James E. Purcell pledges to conduct company business "in a manner that is beyond reproach."

01:00 AM EST on Friday, December 17, 2004

BY LIZ ANDERSON
Journal State House Bureau

PROVIDENCE -- Blue Cross & Blue Shield of Rhode Island's board of directors has appointed James E. Purcell president and CEO of the company, the state's largest health insurance provider.

Purcell had served as the company's acting president since May, when former president Ronald Battista departed in a swirl of controversy over the company's ties to politicians and the perks given to executives and board members.

Yesterday, Purcell pledged to "lead the company by example" and "conduct our business in a manner that is beyond reproach."

"We have to get Blue Cross to a place where people trust Blue Cross again," he said. "That will take consistent, constant effort, starting at the top."

Blue Cross said Purcell's salary, effective Jan. 1, would rise to $500,000 annually, plus benefits, up from $478,000 he was earning as acting president. (Battista's salary was higher, at $546,500.) The nonprofit company said a compensation study it commissioned found Purcell's pay "competitive with the salaries of health plan CEOs nationally."

Purcell said he would get no other add-on benefits -- such as a car allowance -- enjoyed by his predecessor, other than a roughly $2,000 annual allowance to help with his personal financial planning.

Purcell, who will be Blue Cross' sixth president, previously held the titles of chief operating officer and executive vice president at the company, which insures more than 670,000 customers.

AFL-CIO President Frank J. Montanaro, the chairman of the Blue Cross board, called Purcell, in a statement, "an exceptional leader."

"He stepped into the presidency under very difficult circumstances and immediately began the healing process," Montanaro said, and "without question, we are satisfied that Jim is the right man for the job."

A company news release on the appointment gave Purcell credit for instituting a "strong, new, company-wide code of conduct and ethics," and shoring up morale with weekly news memos to employees and visits to their departments after taking over "at a time of unprecedented public controversy."

The reference is to the public outcry that surfaced over revelations of Blue Cross' close ties to politicians, its benefits for well-compensated board members, and Battista's plush compensation package, which included a loan that helped him pay for his divorce and build a house in Warwick Neck. The company later forgave the loan as part of Battista's severance package, worth more than $3.1 million.

The board had met Monday night to choose among three finalists for the president/CEO position, said Scott Fraser, a company spokesman.

Fraser said the company had conducted a national search beginning in August, with the help of the Illinois-based consulting firm Witt/Kieffer, Ford, Hadelman, Lloyd. The other two finalists were from outside Rhode Island, he said.

PURCELL was a former managing partner of the Providence law firm Partridge Snow & Hahn before joining Blue Cross in May 2000. He is a graduate of Cornell University and Boston University Law School, and a Vietnam veteran.

"What I tried to do as acting CEO was to make sure the company is run properly now and in the future," Purcell said yesterday.

While "99 percent of what we did was the right thing," Purcell said, "issues of style and perception are very, very important, [and] some of the things that happened with the former CEO fed into that."

Now, he said, "I sure hope the spate of negative news is bound to end."

Purcell said in the past, "the lack of communication with physicians and other providers was a huge error." He said he wants to "vastly improve" those relationships and to work "to help get them better fees without doing it solely on the backs of subscribers."

Part of that, he said, will be working with doctors to address "utilization" issues -- how and how often patients use medical services -- and to promote health and wellness programs.

Purcell also pledged to provide "superb customer service for our members" and work to ensure the company's financial stability.

Earlier this year, Blue Cross agreed, under pressure from Governor Carcieri and lawmakers, to hold its cash reserves steady at $277 million through next July 31, a figure that amounts to about 17.7 percent of the company's annual premiums.

Purcell said yesterday that, after that date, "it's my intent to increase reserves again at a very modest pace," working toward its goal of having reserves amounting to 22 percent of its annual premiums. Purcell defined a "modest pace" as a reserve contribution of $40 million to $45 million annually.

Blue Cross is waging two court battles with the state, attempting to overturn the Carcieri administration's selection of rival UnitedHealthcare as the new health insurance provider for state employees and a Department of Business Regulation order that Blue Cross cease paying health and dental benefits to some members of its board.

Purcell said he had spoken yesterday with Governor Carcieri and the two agreed that, while there will be disagreements, "we can disagree respectfully."

Jeff Neal, a spokesman for the governor, said Carcieri "looks forward to working with Mr. Purcell to make Blue Cross more responsive to its subscribers." He said Carcieri "hopes that Mr. Purcell will take Blue Cross/Blue Shield down the road of reform."

State Rep. Steven M. Costantino, D-Providence, led the scrutiny last spring of Blue Cross on everything from company compensation to doctor-reimbursement rates during legislative hearings as co-chairman of the Joint Legislative Committee on Health Care Oversight.

Costantino said Purcell had been "forthright" with lawmakers when called before them, and "the direction I'm seeing is a good direction" from Blue Cross. "I think they're listening to us, I think they're hearing our message, but it's too early to say whether they've actually turned the company around as it relates to those issues," he said.

Steven R. DeToy, director of government and public affairs for the Rhode Island Medical Society, said Purcell found himself in a tough position when he took the company's helm last spring, but "he has clearly done all the right things by the provider community," including increasing reimbursement rates.

DeToy said Purcell also seems "to understand what it's going to take to establish a dialogue" for future cooperation.

AMONG THE CHANGES to Blue Cross that state lawmakers ordered this year was adding publicly appointed members to the company's board of directors. House Speaker William J. Murphy, Senate President Joseph Montalbano and Carcieri each have two appointments to the board; one now and one in July.

Yesterday, Murphy became the first leader to announce his choice: Thomas L. Falcone, 45, of Scituate, the president of Jefferson Financial Services, a mortgage banking firm in Cranston. Falcone is also the president of KENTOM Inc. and Toboco Properties Inc., two real-estate holding corporations.

Falcone, in a statement, called his selection "a great privilege."

Fraser, the Blue Cross spokesman, said the public nominees would be added to the board, which has recently had 14 members (Neil Steinberg, former Fleet Bank Rhode Island chairman, resigned his seat after taking a fundraising position with Brown last summer).