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Van Faasen to step down as chief at Blue Cross

Healthcare veteran to replace executive

William C. Van Faasen, chief executive of Blue Cross and Blue Shield of Massachusetts for 13 years, will step down July 5 to make way for his hand-picked successor, Cleve L. Killingsworth.

Van Faasen, who will remain as chairman of the 15-member board at least for now, revealed his departure to employees yesterday. But many healthcare executives have expected a change since Killingsworth arrived as Blue Cross president and chief operating officer more than a year ago.

Van Faasen, 56, transformed a struggling Blue Cross from a traditional fee-for-service insurer into a large, profitable managed-care company. He said the challenges facing Blue Cross are dramatically different from those he dealt with during most of his tenure.

''I'm more of a business guy than a healthcare guy," he said. ''I have completed to my own satisfaction what I came here to do: turn around a company and restore its confidence and connection to the community."

The goal now is to improve the healthcare system and its performance, something Killingsworth is more qualified to achieve, Van Faasen said. Killingsworth, 52, has a master's degree in public health from Yale University; Van Faasen earned a master's in business administration from Michigan State University.

Since Blue Cross has become financially successful, Killingsworth said he plans to focus on initiatives that improve the quality of medical care, including a statewide project to establish an electronic medical record, to which Blue Cross donated $50 million. Killingsworth and other Blue Cross executives also have lobbied politicians to expand coverage for the uninsured.

Van Faasen said his successor would bring ''fresh leadership, energy, and passion" to these endeavors. Before coming to Blue Cross, Killingsworth was president and chief executive of Health Alliance Plan in Detroit, one of Michigan's largest managed care organizations.

Steven Tringale, a Boston healthcare consultant, said Killingsworth's expertise is more in line with the types of contracts health insurers now are negotiating with hospitals and doctors -- contracts that pay providers bonuses when they prove they have provided higher quality medical care.

Van Faasen said his contract with Blue Cross runs through 2005, and that he will receive his regular compensation for the rest of the year. Beyond that, Van Faasen said, the board still must work out details of his board position and whether he will be paid. Regardless, his role will be reduced and there will ''no wrestling about who is running the place," he said. ''Cleve is going to be running it."

He also said he will not be awarded a severance package beyond the retirement benefits he's earned over his 35-year work history. Van Faasen received $2.4 million last year, making him by far the highest paid chief executive of any of the state's major health insurers. About $1.5 million of his compensation was a bonus based on financial performance and other results.

In recent years Blue Cross has grown into a financial powerhouse with significant market clout. That was not always the case.

In 1996, the insurer lost $90 million, and the balance of its reserve fund was in danger of dipping below the state-required minimum, prompting former insurance commissioner Linda Ruthardt to increase oversight of Blue Cross. The insurer also was losing 150,000 to 200,000 members annually to health maintenance organizations, including Harvard Pilgrim Health Care and Tufts Health Plan, as managed health care -- designed to control medical costs -- grew in popularity nationwide. Many younger workers switched to the less expensive managed care plans, leaving Blue Cross with more members who had serious medical conditions.

Van Faasen sold Blue Cross's nine health centers, outsourced data processing and its 625 employees to a private company, and began to develop managed care products for customers.

Since then, Blue Cross has been on the upswing. Enrollment soared to 2.7 million, up from an all-time low of 1.6 million in 1998, and the insurer now has more than $1.1 billion in cash reserves. Some employers, particularly municipal officials, have complained that the insurer's improved financial status means it should minimize premium increases.

Liz Kowalczyk can be reached at kowalczyk@globe.com.

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