John Rowe, a physician for 30 years, will soon face perhaps his toughest challenge yet: reviving Aetna's financially ailing national healthcare unit.
Rowe, president and chief executive officer of Mount Sinai NYU Health in New York, on Sept. 15 will take over as president and CEO of Aetna U.S. Healthcare, which, with 14 million members, is the nation's largest health insurer.
The move is the latest example of a managed-care company seeking expertise outside of its traditional field to lead the company into the future (March 13, p. 28).
After Aetna completes the $7.7 billion sale of its financial and international operations to Dutch insurer ING Group later this year, its remaining Aetna U.S. Healthcare unit will be renamed Aetna and spun off to shareholders. Rowe will retain his titles with the new company.
William Donaldson, Aetna's current chairman and CEO, will remain as chairman. The board of directors at Mount Sinai plans to decide early this week who will serve as interim CEO while the hospital system conducts an executive search for a permanent replacement for Rowe.
The 56-year-old hospital veteran faces the difficult task of boosting the Hartford, Conn.-based insurer's flagging profits and stock price while mending frayed relations with providers.
Aetna U.S. Healthcare has been hit hard in recent months by higher-than-expected medical costs for inpatient stays and drugs. And in a preliminary proxy statement filed with the Securities and Exchange Commission on Sept. 1, it reported a profit margin of less than 2% on revenue of $13.4 billion in the first six months of this year.
Over the past decade, Aetna has also gained a reputation as a tough, bureaucratic company that has alienated both patients and providers.
"I plan to change the direction the company takes to improve its performance. Squeezing providers is not the answer," Rowe said. "I believe the proper pathway is by improving our relationships with doctors and hospitals. So rather than come out shooting with a range of new policies, my first priority is to ensure that Aetna has a clear understanding of the needs of its providers."
Rowe plans to conduct a "listening tour," meeting with doctors and hospital administrators around the country to make Aetna more "people-friendly."
This conciliatory stance toward providers reflects his extensive background as a hospital administrator and doctor. Rowe, a specialist in gerontology, has headed not-for-profit Mount Sinai for 13 years, overseeing its contentious merger with NYU Medical Center in 1998. The highly respected five-hospital system now has 31,000 employees and annual revenue of $1.8 billion.
"Jack has been on the other side of the fence, so he knows firsthand the problems with managed care," said D. Ted Lewers, M.D., chairman of the American Medical Association's board of trustees, who has known Rowe for years. "There has to be a significant cultural change at Aetna if it's going to win back the trust of doctors."
The AMA and the Medical Association of Georgia sued Aetna this year, claiming it routinely delays payments. Aetna denies the charges.
But according to some Wall Street analysts, the distinguished gerontologist may not be what the doctor ordered to improve the huge corporation's bottom line.
Lori Price, senior analyst at Chase H&Q in New York, pointed out that Rowe has little experience in the for-profit sector and has never headed a company as large or as troubled as Aetna.