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Get Four
|  | JANUARY 4, 2006
By Jessi Hempel and Diane Brady A New Doctor for AetnaPresident Ronald Williams will succeed Jack Rowe as CEO in February. Can the new boss keep the health insurer's dramatic recovery rolling?After thriving under the leadership of charismatic geriatrician John W. "Jack" Rowe, Aetna (AET ) announced on Jan. 4 that President Ronald A. Williams is slated to take over as chief executive. The low-key Williams, 55, will inherit a very different challenge than the one that drew 61-year-old Rowe to the top job in September, 2000: Williams has to build on a stunning track record and keep Aetna on the cutting edge of health care amid intense competition and consolidation that has narrowed the industry to three significant competitors -- with Aetna smaller than rivals UnitedHealth Group (UNH ) and WellPoint (WLP ). And when the winning partnership dissolves on Valentine's Day with Williams' ascension to the CEO post, he'll have to steer Aetna alone. Rowe and Williams have made an impressive team for the past five years. The Hartford health insurer has gone from being vilified as emblematic of all that was wrong with managed care to an industry leader. Its stock price is up more than 700% since May, 2001, when business was so bad that Rowe withdrew guidance for the year. That compares with a flat performance in the overall Standard & Poor's 500-stock index and a decrease of almost 6% in the S&P Health Care Index over the same period. VISION AND CHUTZPAH. From a net loss of $279.6 million in 2001, Aetna is expected to post net earnings of about $1.3 billion this year (see BW Online, 12/30/05, "S&P's Top-Shelf Selections"). The once notoriously stingy and fiercely unpopular company is now frequently cast as the country's most physician-friendly insurer. While Rowe's vision and chutzpah were clearly critical to Aetna's success, some credit is also due to Williams' operational prowess. He took many of the ideas generated by his boss and turned them into reality. Among the insurer's initiatives: leading the charge toward health savings accounts with the Aetna HealthFund; creating controversial tiers of doctors with the Aexcel network, which rewards members for using the services of what it considers to be the top-performing medical specialists; and collecting ethnic and racial data on members to address disparities in health care. Together, they transformed Aetna into a powerhouse. But Williams, who came to Aetna from WellPoint in March, 2001, is a very different man than his boss, who created the industry's first guidelines for genetic testing after scribbling them on an envelope. As head of Mount Sinai NYU Health, one of the country's largest private hospital systems, Rowe was trying to sue Aetna before coming over to take the top job -- at which point he broke away from rivals to settle a massive class action from doctors over unfair billing practices. A vocal and passionate advocate of quality care, Rowe says he took the position to help fix what he calls the most broken piece of the health system. He's an active lobbyist, an opinionated decision maker, and a man who frequently pushed his company out on a limb because he felt it was the right thing to do. "QUALITY COSTS LESS." Williams, by contrast, chooses his words carefully -- not even his closest friends would call him chatty. He's so soft-spoken that he brings down the volume of the entire room. Rowe credits him with having incredible "attention to detail, a great discipline, and a great technical proclivity." Adds Rowe: "He was clearly recognized as the finest operating executive in the industry." Though not as openly iconoclastic as Rowe, he wants Aetna to continue pushing the boundaries of health care. Williams, who is African American, is a big believer in collecting racial and ethnic data about subscribers to design better health- and disease-management programs (see BW, 1/9/06, "Helping Your Kid Slim Down"). "I joke that I was probably 22 or 23 before I learned there was another method of cooking beyond frying," he says. If a physician doesn't recommend a culturally appropriate diet, he explains, the patient is unlikely to follow nutritional guidelines. It seems that Williams' goal is not to change direction but to build on the course that Rowe has set over the past few years. He wants to connect the insurer's Aexcel network to its HealthFund accounts, so that employers can reward employees for choosing recommended physicians by depositing funds into their health savings accounts. "We all believe that quality costs less," says Williams. ROOM FOR IMPROVEMENT. Yet for all his operational savvy, few would describe Williams as visionary. He hasn't crafted the big ideas that propelled Aetna to the forefront of health care in America. That could prove to be an issue at a time when everyone -- from policy makers to physicians -- is struggling with the rising costs and disparities of health care (see BW Online, 12/29/05, "A Rough New Year for Consumers"). Part of what has excited investors in recent years is the way Aetna has come up with creative solutions to this crisis, from the consumer-driven funds to new disease-management programs. Whether Williams can match that creativity remains to be seen. Simply building on the legacy of his boss won't be enough. Despite Aetna's great run, there's certainly room for improvement. Membership stands at less than 15 million, down from 21 million, after Rowe -- among other things -- jettisoned a number of counties in which Aetna once offered Medicare. The insurer's operating expenses haven't shrunk as much as membership, leaving room for more cuts. HEALTHY PROSPECTS. Investors also would like to see Aetna expand its product line, in part through new acquisitions. NWQ Managing Director Gregg Tenser, whose company owns 7.6 million shares of the insurer, argues that "the odds of [Aetna] doing an acquisition over the next couple of years are certainly very high." Some observers feel that, in Williams' case, actions do speak louder than words. Jeff Weiss, founder and director of CCI health-care executive summits, calls the incoming CEO one of the brightest minds in the field. "There are a lot of folks who talk a big game," says Weiss. "There are very few who understand it strategically and, more importantly, have it happen and execute." If Williams can build on Aetna's strong record, he and his company will continue to grab the spotlight in health care.  Hempel is a staff editor, and Brady is a senior writer for BusinessWeek in New York Get BusinessWeek directly on your desktop with our RSS feeds.  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