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HMO will fight action by Hatch
HealthPartners opposes appointments to board
Star Tribune: Newspaper of the Twin Cities (Minneapolis, MN)
January 26, 2003
Author: Glenn Howatt
Staff Writer

HealthPartners said it would fight any attempt by Minnesota Attorney General Mike Hatch to install new members on its board, including Minnesota Timberwolves owner Glen Taylor.

The 15-member board of the health care system met in emergency session Saturday and voted unanimously to oppose any court action initiated by Hatch that would place Taylor or others on the board.

``If he takes legal action against HealthPartners or the board, then we would respond in a legal fashion,'' said board Chairman Alan Fletcher.

Hatch said Saturday that he will seek court approval to install Taylor as board chairman and at least one other board member to improve supervision of company spending, which he criticized nearly two weeks ago as being undisciplined and wasteful.

``This is a very, very weak board,'' he said. ``Where are the people who are going to have the confidence to tear into a financial statement and ask the tough questions?''Hatch said he will ask the court to install two new members, despite the board's resolution.

``We are not trying to take control of the board. We are trying to appoint board members who will give the board direction on how corporate governance is to be undertaken,'' he said.

Hatch said Taylor, who has successfully run his own company for years and has served on many corporate boards, would make an excellent candidate and should be made chairman.

Taylor, 61, confirmed Saturday that he was considering Hatch's offer.

``I'm not going up there to run the thing,'' said Taylor, who lives in Mankato. ``I'm going up there to help mentor and put into place business practices that I know are successful.''

They prefer an `adviser'

But HealthPartners Chief Executive Mary Brainerd said the same could be accomplished if Hatch installed an adviser instead.

``We have a lot of respect for Glen Taylor, but we have a lot of concerns about the process,'' she said. ``HealthPartners has a 50-year history of our members electing their board of directors.''

Brainerd said she told Taylor and Hatch in meetings last week that she and the board prefer to install an adviser who would be acceptable to all parties.

``It would be easy to work out some kind of board adviser position, and I was led to believe that HealthPartners would have that option,'' she said.

Hatch said the audit of HealthPartners conducted by his office showed that the board had demonstrated that it lacks the discipline and experience needed to control a nonprofit company with more than $1 billion in revenues.

He particularly criticized former CEO George Halvorson's trips to Argentina, Australia, Chile and other countries, as well as board retreats and meetings that were held at resorts in Arizona, California and New Mexico.

Hatch said the board had ignored red flags raised by internal and external auditors who had discovered that the company was paying for expenses that were not properly documented or that violated company policy.

``This board has failed to properly address management failures at HealthPartners even though it has been repeatedly advised of those management failures in the past,'' he said.

Hatch helped spark a replacement of the Medica and Allina Health System boards after his audit of those companies in 2001.

In those cases, he turned to successful businessmen, appointing banker John Morrison to lead Allina and Ted Deikel to take the reins at Medica. When Deikel left to recapture Fingerhut, he was replaced by John Buck, a former Fingerhut executive.

But Brainerd said HealthPartners is not the same as Medica and Allina, where the spending abuses ran much higher.

``I think the attorney general sees one solution to every problem, and that is to take over,'' she said.

HealthPartners cooperated with Hatch's audit, she said, and has already submitted a proposal to him on how it would comply with all of his recommendations for improvement.

Hatch said that he met with Brainerd last week, but that he had not asked her or the board to step aside.

``She acknowledged that the board has problems; she acknowledged that the board can be strengthened,'' Hatch said. ``But she was very nervous about having a strong member on the board, I think.''

Taylor runs a successful business empire that is centered on his holding company, the Taylor Corp., in North Mankato.

HealthPartners has 660,000 members in its health plans, as well as more than 30 metro-area HealthPartners medical and dental clinics, Regions Hospital in St. Paul and other subsidiaries.

Taylor, who has not yet accepted the position, said he did not know what he would do if a legal battle developed over his appointment.

He said he has had positive meetings with Brainerd and another board member, but he denied a report that he would remove anyone who resisted changes.

``I don't want to be CEO,'' Taylor said

However, he said it would be pointless to take on the role if he didn't have some power.

``I would hope that there would be cooperation,'' he said. ``But if they are unwilling to do that, you have to have some authority to help the process along.''

Hatch said a court order would establish Taylor's authority. He said the orders he obtained to reconstruct the Medica and Allina boards were needed to reassure new directors.

``It just makes sense that they get court approval so that they have protection and it is clear that they are working on behalf of the state,'' he said.

Hatch would not disclose who else he is considering for the board.

`New era of oversight'

Fletcher defended the board and said it will continue to represent member interests.

``We are moving forward in a new era of oversight,'' said Fletcher, an employee of the Northeast Metro 916 School District.

He said that the board will be more attentive to issues raised by the Hatch audit and that it will ask to receive more details on proposals presented to it.

But he said that the board's previous supervision had been adequate and that, in perspective, the audit had not uncovered gross financial abuses.

``The amounts were not significant to the bottom line or to the premiums,'' he said.

The 13 consumer members of the board include Fletcher; Phyllis Goff of Hamline University; Sue Hancock and Candace Kruttschnitt of the University of Minnesota; MayKao Hang of Ramsey County Human Services and Margaret Lund of the Northcountry Cooperative Development Fund.

Also on the board are Roger Siegal of Council 14 of the American Federation of State, County and Municipal Employees; Gerald Stenson of Wells Fargo Bank; Betty Wade of Augsburg College; Willie Mae Wilson of the St. Paul Urban League; Jean Jantzen, retired, and Terry Corbin and Susan DeNuccio, who run their own companies.

Two physicians also sit on the board: Dr. Brian Rank of HealthPartners and Dr. Christopher Tashjian of the Ellsworth Medical Clinic in Wisconsin.

- Glenn Howatt is at

Edition:  METRO
Section:  NEWS
Page:  1A
Copyright 2003 Star Tribune: Newspaper of the Twin Cities