Word: donaldson
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...passing along that added expense to employers and consumers, one of the primary reasons the sector has rebounded a bit on Wall Street. But as Merrill Lynch senior analyst Roberta Goodman points out, "that's like running up the down escalator--the trend is against you." And even though Donaldson produced better-than-expected earnings of $184 million on sales of $7.9 billion for the first quarter, Aetna's profit margins have remained in the sick bay, at around 3%, which lags its competitors...
...this day, though, Donaldson, a founder of the investment firm Donaldson, Lufkin & Jenrette and a former chairman of the New York Stock Exchange, was out to present Aetna's new bedside manner. "In response to a real market need, we heartily embraced managed care," he told the crowd. "But there was a price, in terms of too many restrictions and too much process that have grown increasingly unpopular. There are those who say the pendulum has swung too far. I agree...
...head of the nation's largest, most reviled managed-care provider, currently serving 19 million customers, this was a genuine peace offering. If Donaldson has his way, it won't be the last; he's already struck a deal with the Texas attorney general making similar concessions. Since taking over a few months ago from Richard Huber, the combative CEO who was forced out, Donaldson has been trying his best to mend the HMO giant's sickly relations with doctors and members, who view it as putting profits ahead of patients...
...wouldn't know that, of course, by looking at the company's balance sheet, which makes Donaldson's job all the more challenging. Last week, just as he was nursing a deal to sell Aetna's financial-services and international units to Dutch firm ING Group for as much as $9 billion, Aetna was being sued for taking its sweet time paying bills to a number of New York hospitals. (Aetna says it is hopeful they can resolve the issue through negotiations.) There are also restless shareholders, who watched the stock fall nearly 60% in the past year before...
...Even if Donaldson can diffuse those issues, he doesn't possess a miracle cure for Aetna's woes. The company needs to increase its profits, but the public backlash against managed care has made it all but impossible to cut costs any more. HMO enrollment is slowing; medicare reimbursements are too low; and hospitals and doctors are fighting back against deep fee discounts--in some cases dropping out of networks altogether. More people are opting for flexible plans, choosing preferred-provider organizations over HMOs (see sidebar). Says Tom Ferguson, a health-care consultant at William M. Mercer: "There's less...