The Obama administration criticized WellPoint for proposing in 2009 to raise rates by up to 39% in California, where it is the largest for-profit insurer. The controversy came at a critical point in the fractious political fights over healthcare reform, and many blamed it for the eventual passage of the Affordable Care Act.
In addition, the company has underperformed financially, compared with other large insurers such as Aetna, Cigna and UnitedHealth Group. WellPoint's chief financial officer resigned in 2007 after violating the company's code of conduct. Former CEO Angela Braly, who resigned in August, previously served as general counsel. Some felt she lacked a strong operations background and did not have a clear strategic direction for the company.
“There was a feeling that there was a tremendous amount of drama,” said Carl Mercurio, president of the Corporate Research Group, a research and consulting firm focused on the managed-care market.
Mercurio added that Swedish's appointment presents another layer of uncertainty for the company. Nevertheless, he noted that Swedish's strong operations background and hospital experience, including his work with accountable care contracts and shared-risk models, could be beneficial.
“There's a growing rationale for having someone with hospital experience heading up a health plan—given the emergence of provider risk-sharing and the concept of integrated, accountable care,” he wrote last week on his blog.
WellPoint's short list reportedly included James Carlson, Amerigroup's president and CEO; Ron Williams, the retired CEO of Aetna; and David Snow, former CEO of Medco Health Solutions, the pharmacy benefit manager that Express Scripts acquired in 2011.
While the selection of Swedish was a surprise, it's not the first time that an insurer has put a hospital executive in charge. In 2000, Aetna named Dr. John Rowe, then the president and CEO of Mount Sinai Hospital in New York, as its CEO.
Rowe, now a professor at Columbia University, said he expects to see more insurers hire hospital executives as CEOs or in other C-suite-level positions.
“For a long time, many insurance executives viewed physicians and hospitals as an adversary who had to be defeated in negotiations,” Rowe said. “And now, we see that they are partners working together in organizations like accountable care organizations.”
Under Swedish's leadership at Trinity Health, the health system reported that revenue increased to $8.9 billion in 2012 from $5.7 billion in 2005. During the same period, Trinity acquired 10 hospitals, a number that does not include a pending merger with Catholic Health East, another large health system.
The system announced its first accountable care contract with Blue Cross and Blue Shield of Michigan in May of last year.
“Healthcare reform, as it's constructed, given that it is the law of the land, is demanding these kinds of innovative approaches that break the mold regarding traditions of engagement between the provider and payer,” Swedish said.
Another question in WellPoint's future will be whether Swedish's strategy for the company includes owning provider organizations.
Some insurers have started buying hospitals and physicians groups. The insurer Highmark has been pursuing an acquisition of West Penn Allegheny Health System in Pittsburgh since 2010. UnitedHealth Group acquired Monarch HealthCare, a physician group in Irvine, Calif., while Humana now owns Concentra, an urgent-care provider.
WellPoint dipped a toe in that pool with a 2011 acquisition of CareMore, a Medicare managed-care company that also operates care centers—the division now has 25 centers in four states.
“It wouldn't surprise me the least bit if they wound up acquiring hospitals in the right situation,” Kaufman Hall's Cyganowski said.