It's not easy being CFO of a managed-care company these days. Many health maintenance organizations (HMOs) are reporting lower than expected earnings and wrestling with merger difficulties and cost increases. In some cases, CFOs have been forced to resign or been outright fired. The most recent casualty is James H. Dickerson Jr., who departed as CFO of Aetna Inc.'s giant U.S. Healthcare unit. The announcement sent Aetna's stock tumbling nearly 12 percent. It's not easy being CFO of a managed-care company these days. Many health maintenance organizations (HMOs) are reporting lower than expected earnings and wrestling with merger difficulties and cost increases. In some cases, CFOs have been forced to resign or been outright fired. The most recent casualty is James H. Dickerson Jr., who departed as CFO of Aetna Inc.'s giant U.S. Healthcare unit. The announcement sent Aetna's stock tumbling nearly 12 percent.
Dickerson isn't the only one feeling the pressure. Late last year, Oxford Health Plans Inc.'s CFO, Andrew Cassidy, was forced to resign when problems with the firm's billing and claims payment systems blinded Oxford to huge losses. In addition, such companies as Kaiser Permanente, PacifiCare Health Systems Inc., and Cigna Corp. are having their own share of HMO troubles.
"CFOs of managed-care companies are under a lot of pressure right now," says Cathy Seifert, an analyst at Standard & Poor's Equity Group. "Costs are rising faster than they thought." She says Aetna is also having difficulties integrating U.S. Healthcare.
Although Dickerson had a key role in the integration of U.S. Healthcare, analysts say he was made a scapegoat for the Hartford insurer. "CFOs have been made the fall guys [at HMOs]," says Brian Eisenbarth, an analyst at Collins & Co. The real problems, he says, are beyond their control. "Medical costs are rising, and premiums have not kept up."
Aetna has named Daniel S. Messina CFO of its U.S. Healthcare unit. He was formerly VP of business strategy. "In the managed-care industry, a lot of companies have had difficulties in the past year," says Messina. "But in the long run, the outlook remains sound."
Highs and Lows
David W. Devonshire is out of the pink. He left Owens Corning to become SVP and CFO of Woodcliff Lake, N.J., industrial-equipment maker Ingersoll-Rand Co. He succeeds Frank O'Brien, who died of a heart attack last July. At Owens Corning, Domenico Cecere, former president of the company's roofing-system business, replaced Devonshire as CFO. Devonshire was honored for his reengineering efforts at Owens Corning in CFO magazine (see "America's Best Reengineers," November 1996).
Things are red hot at National Steel Corp. The Mishawaka, Ind., steelmaker fired its VP of finance, Carl Apel, after an inquiry into allegations of managed earnings by the board's audit committee led to a restatement of earnings back to 1992. Michael D. Gibbons was named CFO on an interim basis while the company conducts a search.
Shop at Home Inc. may have "insane" prices, but it showed sound judgment when it selected James Bauchiero as its next CFO. Before joining the television shopping network headquartered in Knoxville, Bauchiero was CFO of robotics designer Orchid International Group.
AirTran Holdings Inc. will make the trip from Atlanta to Orlando without Stephen C. Nevin on board. The CFO has decided to resign from the airline, which was formed from the merger of AirWays Corp. and troubled ValuJet Airlines Inc., rather than relocate along with the airline. The former CFO of ValuJet says he does not want to move his family. A replacement has yet to be named.
For Sue Grove, the four C's are cash, controls, capital, and costs. She was recently named CFO of Zale Corp., a Dallas-based jewelry retailer. She succeeds Lou Grabowski, who resigned to pursue other interests. Grove was formerly SVP at Zale.
Russell G. Owens is one hot tamale. He was named EVP and CFO of Brinker International Inc. after serving as interim CFO at the operator of restaurant chains, including Chili's Grill & Bar, since September. He succeeds Debra Smithart, who is now CFO of First America Automotive, in San Bruno, Calif.
The latest feature being touted by Whirlpool Corp. is its CFO, Ralph F. Hake. The former EVP of North American operations takes over for John P. Cunningham, who retired at the end of last year. Cunningham was responsible for a broad restructuring of Whirlpool's Europe and Asia businesses.
Perhaps Sears, Roebuck and Co. isn't doing as good a job reining in their troubled credit card business as we gave them credit for (see "Where Credit is Due," November 1997). After rising delinquencies renewed concern about the division, Steven Goldstein, the unit head, resigned. He is being replaced by Sears CFO Alan Lacy. Gary Crittenden, who most recently was president of Sears's hardware stores, succeeds Lacy as EVP and CFO.
George Kerckhove intends to flush out inefficiency at American Standard Cos., where he was recently named CFO of the Piscataway, N.J.-based plumbing, air-conditioning, automotive, and medical-products company.
Choice Hotels International Inc. chose Donald H. Dempsey as EVP and CFO. He joins Choice from Promus Hotel Corp., which recently merged with DoubleTree Hotels Corp.
The Securities and Exchange Commission has had a revolving door of late, it seems. The newest departure is Michael H. Sutton, who stepped down as chief accountant for the SEC after two and a half years.
"Mike has served the commission with distinction, insight, and creativity," said SEC chairman Arthur Levitt in a statement. "His work on international accounting standards, derivatives accounting and disclosure, and auditor independence will be long-lasting." One of Sutton's major accomplishments was his role in establishing the Independence Standards Board to oversee auditor independence rules.
Sutton's departure comes just months after his predecessor, Walter Schuetze, rejoined the SEC as chief accountant of its enforcement division, raising questions about whether Sutton left because he felt overshadowed.
However, those close to the SEC say his departure was not related. "There is absolutely zero correlation," says Dennis Beresford, former FASB chairman and current professor of accounting at the University of Georgia, in Athens. "When Sutton joined the SEC, he said it was something he would do for two to three years. He's met that commitment, and he's moving on."
Still, some suspect that Schuetze will be named to his old post of chief accountant. SEC commissioner Isaac Hunt told the Washington Post, "He is a person who comes to mind for me." Beresford says that Schuetze was not enjoying his retirement, and "would make a terrific replacement."