Kenneth Burdick

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Minnesota Blue Cross CEO pushed out after 6 months

  • Article by: JACKIE CROSBY
  • Star Tribune
  • July 19, 2012 - 9:19 PM

Blue Cross and Blue Shield of Minnesota said Thursday that it is pushing out its CEO after just six months in the job.

The state's largest health insurer said the decision to replace CEO Kenneth Burdick, a former longtime UnitedHealth Group executive, followed an investigation that turned up what the board chairman described as "examples of leadership that weren't optimal."

Blue Cross, which provides coverage for about 2.7 million people, declined to discuss specifics but said the problems did not involve financial impropriety or illegal acts. "What you have is a difference in culture," board chairman Vance Opperman said. "The difference between for-profit and not-for-profit is pretty big. ... After looking at this for many hours and many meetings, we came to the unfortunate and unhappy realization that Ken couldn't make the transition and couldn't bring the leadership team with him."

The Eagan-based health plan will now search for another CEO at a time of tremendous change in the health care industry, as insurers and care providers implement the sweeping federal health care law that recently overcame a Supreme Court challenge.

Burdick, 54, took over the top spot at Blue Cross on Feb. 16 after an 18-month stint at Maryland-based Coventry Health Care. He worked at Minnetonka-based UnitedHealth Group Inc. from 1995 to 2009, and was CEO of that company's commercial insurance business.

Both Coventry and UnitedHealth are publicly traded, for-profit companies.

"In general, it's never good to have a swap like that at the top," said Steve Parente, a health finance professor at the University of Minnesota, who hadn't met Burdick but whose program gets some funding from Blue Cross. "But if it wasn't a good fit, it's better to do it now. Health reform is happening, and the Blues are going to play a major role in it in this state."

Three execs had departed

At Blue Cross, at least three high-level executives left within five weeks of Burdick taking the helm. Departing executives included Pam Sedmak, chief financial officer; Dr. Gregory Gilmet, chief medical officer; and Kathleen Mock, senior vice president of marketing and public affairs.

Blue Cross said its board first launched an investigation over concern about whether Burdick had given "adequate disclosure of some anticipated business activities."

Opperman said in an interview that there was a "potential conflict of interest issue that came to the board -- more slowly than it should have," but that ultimately the board decided not to take action.

However, he said, the investigation revealed other issues that drove the decision to replace Burdick.

Scott B. Lynch, chief legal officer, will serve as interim CEO while the company conducts a search. Blue Cross, the state's largest nonprofit organization as well as its largest insurer, expects to name a new CEO in 60 to 90 days.

Burdick replaced Patrick Geraghty, who left in August 2011 to take over as CEO of Blue Cross Blue Shield of Florida.

Burdick is likely to receive a severance package, but Opperman said he didn't know the details. He expected it would be "pretty generous because we don't have stock options."

Opperman gave Burdick the news Wednesday, and employees were notified of the change in an e-mail Thursday morning.

"Years ago we had the luxury of time," Opperman said. "We don't have that luxury anymore. With all the changes in health care -- we've got the ACA [Affordable Care Act] and exchanges -- it's coming at us like a tsunami. We're desirous to move ahead very quickly. This is a time when health care has to be efficiently provided and you have to have terrific leadership."

Jackie Crosby • 612-673-7335

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