CORPORATE CASE STUDY: WellPoint offers healthy perspective on ailing industry

Embracing the IR-PR convergence and a desire to educate the public about itself and its industry have earned WellPoint something rare in the healthcare sector - widespread admiration.

Embracing the IR-PR convergence and a desire to educate the public about itself and its industry have earned WellPoint something rare in the healthcare sector - widespread admiration.

What could be more difficult than developing a communications strategy for a company operating in one of the least-trusted and least-admired industries in the US? How about handling communications for a holding company that operates multiple brands in such an industry. This is the challenge faced by managed healthcare provider WellPoint, which owns several regional health-insurance providers, including Blue Cross of California, Blue Cross and Blue Shield of Georgia, and Blue Cross and Blue Shield of Missouri. It also owns HealthLink and UNICARE, as well as a host of specialty companies, ranging from dental care to pharmacy management to behavioral health. "Being in the healthcare sector is like living in a bad neighborhood," says John Cygul, VP of IR and corporate communications. "Even if you have the nicest house, you still live in a bad neighborhood." Nevertheless, WellPoint has established itself as one of the most trusted and highly regarded companies in the healthcare sector. The company has been named the most admired healthcare company by Fortune for four consecutive years, and has become somewhat of a media darling in an industry the press seemingly loves to tear down. For instance, a Dow Jones Newswire article recently described WellPoint as "widely considered one of the strongest performers among the publicly traded managed-care companies." The key to WellPoint's success has been its commitment to educating the public, the media, and Wall Street as to how it runs its business, as well as how the healthcare industry works. It is an education process that is more important than ever: Healthcare costs continue to rise at rates much higher than overall inflation, and the financial strength of some areas of the healthcare sector are becoming subject to increased scrutiny. WellPoint says a large part of what has facilitated its success is its corporate communications structure, starting with its full embrace of the convergence of IR and PR. At WellPoint, both IR and PR reside under the corporate communications umbrella, and report directly to the CFO. The company says this structure, which it adopted in 1998, is an obvious choice for two reasons. Firstly, because WellPoint is a holding company, it has a very low consumer brand identity, and is therefore much better known on Wall Street than it is on Main Street. Creating a brand identity "We had to create WellPoint as a brand, even as it's just a holding company that doesn't sell many healthcare products under that brand, unlike most other companies in the industry," says Ken Ferber, SVP of corporate communications. "The holding company is as much a Wall Street entity as it is a corporate entity. Therefore, it made sense to bring the IR and corporate communications functions together." But creating a brand identity for the holding company has been a serious challenge. A large part of the effort has focused on making its management team - especially its CEO, who has been at the helm for 14 years - the face of the company. "Back in late 1990s, we realized that WellPoint wasn't really known on a national scale, so it seemed that the natural direction was to point to our management team," says Cygul. "We believe we have a great CEO who has tremendous experience, including time as a healthcare adviser to President Carter. So we have continued to use our CEO as an important part of promoting the company." The second major reason the company says it opted for the IR-PR convergence is because one of the healthcare industry's major PR challenges is that the general public does not completely understand the role managed-care companies play in managing and determining healthcare costs. WellPoint says the industry is often an easy scapegoat for the skyrocketing price of healthcare, when in reality, it has only minimal influence over prices. Therefore, much of WellPoint's general communications effort involves educating the public about its role in the healthcare supply chain. This often means explaining sudden price spikes to a skeptical public, as well as a detailed discussion of the company's financials - a task that more adequately lends itself to the IR-PR convergence. "A large part of communications in this industry is an education process that's tied to the financial end of things," says Cygul. "There's a lot of information circulating about our industry that is not accurate. It usually involves serious questions about our role in the healthcare system and how we make money. So having corporate communications report into the financial end makes sense as we attempt to communicate to various audiences." Admitting to mistakes WellPoint operates under the belief that building credibility can often mean admitting failures. It is ingrained in the culture, and has spread from the top down. In the 1990s, when managed-care providers were being portrayed in the media as heartless cost-cutters who valued their bottom line more than the health of their clients, Wellpoint's CEO stood up and admitted that the company had erred in its focus. He said that although the company initially believed that its customers valued cost savings above all other concerns, he had come to the realization that it was actually choice that people really wanted from their healthcare providers. WellPoint's PR execs believe that kind of blunt talk has gained the company respect and goodwill that continues to be a big benefit. This was never more evident than in October, when one of the Wellpoint's main rivals, Cigna, stunned Wall Street by saying it had dramatically underestimated healthcare expenses, and would be forced to slash its profits forecast. Within hours of that announcement, several news reports quoted Wall Street analysts declaring that Cigna's problems would not afflict WellPoint. "We have been able to establish ourselves as a credible and open company that Wall Street feels it can trust," says Ferber. "I think it's a testament to the job we've done of getting out the message." Although a main WellPoint goal is to continually distinguish itself in an industry that suffers from a poor reputation, it plans to do so without bashing its rivals. Indeed, as in other highly regulated industries, the stocks of the major players tend to trade in tandem - making self-promotion a delicate balancing act. "If one company is having problems, it drags the sector down," says Cygul. "It is of no benefit to us to trash the competition. Our goal here is to elevate the sector." WellPoint says its commitment to refurbishing the healthcare industry's image is a goal to which the company has devoted significant resources. The company has a taken a leadership role within multiple industry associations, including the Coalition for Affordable Quality Healthcare, which is a consortium of healthcare providers that attempts to strengthen and streamline industry practices, while simultaneously educating consumers and physicians. WellPoint's chairman founded the coalition. "We're serious about creating and leading efforts to change the view of the entire industry," says Ferber. "And believe it or not, we realize that often means working very closely with our competition. I think people would be very surprised at how often we interact with our biggest rivals." --------- WellPoint VP, investor & corporate communications John Cygul Staff VP, corporate communications Ken Ferber Manager, IR and corporate communications Heather Rim Outside Agency Powell Tate | Weber Shandwick

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