of Massachusetts, the state’s largest private health insurer, abruptly resigned yesterday, just weeks after he was replaced as chairman of the board.
Cleve L. Killingsworth, 57, who helped lead Blue Cross for six years, departed shortly after the company posted a towering $149 million loss and reported it lost 89,000 subscribers last year.
Former chief executive William C. Van Faasen, 61, who ran Blue Cross for 13 years and handpicked Killingsworth as his successor, will run the insurance giant without taking a salary until a permanent replacement is found. The nonprofit insurer said it just launched an executive search, suggesting Killingsworth’s departure came about suddenly.
Speaking on condition of anonymity, industry analysts and executives said Killingsworth had a reputation for clashing with fellow Blue Cross ex ecutives, spent much of his time on the road, and had trouble containing soaring costs.
Blue Cross, however, said emphatically that Killingsworth was not pressured to leave. Spokesman Jay McQuaide said Killingsworth quit to focus on speaking and writing about national health care issues.
“This is Cleve’s decision,’’ McQuaide said. “Six years, these days, is a long time.’’
Blue Cross said Killingsworth will receive a retirement package, but it will not disclose the details until next March, when it normally reports compensation for top executives. Last year, Killingsworth’s pay dropped 46 percent, to $1.9 million.
Killingsworth declined to be interviewed, but said in a brief written statement: “I look forward now to moving the discussion of quality and affordability to a national level, where I believe my experience can be of value.’’
The departure comes at a challenging time for Blue Cross, which has 3 million members and 3,600 employees in Massachusetts. The insurance giant has been struggling to hold down payments to doctors and hospitals. It is facing new scrutiny from Beacon Hill and Capitol Hill.
Like many other regional insurers, the company finished last year in the red. Blue Cross said it lost $149.2 million in 2009 on revenue of $13 billion, the first annual loss during Killingsworth’s tenure. Blue Cross blamed most of the red ink on investments in stocks and property, but $55 million of the losses was from its core business.
Blue Cross has struggled with skyrocketing bills from health care providers. It signed expensive contracts with Partners HealthCare, the giant hospital system that includes Massachusetts General Hospital and Brigham and Women’s Hospital. And it has offered physician groups and hospitals sky-high reimbursement rates to persuade them to sign up for a new type of health care plan, which pays them a set amount per patient, rather than a la carte prices for each doctor’s visit and service performed. That model could help dissuade doctors from ordering extra tests and unnecessary treatment — and ultimately rein in costs — but it appears to be driving up Blue Cross’s costs in the short term, health care analysts said.
Blue Cross, like other insurers, has tried to pass on rising costs to subscribers. The company recently proposed rate increases ranging from 10 to 19 percent for small businesses, effective April 1. But Governor Deval Patrick recently ordered state insurance regulators to review double-digit premium increases from Blue Cross and other insurers. The state is expected to make a decision this month.
Earlier this month, Blue Cross separated the positions of chairman and chief executive, both of which were held by Killingsworth, after pressure from Attorney General Martha Coakley’s office and its own review. Killingsworth turned the chairman’s position over to Paul Guzzi, a Blue Cross director and president of the Greater Boston Chamber of Commerce.
Coakley launched an investigation into a $16.4 million lump-sum retirement payment Blue Cross made to Van Faasen when he retired as chief executive in 2006. Last year, the attorney general’s office broadened its review to include compensation and corporate governance at Blue Cross and three other nonprofit health care plans.
Van Faasen is credited with helping to turn around Blue Cross after the company posted enormous losses in the 1990s. But Blue Cross said Van Faasen has been brought in only to run the company on an interim basis.
Ellen Lutch Bender, president of Boston health care consultant firm Bender Strategies LLC, said simply replacing Killingsworth probably won’t cure the ills at Blue Cross. In addition to soaring expenses and increased scrutiny from Beacon Hill, health care providers are facing increased intervention from Congress, which is edging closer to passing a health care law designed to shake up the industry.
“The challenges are enormous,’’ said Bender. “The challenges that Blue Cross faces don’t leave with Cleve.’’
Killingsworth’s departure is also notable because he was one of the most prominent black chief executives in the Boston area. He is a founding member of the Executive Leadership Council, a Washington, D.C., nonprofit established to provide African-American executives with a leadership advisory forum.
“It’s definitely a loss,’’ said Robert Turner, codirector of the Commonwealth Compact, a project formed by business and civic leaders to promote diversity in Boston. “There’s not a whole lot of diversity in Boston CEOs.’’
Killingsworth, a Chicago native who has worked in the health care industry for 30 years, joined Blue Cross as president and chief operating office in February 2004 and became chief executive in July 2005.
He previously served as the president of the Health Alliance Plan in Detroit, and ran Kaiser Permanente’s Central East Division.
McQuaide said Killingsworth plans to move to the Rochester, N.Y., area, where he has a second home, but will visit Boston frequently.
Killingsworth, who also dabbles in photography and rare books, serves on the boards of more than a dozen organizations, including Boston University, the Museum of Fine Arts, and the National Institute for Health Care Management.
Todd Wallack can be reached at twallack@globe.com.
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