At the Chief Executives for Corporate Purpose (CECP)’s annual “Board of Boards” event, which also included a CEO Investor Forum on ESG, former Aetna CEO Mark Bertolini entertained audiences at a lunch keynote panel by comparing the U.S. health system to the auto industry.
“We have a warranty system in this country. Just like you have a warranty for when your car breaks…we have a health system that waits for humans to break,” Bertolini said. Rather than getting in front of health problems, the health system waits for people to come to them with their problems.
Medtronic CEO Omar Ishrak, who joined Bertolini on the panel alongside Johnson & Johnson CEO Alex Gorsky and Siemens USA CEO Barbara Humpton, didn’t quite see eye to eye with Bertolini’s assessment. “When a car is under warranty and it breaks, you take it back to the dealer [and get it fixed without paying]. If you have a procedure and it doesn’t go right for some reason…if you go back to the hospital and get it looked at, you have to pay again. Or someone does and your copay goes up.”
Either way, both Ishrak and Bertolini agreed that the health system is not patient centered, which is the major reason people are increasingly facing crushing medical debt (even those with insurance).
Chief Executive got a chance to sit down and talk with Bertolini on how CEOs can improve the cost of care and employee wellness at their own companies, how he got into yoga, why the CVS deal was the right move for Aetna and more. Below are excerpts from this conversation.
I loved what you said up there about the warranty system. From a CEO’s perspective, healthcare is a huge investment at every company. How do you begin to put a dent in those costs and start making a difference in improving employee wellness and lowering costs, pertaining to what you guys were talking about on stage?
First, it should be looked at as an investment and then you should decide whether or not that investment is appropriate. I think in healthcare we conflate financing and investment all the time. As business people are always taught, you have to separate the investment decision from the financing decision. You would never buy a car by saying I have $250 a month. What kind of car can I have? You’d get a lousy car. You have to walk in and say, here’s what I want in a car and then you find the answer. You never tell them if you’re going to do a loan, cash or trade in. You have to say, “This is what I want. How much does cost?”
What I did inside of that is I said, “Why are we making these investments? What do we expect the return to be? Does it matter? Doesn’t it matter?” We did that for all of our benefits. For people under 300% of the federal poverty level in 2015, we said if you engage with us based on six months of your own work of understanding your health and then engage in subsequent programs that support that health, like disease management programs, we will waive your out of pocket costs… if you’re under 300% of the federal poverty level. So we created a social contract with our employees, which had a dramatic effect on our costs.
So we were always looking for the unintended consequences of doing what most employers do. You know, it’s going up by 10%, I can only afford four. That means we’ve got to give more deductibles and more out of pocket. So we looked at it, we spent a lot of time with it and not only included health benefits, but it included our college tuition program, our student loan repayment program, our time off policy, all those sorts of things. And when we did that, we said, “Does this basket of goods create for us in the employee a more engaged employee? And a more present employee who will ultimately help us keep customers.”
I know you are big into yoga. On a personal level, I know yoga has improved your health…but from an initiative standpoint, this seems like something simple that a company could do to increase employee wellness and ultimately lower healthcare costs.
The journey we had at Aetna, which is in retrospect, wasn’t the vision when we started it, is that I was using yoga and mindfulness for my ski injury and my pain as a way of avoiding opioids. It worked so well for me that I said, “Wow I wonder if this would work well with our employees.” And so I said to my team one day during a staff meeting, “Let’s do yoga and mindfulness for all of our employees.” And they all nodded politely because I was the president at the time. I wasn’t CEO yet.
And about an hour later the chief medical officer came in and said, “This is crazy stuff. This is like Voodoo medicine.” I said to him, “You’re a clinician, what would convince you that it worked or didn’t work?” And he says, we need to do a double blind study. So we did. And so we created a double blind study with a control group and we did 12 weeks of yoga and mindfulness, different modalities, different approaches. And about two months after it was over, he came into my office and said, “You’re not going to believe this, but this really worked.”
We found that people that in the highest quintile of stress based on heart rate variability and cortisol levels, we were spending $2,500 a year more on healthcare than the average employee. The average employee was higher because of that. And so when we looked at the results, we actually saved $3,000 per employee for the people at the highest level. We saw 69 minutes more a month in productivity. We, saw more presentee-ism. But the most important part, which I think what led to the rest of the things we did, is we had everybody journal. And when we looked at what happened to families and how yoga saved a marriage and in one case saved a woman’s life, she was ready to kill herself. And the whole program costs us $179,000 for 800 employees.
Next page: Bertolini on the CVS and Aetna deal, plus why he’s a “radical” capitalist.
I said, well, what more can we learn from these journals? We synthesized that information and found out the reason people were so stressed is that we’re underpaying them. I gave everybody a copy of Thomas Piketty’s book on capitalism in the 21st century and said, “Here’s a way that people think about dealing with capitalism that’s not working. And it isn’t. What do we need to do for our employees to fix this problem?”
We ultimately, through a lot of work and pain, came up with raising the minimum wage for our employees from $12 to $16. We went $12 to $16 an hour minimum wage and eliminating out of pocket costs for our employees. And when we did that, all of a sudden an ethos inside the organization developed that said, “You mean we can take care of each other?”
So we raised tuition reimbursement. We now pay back $10,000 of student loans. We have pet therapy in our buildings where pets come in. We paid people to sleep, seven and a half hours for 15 days in a row. And we’d do all these sorts of things. And none of those were my idea. They were ideas by the employees. We share PTO with employees who need it because their families are under stress. We have a way to donate to employees who have a problem. We move our employees out of harm’s way of every natural disaster and we put them up, including their pets, at hotels. And we do all those things and it probably costs us $60 to $70 million a year. What it did is it created a whole culture inside the organization where the company was taking care of everybody and we were taking care of the company. And more importantly its customers.
You have a new book coming out, Mission-Driven Leadership: My Journey As A Radical Capitalist. What makes you a radical capitalist?
I did [ESG and the basis of the conference] when it was unpopular. Everybody looked at me like I was crazy and I actually went to Adam Posen, I’m on the board of the Peterson Institute for International Economics and said, “Can you help me with some whitepapers Adam?” Because I’m going to get attacked by other CEOs. And I did. “This is crazy. You’re going to raise wages, it’s going drive inflation, etc.”
After we started showing our results and particularly given that over that same time period, our stock went from $29.85 to $208 a share, it’s hard to argue that it hurt us. I did it in unconventional ways. I didn’t use a spreadsheet cause a spreadsheet wasn’t going to work on a lot of these things. So what we did is we used the assumptions you put into your spreadsheet, created a ladder of risks based on the most likely to the least likely and said as a team, “What do we need to believe as a team that will allow us to take this set of risks and succeed? And it was in that conversation, we came to the conclusion that we can make a difference. And so that’s what’s radical about it. We shooed away that spreadsheet and all this other stuff that traditional business people would use. We use the logic of scarce resources are our human capital and plentiful resources are our financial capital and all of that at the time was crazy talk. I’m talking to my CFO and I’m talking about stewardship and he goes, “We are a commercial enterprise. We need to make money.” And my view was if we created a strong economic flywheel of investment in employees taking care of customers, customers staying better, bottom line results will come out of the machine. It wouldn’t be something we had to manage either.
What was the mentality in taking CVS and Aetna—two established, iconic companies in different areas of healthcare—and creating a whole new enterprise?
My belief, and we’re seeing it happen today, was that the next political agenda will be “Medicare For All” or something like that. And I would argue that if we tested Medicare eligibility down to 55 and did the increase we did on Medicaid eligibility in every state, we would have never needed the ACA. We could have covered many, if not more people, cheaper. Because those systems are in place, they work and they’re economically viable.
So we’re going to go through that [debate] again. [In this environment] being a freestanding insurance company in and of itself is like standing in the middle of the road waiting to get hit. I said if that’s going to be the case, what would we need to do? Well, my belief is our social and economic ecosystems have gotten so large that the government can’t manage them. And our attempt to make the federal government or state governments larger won’t work. The notion of a new world order won’t work because we’re so diverse.
We need to get back to community and the only way to get into the community is to create place making, where people in the community can gather together like we used to in an agrarian society so nobody falls through the cracks. You had to be in the local community in a meaningful way.
So we asked, “Should we build Aetna stores?” I said [sarcastically], “Yeah I can see what people lined up to get into and out of an Aetna store.” So what could we do to build a local presence at the community level that will matter? That was the CVS deal. And what can we do to solve this notion of conflated financing and investment, move the financing to the back of the dealership instead of upfront. Build the journey and talk about the investment. Find the cheapest way to finance it. And it’s my plan. It’s not the plan the doctor devises.