Schafer: Blue Cross still needs a change in culture

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: July 25, 2012 - 9:16 PM

Kenneth Burdick took over as CEO of the nonprofit Blue Cross and Blue Shield of Minnesota after a career in the for-profit world, and not just any for-profit. Much of his career was at Minnetonka-based UnitedHealth Group -- a company that would be known for its fast-paced change and profit-oriented aggressiveness if it were a Silicon Valley start-up or a used-car lot.

Perhaps the result was predictable: an apparent culture clash that led to Burdick's ousting last week after just six months.

But even though Burdick didn't work out, the board's strategy in his early 2012 appointment was the correct one. It seems clear the board went outside for leadership because directors wanted Blue Cross to move faster with innovations, reach decisions quicker, be more aggressive in partnerships and alliances.

In short, become a little more like UnitedHealth.

"Each of the directors would probably answer that a little differently," board chairman Vance Opperman said. "But that's a fair conclusion."

The appointment of Burdick marked the second time Blue Cross had gone outside for a CEO in the recent past. Patrick Geraghty arrived in late 2008 and moved on last summer to a CEO job at the Blue Cross affiliate in Jacksonville, Fla.

Opperman said the board had a good experience with Geraghty, who sought the position in Florida to be nearer aging family members. "We had a very good experience with somebody from the outside," Opperman said. "And with Pat we were embracing much of what was ultimately included in the Affordable Care Act."

And because Geraghty had management experience with for-profit Prudential Insurance Co. units as well as Blue Cross nonprofit affiliates in New Jersey, Opperman said, "We were maybe not as concerned about Ken's for-profit background as maybe we should have been."

At the time the board found Burdick he was senior vice president of Coventry Health Care Inc. He had only been there since 2010, however, having spent most of the past 20 years at UnitedHealth, leading UnitedHealth Group's Medicare unit and also serving as the head of UnitedHealthcare's commercial business.

The culture at UnitedHealth is fast-paced, competitive and very aggressive, which you can pick up reviewing UnitedHealth's recruiting documents. The culture at Blue Cross, the nation's first Blue Cross affiliate, is simply nothing like that.

That does not mean that the organization has not been successful or that it is in any real trouble. Roughly a third of the state's people carry a Blue Cross membership card, and last year revenue came to $9.26 billion.

And nonprofit or not, last year Blue Cross made money, as any nonprofit needs to do to stay around. So what about Burdick's for-profit mentality became the issue?

"I don't know that I can answer that with specificity," Opperman said. "It sounds a little amorphous, and you kind of know it when you see it, but there was a leadership and cultural gap.

"That is not a very satisfying answer, and I am sure it was not very satisfying to Ken Burdick."

The knock on Blue Cross is that, as an organization, it just doesn't seem to act enough like a company in an acutely competitive industry undergoing a once-a-generation change due to the implementation of health care reform.

Chris Schneeman, the president of SevenHills Benefit Partners, a St. Paul health benefits broker, said an recent example of a Blue Cross missed opportunity is the rollout of online diagnostic and treatment programs for simple illnesses. HealthPartners launched its program, called Virtuwell, in October 2010 and Schneeman described it as a "great success." But to Schneeman that great success could have been Online Care Anywhere, the Blue Cross system, which was launched well before Virtuwell.

"Blue Cross had this in the bag before Virtuwell, and they really did nothing but dabble with it internally," Schneeman said. "I bet you I could come up with 10 examples of how [Blue Cross] came up with some innovation, and then just didn't seem to do anything with it."

In Opperman's view there is nothing fundamentally broken with Blue Cross, particularly its nonprofit mission built around the idea of improving the health of its members.

But he does sound the theme of speeding up. He can remember learning of a newer approach to funding health care costs called a health savings account. Great idea, he thought, although when he later joined the Blue Cross board it was two years before Blue Cross did much with the HSA concept. He said in 2012 Blue Cross could not afford to wait.

In rolling out innovation, forming alliances and cutting ineffective programs, what Opperman called "the toolkit," he said "the pace of doing those things, and the care with which you do them, has to increase. In that sense it may be easier to do those sorts of things with an outsider. It was with Pat Geraghty."

The board expects to name a CEO in 60 to 90 days and, having just gone through a search less than a year ago, the board has an up-to-date list of candidates already. Opperman said current executives, including interim CEO Scott Lynch, who had been chief legal officer through last week, may be considered as well.

Of course, the directors will be more acutely aware of the cultural issues that sank Burdick, although Opperman pointed out several times that the cultural fit would have been handled in a more measured way had the health care market not been undergoing such dramatic change. "If this were 10 years ago," he said. "We would have had the time to work all of this out."

lee.schafer@startribune.com • 612-673-4302

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