WellPoint Inc named Joseph Swedish, the top executive in a large non-profit hospital system, as the health insurer's new chief executive officer after a half-year search that began when former CEO Angela Braly abruptly stepped down in August.
The No.2 U.S. health insurer faces a challenging year in healthcare reform as the Affordable Care Act brings more changes in 2014, including the introduction of electronic marketplaces where insurers will sell directly to consumers.
Insurers like WellPoint and hospitals already have been struggling with some of the vast changes the law has brought, such as new taxes and payment methods for government insurance like Medicare and Medicaid.
As CEO of Trinity Health, a not-for-profit hospital group that also had an insurance business, Swedish said that he had experience with both hospitals and insurers.
"The tradition of separation of the two sectors is rapidly closing. That gap is at times, I think, going to become very, very minimal," Swedish said in an interview.
"There's absolutely no doubt that there's a convergence happening on many fronts in healthcare," he said.
WellPoint, which sells health insurance as Blue Cross Blue Shield, holds the No. 2 spot in the United States behind UnitedHealth Group Inc. WellPoint's former CEO Angela Bray, an outsider who took the role in 2007, stepped down in August under pressure from investors who were unhappy with the company's financial results.
Since then, the company has been run by interim CEO John Cannon, and Swedish will take over March 25.
After missing analysts' estimates in four consecutive quarters, the health insurer last month reported better-than-expected revenue in the fourth quarter, with Cannon at the helm.
Swedish brings a new perspective to WellPoint and the challenges the healthcare industry faces as it moves toward a model in which providers are rewarded for improving patient outcomes rather than performing more procedures, said Tim Nelson, analyst with Nuveen Asset Management, which does not own WellPoint shares.
"He looks well-qualified. The healthcare industry is integrating. The accountable care organization of the future is a combination of an insurance company and a provider network of hospitals," Nelson said.
(Additional reporting By Pallavi Ail in Bangalore; Editing by Sriraj Kalluvila, Bernard Orr)