Dr. William McGuire worked as a pulmonologist in Colorado Springs in 1985, when he became president of Peak Health Plan of Colorado.
A health-care revolution had just begun. Goodbye, Sisters of Charity. Hello, big corporate daddy.
In a series of mergers and acquisitions, Peak became part of what is now Minnesota-based UnitedHealth Group Inc. And in 1991, McGuire became UnitedHealth’s chief executive.
Today, at 58, McGuire sits on stock options valued at $1.6 billion. He is also center stage in the latest scandal to rock corporate America.
Federal investigators are probing whether executives at companies including UnitedHealth backdated their stock options, granting themselves shares at the lowest possible price in a given year. The practice, if not disclosed to investors, may be illegal.
Other companies in investigators’ sights include Camarillo, Calif.-based Vitesse Semiconductor Corp. and New York-based Comverse Technology Inc.
Earlier this week, UnitedHealth acknowledged it has received a subpoena from the U.S. attorney in New York for documents related to stock-option grants.
The Internal Revenue Service also has requested documents from 2003 to the present regarding grants to top UnitedHealth executives.
And on May 11, UnitedHealth issued a statement acknowledging a “significant deficiency” in the way it handled stock options. Oops!
With enviable entrepreneurial flair, McGuire acquired more than 30 companies and grew UnitedHealth from a regional HMO into one of the nation’s most diversified health-care companies.
Today, UnitedHealth is the nation’s second-largest health-care insurance provider. It’s also the largest health-care plan in Colorado, with more than 814,000 members, according to the Colorado Managed Care newsletter.
When news of McGuire’s great fortune recently broke, it understandably raised eyebrows.
It is, after all, even bigger than the $400 million retirement package that Exxon Mobil gave its former CEO and chairman Lee Raymond in an era of soaring oil prices.
McGuire built this fortune on the backs of the sick and infirm. Each year that his company grew, his fortune grew and health-care premiums skyrocketed, leaving more Americans amid the ranks of the uninsured.
Some have argued that McGuire’s compensation, while whopping, is in line with his performance as an executive. He did, after all, build one of the largest health-care companies in America.
Others, however, criticize UnitedHealth’s board as too loose and too generous. UnitedHealth’s executives and its board of directors now face investor lawsuits as well as a federal investigation.
One director, Douglas Leatherdale, was re-elected to the board of Xcel Energy this week at the utility provider’s annual meeting in Denver.
Before the vote was tabulated, Denver investor activist Gerald Armstrong spoke out against voting for Leatherdale. “There’s too big of a question mark hanging over him,” he said.
Xcel CEO Richard Kelly defended Leatherdale, saying the matter is still under investigation. “We shouldn’t do anything unless there is something wrong, and I’m not sure there is (regarding Leatherdale),” he said.
Decades ago, nonprofit organizations ruled the health-care industry.
They were stodgy, noncompetitive and often run by nuns. But their profits typically went to patients in the form of reduced premiums or lower health-care costs.
Today, those same profits go to investors, who bid up stock prices, so guys like McGuire can become stock-option billionaires instead of pulmonologists.
“As a country, we haven’t decided whether health-care finance should be the purview of government, nonprofit organizations or publicly traded companies,” said Denver health-care consultant Jim Hertel, publisher of Colorado Managed Care. “In that vacuum, publicly traded companies have assumed the leadership role.”
Tell Al Lewis about your experience with corporate health care on his blog at denverpostbloghouse.com/lewis.
