Stephen Hemsley, the chief executive who oversaw extraordinary growth in more than a decade running UnitedHealth Group, is leaving the job next month and will be succeeded by Dave Wichmann, the company's president.
Minnetonka-based UnitedHealth Group announced the Sept. 1 move on Wednesday, with Hemsley saying in a statement that it's "the right time for this transition to take place."
UnitedHealth Group is the nation's largest health insurer and Minnesota's largest publicly traded company. Hemsley will take the new job of executive chairman of the board of directors, while current board chairman Richard Burke will become lead independent director.
Wichmann grew up in Iowa, graduated with a degree in accounting from Illinois State University and followed Hemsley to UnitedHealth Group nearly 20 years ago from the accounting firm Arthur Andersen.
"Today's action is the culmination of almost four years of discussion, careful planning, leadership development and execution," Burke said in a statement. "Dave Wichmann was one of Steve Hemsley's first hires at our company and has been preparing for the CEO role for many years."
Hemsley, 65, became chief executive in December 2006, succeeding William McGuire, who left over allegations of stock-option backdating.
During Hemsley's tenure, UnitedHealth's workforce grew from 58,000 to more than 260,000, including 17,000 in Minnesota. Revenue grew from $71.5 billion to an estimated $200 billion this year. At the end of June, more than 49 million people had health insurance coverage from UnitedHealth Group.
Before taking the top job, Hemsley was chief operating officer and guided the company's reorganization into the two key businesses it operates today — the legacy health insurance business called UnitedHealthcare and the fast-growing health services business called Optum.
As an insurance company, UnitedHealthcare under Hemsley has taken advantage of growth opportunities in the Medicare program, which introduced prescription drug benefits via private health plans in 2006. While the insurer now stands as the nation's largest provider of Medicare health plans, it's also a defendant in two ongoing whistleblower lawsuits that allege improper Medicare billing practices.
Like other insurers, UnitedHealthcare stumbled after 2014 when the federal government via the Affordable Care Act (ACA) started pumping subsidies into the market where individuals buy health insurance. UnitedHealthcare amassed considerable red ink before largely abandoning the market this year, and Hemsley took responsibility for the losses.
The company's overall financial performance, however, wasn't badly hurt. During its most recent quarter, UnitedHealth Group for the first time ever broke the $50 billion mark in quarterly revenue, due in part to growth at Optum.
Hemsley oversaw a significant expansion of the pharmaceutical benefits management business at Optum with the $12.8 billion acquisition in 2015 of Illinois-based Catamaran Corp. Optum has grown as a health care provider, as well, most recently with a $2.3 billion acquisition this year that makes the company one of the nation's largest operators of surgery centers.
"I look forward to continuing to help drive the mission, growth, quality, performance and development of this enterprise," Hemsley said in a statement.
Wichmann, 54, joined UnitedHealth Group in 1998 and served as chief financial officer from 2011 until mid-2016. Most recently, he has been president of UnitedHealth Group and led the UnitedHealthcare business.
UnitedHealth Group said that Wichmann has directed operations and technology efforts and has led external development, acquisitions and integration activities at the company.
Wichmann currently leads the company's activities in Brazil, where UnitedHealth Group in 2012 acquired a majority stake in the nation's largest health insurance company. UnitedHealth has since expanded hospital holdings in Brazil.
Global markets are seen as the "third leg" of UnitedHealth Group's long-term growth strategy. Since Optum's high-profile rescue of the federal government's HealthCare.gov website in 2013, company officials have talked about taking a bigger role in overseas markets, including possible work with the National Health Service in the United Kingdom.
Andy Slavitt, a former UnitedHealth Group executive, said he worked with Wichmann for about 10 years after the new CEO was involved with the deal to acquire Slavitt's start-up company in 2003.
"Dave is one of the most humble, approachable and hardworking leaders in the company," Slavitt said via e-mail. "He has the benefit of knowing every inch of [UnitedHealth Group] and he cares deeply about the people. Working side by side with [Hemsley], he's been a big part of the growth and performance story of the company."
Stock analysts expressed some surprise at the timing of Wednesday's announcement, which they said was earlier than expected, though not the rise of Wichmann.
Wichmann was positioned to succeed Hemsley, the company said, during a management shuffle back in 2014.
"While Stephen Hemsley has been an iconic CEO and these are big shoes to fill, in our view the company will continue successfully along its game-changing path of shaping health care in America and beyond its borders, with no change expected in the strategy," Ana Gupte, an analyst with Leerink, wrote in a note to investors.
Sheryl Skolnick, an analyst with Mizuho Securities USA, said her only concern was whether Larry Renfro, the leader of Optum, would stay on and concluded that Renfro is willing to work for Wichmann since he re-upped his employment contract.
She also wrote in a note to investors that it was important Hemsley continue to have influence through the company's board.
"That's critical to us," she wrote, "that Steve, who made the transition from 'the guy who makes the trains run on time' to the single most visionary health care executive we know ... is staying on in that strategic role."
UnitedHealth Group shares closed Wednesday at $193.77, down 73 cents or 0.4 percent.