William McGuire, M.D. former chief executive of UnitedHealth Group, agreed to one of the largest executive-pay givebacks in history, forfeiting $620 million in stock option gains and retirement pay, to settle civil and federal claims against stock-option backdating. The final outcome, however, remains uncertain as of Dec 28.
A year ago, McGuire was ousted from his position as one of the most successful and highest paid executives in the U.S. because of the back-dating scandal. More than 80 corporate officials lost their jobs in the scandal.
He still retains about 24 million stock options that currently could be cashed in for a gain of about $800 million, on top of the $500 million in pay he received from UnitedHealth between 1991 and 2006. A freeze on these assets was continued by U.S. District Judge James Rosenbaum in a Dec 26 ruling, pending a decision by the Minnesota Supreme Court on whether he has the power to examine the settlement beyond just rubber-stamping it. State courts give varying degrees of deference to special litigation committees.
Calling the settlement a “business judgment,” Judge Rosenbaum noted that the special litigation committee’s “lack of any findings…leaves no tracks showing why or how its business judgment can be considered reasonable.”
The committee, appointed by UnitedHealth’s board, had concluded that some of the accusations against McGuire might have merit, but the cost and risk of suing him might not be worth it. McGuire neither admitted nor denied wrongdoing.
The two former Minnesota Supreme Court justices on the committee wrote that their ability to evaluate McGuire’s potential defenses were “hampered by his unavailability for an interview.” They interviewed 50 other people over the course of a year (Joshua Reed, Chicago Sun-Times 12/7/07).
Judge Rosenbaum also expressed some thoughts about the amount of money that McGuire had claimed when he was forced out of UnitedHealth. “Words such as ‘huge,’ ‘fantastic,’ ‘astounding,’ ‘staggering,’ or ‘astronomical,’ do not describe $1 billion,” he wrote. “Such a sum can only be thought of as ‘transcendent,’ or in terms of the gross national product of smaller members of the United Nations” (Vanessa Fuhrmans and Peter Lattman, Wall St J 12/28/07).
McGuire is barred from serving as an officer or director of a public company for 10 years. He also still faces a criminal inquiry.
UnitedHealth’s current CEO, Stephen Hemsley, plans to voluntarily have his remaining options repriced, effectively forfeiting $50 million, on top of the $190 million in gains he agreed to give back last year on options with questionable grant dates (Wall St J 12/7/07).
McGuire turned UnitedHealth into one of America’s largest health-care companies through a series of mergers.
While growing into a colossus, the company has repeatedly failed to perform its basic job of paying medical bills. UnitedHealth, which covers 70 million Americans, has been sanctioned in nine states for paying claims slowly; shortchanging doctors, hospitals, or patients; or poorly handling complaints and appeals.
One Nebraska woman complained to state regulators that UnitedHealth’s computers had incorrectly rejected claims related to her son’s surgery—six times.
At one point, UnitedHealth owed Dr. George Schroedinger, an orthopedic surgeon, $600,000. He and his clinic sued UnitedHealth of the Midwest in 2004.
Ruling in favor of the clinic, U.S. District Judge Stephen Limbaugh of Missouri declared that the company’s claims processing systems were “flawed in many ways, denying, reducing, and improperly processing claims on a regular basis. And despite innumerable requests, United was unwilling to remedy the underlying errors in its systems” (Star-Tribune 12/12/07).
Payment troubles continued after the verdict, and Dr. Schroedinger filed a second lawsuit. “These people can never get it right, which says to me that they just plain lie,” he said in an interview.
Failure to pay isn’t the only complaint. The insurer also gives incorrect information on which physicians are in its network, creating enormous problems for physicians’ staff.
The AMA said that no other insurer has prompted as many complaints as UnitedHealth about abusive and unfair payment practices. AMA officials have met with UnitedHealth executives 16 times since 2000, with little to show for it.
“They have always got a new plan to fix it,” said Dr. William G. Plested III, past president of the AMA. But “nothing ever happens.”
Additional information:
- “Doctors’ Reputations Harmed by Inaccurate Rating System,” AAPS News of the Day 8/10/07.
- “Is Medicine Ripe for the Taking?” AAPS News, July 2007.
- “AARP Signs Contracts with Aetna and UnitedHealthGroup,” AAPS News of the Day 5/5/07.
- “Physicians’ Suit Against UnitedHealth Dismissed,” AAPS News of the Day 6/22/006.
- “Industry ‘Land Grab’ Sparked by Medicare Drug Benefit,” AAPS News of the Day 2/13/06.
