Blue Cross chief prizes the 'big picture'

September 20, 1992|By Ann LoLordo | Ann LoLordo,Staff Writer

The imposing figure, felt-tip pen in hand, stands before a sketch board in a stark conference room at Blue Cross and Blue Shield of Maryland headquarters and quickly draws a time line to show dramatic changes in the health care industry.

The days of just paying claims for Marylanders are gone, says Carl J. Sardegna, chief executive officer of the Blues, on this day in early July. More and more, the organization has been pressed to help control the ever-rising cost of health care and to provide subscribers with a less expensive means of getting it -- new "products" that require more capital to operate initially than the old-style insurance business for which Blue Cross became synonymous.

During this long prickly summer -- amid charges of financial instability and congressional subpoenas to investigate the matter -- Mr. Sardegna has repeatedly been trying to explain what he calls "the big picture" and the Blues' profitable bottom line. All this has been dress rehearsal for the main event -- a hearing Thursday and Friday before a U.S. Senate panel investigating insurance fraud and abuse.

"What I've been doing is building us back up," Mr. Sardegna, 55, who declined to be interviewed for this article, said in an earlier interview. "How else can you build it back up but by raising rates dramatically? You don't do that without significantly impacting the citizens of Maryland. You try to do this gradually. And that's exactly what we've been doing -- steadily building back financial strength in this company."

If only Carl Sardegna could set himself on a stage, he could demonstrate the struggle to compete in a vastly changed marketplace and show how non-profit health plans must generate profits to stay in business. He could make his audience understand why investing $170 million in for-profit subsidiaries was the right business decision to make. And in his easygoing, earnest style, he could even convince them that, though Blue Cross lost $140 million on those ventures, the risk was worth it.

It would take a man of Carl Sardegna's stature, his smarts and the size of his ego to get up on that stage. For the most part, he already has.

When John A. Donaho, the state insurance commissioner, told a U.S. Senate subcommittee this summer that Blue Cross and Blue Shield of Maryland was "barely solvent," it was Carl Sardegna who launched the counteroffensive. He quickly issued a point-by-point rebuttal that went to all Blue Cross employees and state legislators, bought full-page newspaper ads emphasizing the organization's trustworthiness, hired high-profile attorney Benjamin R. Civiletti to defend the company in Washington, briefed independent insurance brokers on the company's condition and led the presentation in a 3 1/2 -hour hearing before a General Assembly committee.

"I think Blue Cross and Blue Shield of Maryland is a significant part of who Carl Sardegna is," said Robert C. Heird, a former Blue Cross executive. "There are some people who make decisions based on opportunities and who are opportunistic. Carl bases his decisions on principles and values. And he's not going to make a decision . . . that does not enhance the value of the corporation he works for and the customers he is trying to serve."

Since his arrival at Blue Cross in fall 1985, Carl Sardegna has set out to make the company and himself a player -- in the marketplace, in corporate boardrooms, in the communities, in Annapolis.

A former top executive with a Maine life insurance company, Mr. Sardegna has the mind of a corporate strategist and the ability to massage the political muscle needed to advance his agenda, according to interviews with Blue Cross board members, area business executives, former associates and state legislators.

Mr. Sardegna, who started his career in a night training program at New York Life Insurance Co. to work his way through college, had been the unanimous choice of the board of the newly merged Blue Cross and Blue Shield to reorganize the company and lead the non-profit insurer into the 21st century and, more important, into the black.

Blue Cross is "a not-for-profit business, but it is a business like the University of Maryland is a business and the state government is a business and they need to be managed like a business," said Richard E. Hug, president of Environmental Elements Corp., who chaired the insurer's search committee. "That is one of the reasons we chose Carl at the time."

What Mr. Sardegna found when he got to Blue Cross was a lethargic bureaucracy beset by staff rivalries, an institution set in its ways and a balance sheet encumbered with debt. The company was in a state of financial decline and on the cusp of a downturn in which it would post $110.5 million in operating losses over the next 2 1/2 years.

This was Mr. Sardegna's chance to make his mark: He had left Union Mutual Life Insurance Co., where he was second in command, for just this chance: to run his own company.

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