The Most Successful CEO of His Generation Steps Down
The corporate chief who’s arguably created more wealth for shareholders, over the longest period than any sitting CEO, is stepping down. Yet news stories barely mentioned his incredible record, or failed to recognize his stature. In fact, most Americans, even those well versed in business, have probably never heard of Stephen Hemsley, the outgoing boss at America’s largest insurer, UnitedHealth Group. In part, that’s because Hemsley is probably the most retiring, publicity-adverse CEO heading an iconic company. Yet he belongs in the pantheon, for his feats for shareholders and for pioneering the Big Data revolution in healthcare.
On August 16, UnitedHealth announced that David Wichmann will become CEO, while Hemsley assumes the role of executive chairman. The succession was expected: Wichmann, chief of the benefits business, is like, Hemsley, a 19-year veteran at UnitedHealth, and has been heir apparent since being named president in 2014.
Although Hemsley became CEO in 2006, his performance is best measured from his ascension to chief operating officer in September of 1998, since he’s been running the basic businesses, and deciding where to place what he calls “precious capital,” ever since. In that 19 year span, UnitedHealth has delivered total returns of 4,500%, or 22.4% annually, more than triple the gains of the S&P 500. That year, UnitedHealth ranked 103 on the Fortune 500 list. On the current roster, based on 2016 results, UnitedHealth stood at 7th, capping one of the most remarkable ascensions in the 500’s history. Yet Hemsley has never even made the Harvard Business Review list of the worlds “100 Best-Performing CEOs.”
The bald, bespectacled Hemsley neither look, nor acts, like a corporate titan. Trained as an accountant, he joined UnitedHealth in 1998 after serving as CFO of Arthur Andersen. He served for eight years under a brilliant, big-picture strategist, William McGuire, a charismatic, 6’6″ former pulmonologist and butterfly collector. It was McGuire who transformed UnitedHealth from a manager of HMOs into a sizable insurer via a string of spectacularly successful acquisitions, notably the purchase of the MetLife health business. In 2006, McGuire and several other top executives departed following a much-publicized options backdating scandal. The new, self-effacing CEO steered UnitedHealth past that problem, and through a period of unprecedented growth.
Besides establishing UnitedHealth as the leading insurer for big companies, Hemsley made big bets on what he considered the future for growth and profits, healthcare services. UnitedHealth is in the forefront of deploying data to identify patients most at risk of becoming seriously ill. Using detailed information on tens of millions of patients, physicians managing large populations reach out to enrollees suffering, for example, from diabetes, to arrange office visits and treatment regimens, rather than depending on the patient to seek help. The system is coupled with “pay-for-performance” metrics that rewards doctors for taking the initiative in managing these patients with chronic illnesses, the group most responsible for the explosion in healthcare costs.
This writer had the privilege of conducting what was then, and may still be, Hemsley only face-to-face interview. The scene was a non-descript conference room at UnitedHealth’s headquarters in Minnetonka, Minnesota. Helmsley, who’d been known earlier in his tenure as a cool, taciturn, numbers-obsessed leader, spoke enthusiastically about the importance of a welcoming, collaborative corporate culture, and his progress in humanizing the company. He noted that in the past, UnitedHealth had been arrogant with clients, as well a tough place to work. “We’re in the most sensitive area of human endeavor,” he declared, “and we were not respectful of the importance of our role. We were too self-centered and needlessly aggressive.”
In effect, Hemsley was talking about corporate parenting. Shedding the “we’re the best and we know it” hubris, he said, ranked as perhaps his greatest accomplishment. We were supposed to speak for 30 minutes, but as it turned out, Hemsley was in no hurry for the interview to end. Snow was falling, and I had to catch a plane. So this writer had to end a fascinating encounter with the CEO who almost never talks to the press. From my experience, Hemsley should have expressed his ideas a lot more widely. How many leaders can warm a frosty culture, produce astounding numbers, and deliver on a services-are-the-future vision, all a the same time? In his own way, this CEO who at first appears to epitomize blandness is about as colorful as they come.