Health Systems’ CEO Quits Over Post-Merger Job Title : Health care: Roger F. Greaves had sought to be top executive under the deal expected with rival HMO WellPoint.
Roger F. Greaves resigned as chief executive of the parent company of Health Net after he lost a bid to be the top executive in a merger his company is negotiating with rival WellPoint Health Networks, sources said.
The resignation, which company officials said was unexpected, came as WellPoint was on the verge of announcing its acquisition of Health Systems in a $1.8-billion stock swap. His resignation suggests that Health Systems expects a formal announcement of the deal--possibly over the weekend--and that WellPoint will concurrently reject a $4.8-billion takeover offer from San Francisco-based Blue Shield of California.
“It appears as though this is related to issues dealing with the merger,” said Don Prial, a Health Systems spokesman. “The staff was shocked to hear it.”
Greaves, 57, is best known to the public for appearing in Health Net TV commercials promoting the preservation of whales and California redwoods. He was unhappy with the management role he was offered as part of the WellPoint transaction, sources said.
If the deal is completed, Malik M. Hasan, Health Systems’ co-chairman, will become chairman of the new company. Leonard Schaeffer, chief executive of WellPoint and its 80% owner, Blue Cross of California, would be president and chief executive.
Greaves and Hasan have had a testy relationship since the January, 1994, merger between Health Net and Qual-Med that created Health Systems International. The merger settled a bitter takeover battle in which Hasan’s much-smaller Qual-Med HMO tried to swallow up Health Net. After the merger, Greaves and Hasan reached a cumbersome management agreement, sharing the titles of co-chairman, co-chief executive and co-president.
But Hasan, a Pakistani-born physician with a reputation as a tough negotiator, lobbied for and won the chairman’s title in the new company to be formed by the WellPoint-Health Systems merger.
“Roger feels that he has produced a successful record with Health Net that entitled him to assume a leadership role in any new health care entity,” Prial said.
Hasan holds a 20% stake in Health Systems, compared to Greaves’ 4% stake.
Greaves’ holdings would be worth nearly $32 million, based on the WellPoint transaction, which values Health Systems at about $35 a share. Both companies are based in Woodland Hills.
Under terms of his employment contract, Greaves would receive three years’ salary after his departure, or a total of about $2.7 million, regardless of whether he leaves voluntarily or involuntarily. Oddly, Greaves’ announcement came the same day that Health Systems won an important five-year, $2.5-billion contract to provide managed health care to more than 700,000 military dependents and retirees in California and Hawaii. The company beat out incumbent Aetna Life & Casualty, Foundation Health and WellPoint.
Greaves was named president of Health Net in 1982 under its former owner, Woodland Hills-based Blue Cross of California. Shortly afterward, Greaves and other Health Net executives fought a bitter legal battle to wrest control of Health Net from Blue Cross.
The case was eventually decided by the California Supreme Court, which allowed Health Net to become independent.
Greaves built Health Net’s membership from 100,000 in 1982 to 1.6 million today, making it the nation’s sixth-largest HMO.
Greaves said he will remain as acting chief executive until a replacement is named.
In a letter to employees Friday, Greaves said his resignation was a “difficult decision, but one which I’m convinced will help facilitate the many changes contemplated by our board.”
After he leaves Health Net, Greaves said, he plans to continue his involvement in illness-prevention and “wellness” programs, which he actively promoted at Health Net.
