UnitedHealth move may have broad impact
WASHINGTON — Health care industry professionals expressed mixed views Monday to news that UnitedHealth chairman and chief executive William McGuire plans to step down after an independent investigation concluded stock options granted to him were backdated — possibly in violation of federal regulations.
Representatives from drug companies, health care providers, hospitals and investment groups gathered here Monday for the National Medicare Congress, one day after UnitedHealth announced McGuire would leave the company he has led since 1991.
An independent probe into 29 options granted to McGuire between 1994 and 2006 found that most of the options did not show a written grant date or price until weeks after the original date of issue. By the end of 2005, McGuire had accumulated stock options worth at least $1.6 billion. UnitedHealth said Sunday McGuire would leave its board of directors immediately and retire by Dec. 1.
David Chao, an analyst with Balyasny Asset Management, said many professional investors expected McGuire to stay on at UnitedHealth, citing recent rumors that the investigation would clear the company of wrongdoing. Some in the investment community are also concerned that McGuire’s replacement, chief operating officer Stephen Hemsley, may not have his predecessor’s strategic vision.
One regulatory affairs specialist said he believes the continuing UnitedHealth stock options scandal could have repercussions beyond the health care industry. According to the specialist, who declined to be named, McGuire’s high-profile departure could attract scrutiny from Capitol Hill and ultimately decrease the appetite for the outsourcing of government programs to the private sector.
According to Ira Wilson, a physician and health service researcher from Boston, the backdating practices apparently used by McGuire are “sleazy, but they are everywhere.” Wilson said it is unlikely McGuire was acting alone, pointing out that boards of directors issue stock options, not executives.
One woman who identified herself as an employee for a Minneapolis medical supply company said McGuire is “probably a decent guy. But once you get into the type of money that he was making, for as long as he was making it, I think people develop a sense of being above the law, and that’s usually when they get caught.”
“Meanwhile, UnitedHealth said Monday that it would pay McGuire $5.1 million a year for the rest of his life and a $6.5 million lump sum, according to a calculation of his severance benefits by The Corporate Library, a watchdog group based in Portland, Maine, that has criticized McGuire’s pay before.
He also has stock options that were worth $1.78 billion as of the end of 2005.
McGuire’s 1999 employment contract, which has been amended since then, has been criticized as too generous, but the severance provisions came into sharper focus on Monday now that he is leaving.
The value of McGuire’s options are not known. They were worth $1.78 billion at the end of last year.