Cleve Killingsworth

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Globe’s Kevin Cullen Takes Patrick To Task On Blue Cross Payout


In case you missed it, Globe columnist Kevin Cullen perfectly captures here the public outrage over Blue Cross Blue Shield’s $11-million payout to former CEO Cleve Killingsworth. Kevin’s anger extends beyond Blue Cross to the governor who has failed to denounce that “big fat wet kiss” as obscene when so many are struggling to pay for health insurance:

Cornered by reporters Friday, Deval Patrick sounded like Peter in the Garden at Gethsemane, rejecting chance after chance to speak the truth about the money Blue Cross hands its big shots.

“It doesn’t matter what I think,’’ the frustrated governor said. “I’m not going to get into managing individual companies or individual compensation.’’

Hmmm. That doesn’t sound like the same guy who threatened to withhold state business from Hyatt Hotels after the chain crudely and cruelly replaced 100 housekeepers at its hotels in Boston and Cambridge with people who were forced to work more for less pay and benefits.

“You tell me that there are sound financial reasons for the company’s decision, and I accept that,’’ Patrick wrote Sept. 22, 2009, to Mark Hoplamazian, the chief executive of Hyatt Hotels. “But the manner in which these workers were discharged is so inconsistent with both the expressed values of the Hyatt organization and basic fairness.’’

Blue Cross flunkies can bleat as much as they want about the compensation packages they give their CEOs and board members being commensurate with the marketplace and blah blah blah. The truth is, to paraphrase the governor, it is inconsistent with both the expressed values of a nonprofit and basic fairness.

Premium Pay: Ex-Blue Cross CEO Compensation Is Closer To $11.3M

Wow, health care costs are really rising fast.

Just a few hours ago we posted that former Blue Cross Blue Shield CEO Cleve Killingsworth received a pay package worth $8.6 million when he abruptly resigned as chief of the state’s biggest health insurer last year.

Well, on closer inspection, WBUR’s Martha Bebinger reports that Killingsworth’s total pay package is closer to $11.3 million. Here she is on All Things Considered earlier this evening:

Here’s how the deal breaks down: Cleve Killingsworth received $8.6 million dollars last year, most of which was his retirement benefit. The remaining $1.4 million was the first of three severance payments. Killingsworth will receive two more severance payments for a total of $11.3 million.

We asked Blue Cross Senior Vice President Jay McQuaide how the company could justify this expense at a time when rising health care costs are one of the state’s most pressing problems.

“There’s no questions that this is a significant amount of compensation and we would be the first to recognize that,” says McQuaide. “We also understand that affordability is the central issue facing the community today and that we need to lead by example.”

That example, says McQuaide, is a less generous payment package for the current CEO Andrew Dreyfus. His base salary is 25% less than what Killingsworth earned and the company is reducing the retirement and severance pacakages as well. But that attempt to say “we’ve learned our lesson,” isn’t persuading some critics.

“This kind of compensation package is outrageous, it’s inappropriate and it’s one of the exact reasons why health care costs are skyrocketing,” says Dierdre Cummings, the legislative director for MASSPIRG. It “leads the public to lose faith that we can actually be serious about driving down the cost of health care.”

“Frankly I think they lose all credibility that they are struggling financially when they grant these packages,” says Jon Hurst, president of the Retailers Association of Massachusetts. Hurst says this deal is out of line with the state of the economy.

“We’ve gone year after year with double digit premium increases for small businesses and working families in a very tough economy,” Hurst continues, “and we think the health care industry needs to better reflect what’s happening in our economy.”

Many low wage health care workers are also angry. Jeff Hall, spokesman for 1199, Service Employees International Union, says this deal is frustrating at time when members are making sacrifices to control costs.

“This sends a troubling message from the insurance industry,” says Hall, “and somebody ought to take a closer look given the situation around costs, it’s troubling.”

Attorney General Martha Coakley said in a statement, “While Blue Cross may be required to meet its contractual obligation to its former CEO, we continue to be concerned about high levels of executive compensation at health care organizations given current fiscal condtions and efforts to control costs in health care.”

The Patrick administration says it is reviewing the deal to see if it warrants further scrutiny or action.

Ex-Blue Cross CEO Got $8.6M Pay Package

Bending the cost curve? Sure, but which way?

In a disclosure already generating public outrage, Blue Cross Blue Shield of Massachusetts reports today that its outgoing CEO Cleve Killingsworth received $8.6 million in compensation last year, including $1.4 million in severance pay.

The details of the pay package were part of a state insurance filing by Blue Cross, the state’s largest insurer. Here’s more from The Boston Globe.

And here’s a statement (aka damage control) from former Blue Cross Board Chairman Paul Guzzi about the compensation filing:

Today, Blue Cross Blue Shield of Massachusetts filed its annual compensation report with the Massachusetts Division of Insurance. Included in the report is the compensation paid to former CEO Cleve Killingsworth upon his resignation in March of last year.

Cleve chose to resign his position following discussions with the Board about the direction of the company. He agreed to resign on the condition that he would receive the same severance benefits that were called for if he were terminated under his employment contract. The Board agreed to proceed on that basis. Cleve’s severance and retirement benefits were negotiated as part of the employment contract signed in 2005 when Cleve became CEO.

The Board understands and is sensitive to the community’s interest and concern about executive compensation. With the full support and urging of our new President and CEO Andrew Dreyfus, we have significantly reduced the CEO’s compensation and benefits.

(Guzzi was Chairman of the BCBSMA Board when Killingsworth resigned.)

Outrage-filled comments are already stacking up on The Globe’s website:

“Nonprofit they say? Sounds like plenty of people are profiting. Keep paying those premium[s],” feedbass writes

Rileysdad adds: “As a right leaning, free-market independent, even I am speechless.”

And here’s Dianadot: “OMG This is so disgusting. Why on earth was he receiving that kind of compensation??”

Reached at his home in upstate New York, Killingsworth told The Globe: “The payment I got was consistent with my contract, no more, no less.”

And then comes this irony-rich kicker:

He said he is currently serving on the boards of a half dozen companies and universities and writing about health care issues, including the need for reforms in how doctors and hospitals are paid.

(Italics mine.)

This just in from Attorney General Martha Coakley’s office, also clearly not pleased:

“Today, Blue Cross Blue Shield reported the compensation owed to its former CEO as a result of his employment contract negotiated back in 2005. While Blue Cross may be required to meet its contractual obligations to its former CEO, we continue to be concerned about high levels of executive compensation at health care organizations given current fiscal conditions and efforts to control costs in health care. Blue Cross has assured us that significant changes have been made in its contract with its current CEO to bring it more in line with current fiscal conditions. Every board is primarily responsible for establishing CEO compensation and more transparency is needed to enhance public confidence in our charities.

Two years ago, our office issued new findings regarding our investigation into executive compensation at non-profits and brought additional levels of transparency on these issues. We also are continuing our review of compensation practices at health care organizations as part of our work to help achieve quality, affordable health care in our Commonwealth. Today’s news is yet further evidence of the importance of that work.”