Record-Keeping Flaws Costly to Aetna, CEO Says

HARTFORD, Conn. — Aetna Inc. is paying millions of dollars for people whose benefits have expired because its record keeping is poor, the chief executive of the biggest U.S. health insurer told investors Thursday.

Aetna, which lost $36.6 million from operations in the first quarter, is trying to fix the problem quickly, John Rowe said at a Sanford C. Bernstein & Co. conference. Rowe said a new records system may be in place in 40 days.

The Hartford-based company is struggling to control medical costs as it relaxes some restrictions on care under pressure from patients and physicians who complained that Aetna pays claims slowly and requires too much paperwork. Aetna, which has about 18.3 million customers, is dropping about 10% of its unprofitable clients this year to try to boost profit.

Rowe said Aetna found that it sometimes pays the claims of patients whose coverage has lapsed and occasionally pays twice for the same services. He called the discoveries “somewhat embarrassing.”

“We’re overpaying substantially, and we’re going to stop overpaying,” Rowe said. “I believe it’s millions of dollars. My guess is there’s more to be discovered.”

Aetna sets new premiums for 60% of its business in January and hopes to see some improvement in its operations next year, Rowe said. The company hopes to have results similar to its competitors in 2003, he said.

Rowe, who became CEO in September, said that Aetna’s problems are fixable, and that he’s working to improve the morale of employees.

“I’ve told people I’ll carry the wounded, but I’ll leave the stragglers behind,” he said. “If you’re demoralized, I can help you. If you’re disinterested, I don’t want you on my payroll.”

Shares of Aetna rose 44 cents to close at $25.90 on the New York Stock Exchange. They’ve fallen about 37% this year.