Board members express confidence in Sardegna's stewardship

September 26, 1992|By Ann LoLordo | Ann LoLordo,Staff Writer

Members of the governing board of Blue Cross and Blue Shield of Maryland expressed confidence yesterday in the company's management, the financial health of the plan and its ability to improve service to its 1.4 million customers.

Four of the Blues' 18 board members were reached late yesterday as a congressional panel ended a two-day hearing on the financial stability of the company and the plan's performance under the stewardship of Chief Executive Officer Carl J. Sardegna, who also serves as board chairman.

The U.S. Senate Governmental Affairs Permanent Subcommittee on Investigations released a staff report that seriously questioned the Blues' solvency, criticized company spending practices at a time when the plan was raising rates and attacked the credibility of the Blues as "the name to trust."

Despite those findings, the four board members said they supported Mr. Sardegna's efforts to steer the company on the right course and maintained that he had kept them apprised of the insurer's progress -- both when it faltered and and when it flourished.

"Everybody was aware that Blue Cross-Blue Shield had a lot of financial problems in past years, and the major effort has been to rebuild that situation," said Barry P. Bosworth, an economist at the Brookings Institution, who has served on the board for about 18 months. "My view is that they've made a lot of progress. Service is the next item where they haven't done enough yet."

The board members, who are paid $20,000 a year, include prominent business leaders, health care experts and the politically well-connected. The board must approve all company policy and sets compensation levels for the president and his chief officers.

Attempts to reach all board members were made last night.

Member Mary "Mitzi" Perdue, a columnist for the Salisbury Times, described the board's monthly meetings as "very good, very frank."

Albin O. Kuhn, a former chancellor of the University of Maryland Baltimore County, who has been on the board since before the 1984 merger of Blue Cross and Blue Shield, said "there is a good sharing of information with the board."

"I felt we have gotten complete reports -- good and bad," he added.

During the Senate hearing, a former internal auditor at the Blues testified under oath that staff members were often told to improve the company's financial picture in the monthly reports to the board. And testimony from the company's treasurer, Rosemarie K. Schwartz, suggested yesterday that Blue Cross officials would rather mislead the public than present a less-than-rosy financial picture to subscribers.

Board member William A. Beasman Jr., retired president of the Bank of Baltimore whose tenure predates the 1984 merger, said, "The idea that management has not leveled with the board is something I cannot believe nor can I accept."

But while he could not rule out that management may have made the monthly financial statements "appear attractive," he said he was confident that "when those statements were shown to the board there was basis for them being the way they were."

Other members of the board are Joseph A. Califano Jr., a Washington attorney and former secretary of health, education and welfare; J. Owen Cole, chairman of the executive committee of First Maryland Bancorp; Dan A. Colussy, chairman and chief executive of UNC Corp.; M. Thomas Goedeke, former Howard County school superintendent; Frank A. Gunther Jr., retired head of Albert E. Gunther Hardware; Richard E. Hug, president of Environmental Elements Corp.; John D. Jefferies, a state delegate from Baltimore; Robert D. Kunisch, head of PHH Corp.; Shirley F. Phillips, of Phillips seafood restaurants; Morton I. Rapoport, head of the University of Maryland Medical System; George L. Russell Jr., a partner in the law firm of Piper & Marbury; and John F. Strahan, a physician.

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