Will new CEO Joseph Swedish help or hurt WellPoint?

WellPoint's unexpected selection of career hospital executive Joseph Swedish to become its new CEO has resulted in a mixed bag of reactions throughout the industry and on Wall Street.

A relatively unknown figure in the payer industry, Swedish's lack of managed care experience could hurt WellPoint when it should be better executing its core health insurance businesses, according to the Indianapolis Star.

"WellPoint's biggest issue over the last five years has been poor execution, and its biggest challenge over the next couple of years is that the profitability of its core businesses may be savaged in 2014 and beyond because of health reform," Citigroup analyst Carl McDonald said in a note to investors, reported the Indianapolis Business Journal.

Indeed, WellPoint's shares fell 4.6 percent a day after the company announced its new CEO appointment, the Wall Street Journal reported. "The market doesn't like uncertainty, and they don't know much about him," said Robert Medway, managing partner at Royal Capital Management LLC and WellPoint shareholder.

Another shareholder and managing director of CRT Capital Group questioned whether choosing Swedish is in the "strategic and operational best interests of the company," Sheryl Skolnick said. "You don't experiment with the shareholders' money, especially not with a business that has maybe stabilized but is still highly fragile."

But other analysts think Swedish's background in the provider industry makes him the ideal CEO pick, particularly since payers and providers increasingly are collaborating and cooperating with each other, the WSJ noted.

"While not a name or background we expected, it may be argued that Mr. Swedish's experience and interests align well with the likely U.S. health care system of tomorrow--that being a more integrated delivery care model where payers and providers together move increasingly toward accountable care and overall efficiency," Stifel Nicolaus & Co. analyst Tom Carroll wrote in an investor note.

And WellPoint Board Chair Jackie Ward called Swedish an "agile leader at a time when major transformations are requiring health benefit companies to examine new ways to better serve our stakeholders."

Barclays analyst Joshua Raskin pointed out that WellPoint isn't the first payer to choose a hospital exec as CEO, the Indianapolis Star noted. "The last time we saw a publicly traded managed care company name a CEO that previously ran a large hospital system was in 2000 when Dr. Jack Rowe became CEO of Aetna," he said, adding that "shareholders were very well served in our view."

To learn more:
- read the Wall Street Journal article (subscription required)
- see the Indianapolis Star article
- check out the Indianapolis Business Journal article