New Blues chairman vows disclosure Internal review's findings to be open

October 10, 1992|By Ann LoLordo and Patricia Meisol | Ann LoLordo and Patricia Meisol,Staff Writers

The new chairman of Blue Cross and Blue Shield of Maryland pledged yesterday to fully disclose the findings of an internal review of the embattled insurer's financial health and management practices.

The review, by a special board committee, will examine allegations and questions raised recently about Maryland's largest health insurer, said Frank A. Gunther Jr., the new board chairman.

"We're not going to try to hide or camouflage or massage anything," said Mr. Gunther, a retired businessman who was named Thursday to replace Carl J. Sardegna as chairman.

In testimony before a U.S. Senate subcommittee, the company came under attack for its accounting practices, its membership in exclusive country clubs, the company president's salary and the $17,600 annual payment to board members. The revelations have undermined public confidence in a company that bills itself as "the name to trust."

Mr. Sardegna, the Blues' chief executive officer and company president, called a special meeting Thursday afternoon to brief the Blues' board on the results of the Senate investigation, which lambasted the company for poor customer service,secretiveness in its dealings with regulators and questionable dealings at several for-profit subsidiaries.

Soon after the 55-year-old chief executive made his presentation, the 14 board members in attendance asked him to leave and went into executive session, Mr. Gunther said. During a heated three-hour meeting, the board discussed the past few weeks' troubling revelations about the insurer's financial health.

At the meeting's end, Mr. Gunther said, the board voted to strip Mr. Sardegna of his chairmanship but retain him as CEO, president and a board member. And it named a special committee to review the host of questions that have been raised vTC since the Senate Permanent Subcommittee on Investigations began looking into the Maryland plan this summer.

The board itself came in for criticism from the Senate panel for how much it pays its members, an amount the committee said was almost double that of Blue Cross boards in other states. "The staff questions whether this practice has an impact on the independent judgment exercised by the board," the report said.

Mr. Gunther would not detail the concerns of each board member, characterize their reaction to the Senate report or respond to specific findings. But he said board members "felt embarrassed" and want to address the issues fully, not "piecemeal."

"All those areas of conflict are on our list, and we will look into it and we will respond," said Mr. Gunther, the 60-year-old former owner of Albert Gunther Inc., a hardware supplier. "Because of everything that's happened, we have a responsibility to ask ourselves, 'Should we change the way we do business?' "

Mr. Gunther said the board is not interested in "micromanagement" but wants to identify problems if they exist, determine their source and fix them. To that end, the board panel will collect whatever data it needs.

"The entire board has taken ownership of this," Mr. Gunther said of the review, which will be conducted by five board members.

"Blue Cross and Blue Shield is a vital part of this community, and it's up to us to make sure we have a viable, forward-thinking enterprise here" to serve the public, Mr. Gunther said during an hourlong interview yesterday at Blue Cross' Owings Mills headquarters.

Mr. Gunther said neither he nor other board members assigned to the review will receive any additional compensation for the work. The board panel wants to act swiftly, but Mr. Gunther could not say how long the panel's work will take.

He said the board will present a "total package" of recommendations.

"We may want more data than we had in the past," said Mr. Gunther, a board member for a decade. "The board may want to play catch-up."

Yesterday, Mr. Sardegna said he supported the board's action.

"In light of the comments being made in the public, I think it is a proper role for the board," said Mr. Sardegna, who had served as board chairman since 1987. "Anything that helps this company become a better company makes sense to me."

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