Stephen Hemsley, the chief executive who oversaw extraordinary growth in more than a decade running UnitedHealth Group, is leaving the job next month and will be succeeded by Dave Wichmann, the company’s president.
Minnetonka-based UnitedHealth Group made the announcement Wednesday morning, with Hemsley saying in a statement that his move on Sept. 1 “is the right time for this transition to take place.”
UnitedHealth Group is the nation’s largest health insurer and Minnesota’s largest publicly-traded company. Hemsley will become executive chairman of the board of directors, while current board chairman Richard Burke will become lead independent director.
Wichmann grew up in Iowa, graduated with a degree in accounting from Illinois State University and followed Hemsley to UnitedHealth Group years ago from the accounting firm Arthur Andersen.
“Today’s action is the culmination of almost four years of discussion, careful planning, leadership development and execution,” Burke said in a statement. “Dave Wichmann was one of Steve Hemsley’s first hires at our company and has been preparing for the CEO role for many years.”
Hemsley, 65, became chief executive in December 2006, succeeding William McGuire who left over allegations of stock-option backdating.
During Hemsley’s tenure, UnitedHealth’s workforce grew from 58,000 to more than 260,000, including 17,000 in Minnesota. Revenues grew from $71.5 billion to $200 billion.
Before taking the top job, Hemsley was chief operating officer and guided the company’s reorganization into the two key businesses it operates today — the legacy health insurance business called UnitedHealthcare and the fast-growing health services business called Optum.
As an insurance company, UnitedHealthcare under Hemsley has taken advantage of growth opportunities in the Medicare program, which introduced prescription drug benefits via private health plans in 2006. Like other insurers, UnitedHealthcare stumbled with the next big shot at government-related growth starting in 2014, when the federal government via the Affordable Care Act (ACA) started pumping subsidies into the market where individuals buy health insurance.
UnitedHealthcare amassed considerable red ink in the ACA’s individual market before largely abandoning it this year. Hemsley took responsibility for the losses but the company’s overall financial performance wasn’t badly hurt.
During its most recent quarter, UnitedHealth Group for the first time ever broke the $50 billion mark in quarterly revenue, due in part to growth at Optum.
Hemsley oversaw a significant expansion of the pharmaceutical benefits management business at Optum with the $12.8 billion acquisition in 2015 of Illinois-based Catamaran Corp. Optum has grown as a health care provider, as well, most recently with a $2.3 billion acquisition earlier this year that makes the company one of the nation’s largest operators of surgery centers.
Wichmann, 54, joined UnitedHealth Group in 1998 and served as chief financial officer from 2011 until mid-2016. Most recently, he has been president of UnitedHealth Group and led the UnitedHealthcare business.
UnitedHealth Group said that Wichmann has directed operations and technology efforts and has led external development, acquisitions and integration activities at the company. Wichmann currently leads the company’s activities in Brazil, where UnitedHealth Group in 2012 acquired a majority stake in the nation’s largest health insurance companies. UnitedHealth has since expanded hospital holdings in Brazil.
Global markets are seen as the “third leg” of UnitedHealth Group’s long-term growth strategy. Following Optum’s high-profile rescue of the federal government’s HealthCare.gov website in 2013, company officials have talked about taking a bigger role in overseas health care markets, including the possibility of contract work in the United Kingdom.
“Helping to guide this enterprise, with its extraordinary people, purpose and capabilities, is a distinct yet humbling honor,” Wichmann said in a statement. “We are fortunate to have an exceptional organization, a deep and talented leadership team, and highly dedicated people.”
Stock analysts expressed some surprise at the timing of Wednesday’s announcement, which they said was sooner than expected, though not the rise of Wichmann.
“While Stephen Hemsley has been an iconic CEO and these are big shoes to fill, in our view the company will continue successfully along its game-changing path of shaping health care in America and beyond its borders, with no change expected in the strategy,” Ana Gupte, an analyst with Leerink, wrote in a note to investors.
Sheryl Skolnick, an analyst with Mizuho Securities USA, said her only concern was whether Larry Renfro, the leader of Optum, would stay on and concluded that Renfro is willing to work for Wichmann since he re-upped his employment contract. She also wrote in a note to investors that it was important Hemsley continue to have influence through the company’s board.
“That’s critical to us,” she wrote, “that Steve, who made the transition from ‘the guy who makes the trains run on time’ to the single most visionary health care executive we know … is staying on in that strategic role.”