Editor’s Note: In 2014, after CVS CEO Larry Merlo announced the decision to stop selling cigarettes at its 7,700 retail pharmacies, Mark Bertolini, then CEO of healthcare giant Aetna, called to congratulate him. They agreed to meet to discuss business strategies and the future of the healthcare industry. In the conversation that ensued, Merlo referenced the estimated $2 billion revenue hit the decision would cost. “You make money on a fee-for-service basis,” Bertolini recounts responding. “I make money by keeping people healthy. You need a different revenue model, and if you continue doing the things that you’re doing, our revenue model is the right one.”
The discussion that ensued laid the groundwork for possible partnerships, including the idea of combining the two companies. Bertolini, who was in the throes of Aetna’s attempt to acquire Humana at the time, left the meeting with a mission: wrap the Humana deal, buy CVS—and change the healthcare industry.
“That a health insurer would buy a pharmacy chain is certainly unconventional—such a merger, as far as I knew, had never been contemplated—but it fit precisely with what I was envisioning for the future of healthcare,” he writes in his new memoir, Mission-Driven Leadership (Currency Books, April 2019).
That plan went south when the Department of Justice blocked the Humana acquisition, claiming it ran afoul of antitrust laws. But Bertolini, who had a harrowing firsthand experience with healthcare when his son, Eric, was fighting a rare form of cancer, didn’t give up on the vision. In this excerpt from the book, he lays out the healthcare system’s flaws—flaws that are not only spiraling costs, but resulting in our dying younger and killing ourselves more often. And he tells us how to fix it.
Aetna’s mission is to “build a healthier world,” and it starts at home. I view our healthcare system through a unique prism. I’ve been a worker, a manager or an executive in the industry for more than four decades. I saw it up close, in its glory and its failings, with Eric. And I continue to experience it firsthand, intensely, gratefully and inadequately, with my own injuries.
Consider how our health system works. You buy insurance and you get a card. You pull out that card when you get sick or sustain an injury, and you go to a clinic or a hospital, and then the system throws you back into your life. That’s how we take care of people—no sustained engagement in you as an individual, no effort to understand what your needs might be. Our system is mainly reactive: it responds to illness or injury but is otherwise detached from the daily lives of most Americans. That approach may have been adequate at one time, but our country’s social and economic ruptures have exposed its unsuitability to our current needs.
In 2015, researchers Anne Case and Angus Deaton published a paper documenting the dramatic rise in deaths among middle-aged white Americans, driven not by conventional disease but by suicide, drugs, alcohol and loneliness. The report stunned many commentators, as these “deaths of despair,” as they were called, seemed beyond the reach of our $3.3 trillion medical-industrial complex.
Opioid abuse rightfully drew much of the attention. Eighty percent of all opioids produced in the world are consumed by Americans, or enough to keep every American stoned for six weeks. The scourge is only getting worse. According to the National Center for Health Statistics, opioids were blamed for 34,572 deaths in 2016, a 52 percent increase from 2015. Drug fatalities overall in 2016 reached a staggering 72,000. That number does not reflect the millions of Americans who have been compromised, incapacitated or removed from the workforce due to drugs. According to a study by the American Action Forum, nearly 1 million people were not working in 2015 due to opioid addiction.
The cumulative toll, from opioids and other threats, is grim. According to the National Center for Health Statistics, death rates are ballooning across virtually all major diseases and rising or staying the same for every demographic. This defies everything we thought was true about our healthcare system, in which extraordinary advances in medical technology, diagnostics and individual therapies were lifting us to ever higher plateaus of wellness. Instead, we are dying younger, and we are killing ourselves more often. In 2018, the CDC reported that suicide rates rose steadily in nearly every state from 1999 to 2016; the CDC attributed this increase to social isolation, lack of mental health treatment, drug and alcohol abuse and gun ownership.
If you’re in pain, if you’re not clearheaded, if you’re addicted to drugs, if you’re sluggish or depressed or lonely, you don’t care about anything else. You won’t have a steady job. You won’t have an intact family. You won’t be economically, socially or physically mobile, and the American Dream will be something that you read about in a middle school history book.
That’s why I believe if we’re going to solve the big economic and social problems in our country, we have to start with healthcare. Toward that end, we need to rethink what our healthcare system should do and even redefine what health is.
I’m partial to the World Health Organization’s definition of health, from 1948, as “a state of complete physical, mental and social well-being and not merely the absence of disease” (my emphasis). That definition grasps the deeper and more holistic nature of health, yet very few people describe it in that fashion. Maybe the WHO’s language does not speak directly enough to outcomes. We need something that is more affirmative and reflects the broader good of wellness, so I like to say that “a healthy person is productive; a productive person is socially, spiritually and economically viable, and a viable person is happy.”
How we get there begins by changing our understanding of healthcare from something provided by your employer or the government to a journey that you are in charge of. Consider how you buy a car. You don’t go to GM’s headquarters and order one, and you don’t go to GMAC or to some other lender. You go to a dealership, and you tell the dealer what you want: the size, the color, the interior, the sound system, the trunk space, the seat covers, all the bells and whistles. You get the car that meets your needs, and then you develop a plan for how to pay for it.
Our healthcare system does the exact opposite. In most cases, we tell you about your health plan, and then you figure out whether it meets your needs. We need to flip that. What if we had a system in which your health insurer asked first about your health status and your life goals? Those goals may be to watch your grandchild graduate from college, to climb Mount Kilimanjaro or to see your 50th wedding anniversary. We could then say, “Based on your current health and your long-term goals, let’s design a set of benefits and a way to pay for them that would take care of you for life.” That would be a much better experience than for you to buy a health insurance policy and wait until your knee is broken or your lungs don’t work.
Next, let’s recognize the importance of what most influences health. We know from our own research that 10 percent of your life expectancy is associated with clinical care, 20 percent is related to where you live, 40 percent is influenced by your lifestyle and 30 percent is related to your genetics. That means that 90 percent of the factors affecting premature death occur outside the doctor’s office, hospital or pharmacy, where we spend most of our healthcare dollars. What we don’t invest in are social determinants, a failure that only commands our attention during a crisis—such as the unsafe drinking water in Flint, Michigan, that, starting in 2014, exposed more than 100,00 residents to high levels of lead and where residents today still refuse to drink the cloudy tap water.
We see the practical effects of this failure in other ways. A 2014 study by the Robert Wood Johnson Foundation found that babies born in Montgomery County, Maryland, and neighboring counties in Virginia (Arlington and Fairfax) have a life expectancy six to seven years longer than those of babies born in Washington, D.C., just one zip code away.
Washington, of course, is a much poorer community. Those kinds of jarring socioeconomic disparities between adjacent communities can be found in cities and suburbs across America. In 2018, the Aetna Foundation worked with U.S. News & World Report to assess 3,000 communities in America and to rank the 500 healthiest. My home community in Michigan, Wayne County, didn’t even make the list of 500, while the adjacent counties of Oakland and Washtenaw were in the top 300.
It’s why I believe that as far as morbidity and mortality rates go, your zip code matters more than your genetic code. Or as David Nash, the dean of the Jefferson College of Population Health, said, “Where you are on the map predicts your lifespan.”
We should be investing in those parts of the map that need the most help, but our overall spending is too low to make a difference. In the U.S., our expenditures on social determinants, as a percentage of GDP, are ranked 12th out of the top 13 OECD countries, according to 2013 data compiled by the Peterson-Kaiser Health System Tracker. We underinvest in the very things that can have a big impact for the same reason that companies underinvest in their employees or customers—their costs are immediate, their benefits long term.
Focusing on social determinants lies at the core of prevention, whose benefits should be self-evident. Fifty percent of the American population has a chronic disease, and they drive 86 percent of all healthcare costs. For that cohort, healthcare is not episodic; it’s continuous. The goal is to intervene early to deter bad outcomes down the road. Even delayed interventions can be valuable. At Aetna, we had a 78-year-old female client with asthma who made 405 visits to the emergency room in one year (yes, more than once a day) at a cost of $2.7 million. We sent a nurse to see her, and it turned out that she kept her thermostat at 60 degrees, so she often wore sweaters. Her friends made her angora sweaters, which she liked very much, except that she was allergic to angora!
It’s a perfect demonstration of how preventive measures—in this case, a simple home visit—can improve people’s health while reducing overall costs. Once you visit the person and make a health assessment, you can invest to improve outcomes. But as a country, we don’t get close enough to the community or the home to generate better results.
Personal engagement also needs to be a top priority: how do we motivate individuals to care about their well-being, and how do we make that engagement meaningful? This is the Holy Grail of healthcare. Progress will not happen at annual checkups (too infrequent, too perfunctory) or at the hospital (too expensive, too late). Progress also won’t occur through some “wellness program.” Many organizations have wellness programs, and frankly they don’t do much. The real question is, what motivates someone to act differently than they ordinarily would?
The answer, in my opinion, is to become more local. We need to meet people in their homes and communities, and find out what matters to them. In putting the individual first, we need to integrate the power of community and technology to engage that person in ways the current system does not.
The federal government is gradually beginning to accept some of these principles. In 2018, Congress, with support of Republicans, Democrats and the Trump administration, passed a law that provides additional social and medical services to Medicare beneficiaries with multiple chronic illnesses. These services include home improvements such as wheelchair ramps and bathtub railings, transportation, home visits by nurses and home delivery of meals. David Sayen, a longtime administrator for CMS, told The New York Times that this new federal policy will give health plans “a whole new toolbox to address social determinants of health.”
We want to move the conversation about your health from the exam table to the kitchen table. When you visit your doctor, you might get 10 or 15 minutes, and if the doctor asks you how much you’re eating, exercising or drinking, you’ll probably offer misleading statements on at least some of those questions—assuming, of course, you even have a doctor. Surveys indicate that between 20 and 25 percent of people don’t.
That’s why I want to bring the conversation to the kitchen table, where you’re with people who know you and where people find out what’s really going on: who’s got a new job, who’s selling their car, who’s getting married or divorced.
That was the idea behind our partnership with Meals on Wheels, whose volunteers notify us of changes in health status. Those kinds of jobs require transferring data or other communications among payers or providers, and all of that is now possible with smartphones and other communication devices. Just as the digital age has changed the workplace, it is now allowing for new kinds of home engagement.
Aetna, for example, has a program with our congestive heart failure patients, who are our most expensive. When they leave the hospital, we give them a scale and install it with Bluetooth technology. We ask that they weigh themselves each day, and when their weight rises to “out of tolerance,” we see that and call their doctor, who can then intervene so that care is provided before the next episode.
The FDA has already approved wearable sensors that can continuously monitor all vital signs: blood pressure, heart rate, body temperature, breathing rate, oxygen concentration in the blood and blood sugar. “The cost to do this for weeks would be a tiny fraction of the cost for a day in the hospital,” said Dr. Eric Topol, a cardiologist who is a professor of molecular medicine at the Scripps Research Institute.
We’ve barely scratched the surface of consumer analytics in healthcare, and that data will personalize—and revolutionize—the industry.
The challenge is how we distribute, connect, wear and exploit that information for each person’s health journey, but with the likes of Google, Apple, Amazon and many other companies entering or expanding into this market, those challenges will be met. Patients are sick and tired of being sick and tired, but personalized data will empower them, in concert with their providers and their insurer, to build a health plan that works for them. A consumer revolt is coming, and it’s easy to foresee. In employer-based health plans, workers are now paying for 41 percent of their overall healthcare costs, including premium and benefits. At some point, employees will demand a greater say in how their money is being spent, and they will want coverage that applies to their needs—the curated experience.
In describing what our healthcare system should be, note that I’m not talking about “single payer” or “private payer” or any other kind of payer, nor how we provide coverage for the uninsured. Those issues relate to how we finance care, which is undoubtedly important, but not most important. We can change the financing of healthcare all we want, but if the system is broken, we’ll still be financing poor outcomes at ever-higher costs.
In sum, we need a system that promotes health and wellness, and that system should do the following:
• Enlist the resources of the community, including storefronts and pharmacies, as the first line of defense against disease or sickness.
• Deploy friends, neighbors and relatives in persistent, caring engagement.
• Recognize that social determinants are driving huge disparities in health outcomes across the country and invest accordingly.
• Invest in the prevention of disease, not just the treatment of symptoms.
• When people need care, provide a personal solution aimed at improved quality of life. I had been thinking about these ideas ever since Eric’s illness and had consulted any number of experts. At Aetna, we began implementing a more consumer-oriented journey for our members. (Our new motto was, “You don’t join us, we join you.”) We were making progress, but we needed to make deeper inroads into our communities, which brings me to CVS.
No matter how many individuals we could enlist to reach our members in their homes or apartments, we could never reach enough of them. We needed retail outlets in towns across America that would serve as the front door to our healthcare system. We weren’t going to build them, so we needed a partner.
On July 3, 2015, Aetna announced that it would purchase Humana for $37 billion, combining the country’s third- and fourth-largest insurers. Once the two companies were integrated, we’d have a big enough balance sheet to buy CVS, which would have made us America’s second-largest publicly traded company by revenue, behind Walmart.
But the Department of Justice blocked that merger; and did the same to stop the merger of two other large health insurers, Anthem and Cigna. The ruling was a setback, but it did not deter us from our goal of broadening our footprint and finding new and better ways to engage patients. In that regard, one of the first calls I received after this setback, in February 2017, was from Larry Merlo at CVS.
“Do you still want to talk?” he asked. I did.
Our early conversations envisioned any number of partnerships between CVS and Aetna, including contractual agreements, joint ventures and a merger. My team and I also talked with two other companies about possible combinations, but CVS represented the greatest opportunity. The company now has 9,700 retail locations and 1,100 clinics, and nearly 80 percent of the U.S. population lives within five miles of one of its stores. If our goal was to move healthcare into the community, CVS was the most direct path to get there.
My team and Larry’s team had numerous meetings and conversations about what the two companies could do together. It took time. We didn’t understand their business, they didn’t understand ours. But I told Larry the same thing that I told Apple when we were discussing a partnership with the Apple Watch: every 50 basis points that we reduce healthcare costs is $480 million in underwriting margin; so, in CVS’s case, if we could build a model that reduces costs—in greater patient engagement, increased adherence to medication, preventive care, and early intervention—everyone would win.
Academics talk about “disruption” in the market, and an alliance between CVS and Aetna could certainly be disruptive. But it’s worth remembering that companies don’t disrupt anything. Customers do. Amazon created an online platform, but it was the customers who disrupted the market. They wanted products that were fast, reliable and cheap, and Amazon recognized that need and filled it.
Like every brick-and-mortar retailer, CVS must now compete against Amazon and other low-cost, high-quality online businesses. But as Larry and I talked about this challenge, we agreed that a successful outcome had little to do with Amazon and everything to do with whether we could satisfy the unmet needs of our customers. What exactly did they want?
The healthcare system was the problem: It’s confusing. It’s impersonal. It’s the largest line item in most people’s budgets. And the whole process is horrifying.
I would also add, it doesn’t keep people healthy. Its focus is to fix unhealthy people.
Larry and I gathered our teams and began developing a model that would make healthcare more accessible, more convenient, more intelligible and more affordable. It centered on transforming the role of the stores in the community: They are currently pharmacies that are attached to crowded aisles of potato chips, batteries, deodorant, greeting cards, gift cards, playing cards and a whole lot more. Let’s turn them into community health centers instead.
When I initially broached this idea with the CVS team, someone asked me if I wanted to expand the CVS MinuteClinic. I said, “No, we don’t need three more plastic molded chairs and a countertop. We need something much more radical. We need to create a venue that people actually want to visit.”
Ron Williams used to say, “No one goes into a store and buys an Aetna.” Instead, an Aetna product is sold to people because it’s something they need. Similarly, most people go into a CVS to buy something they need. The store serves a function, but it could aspire to something greater. Other retailers take that approach.
George Blankenship designed the stores for the Gap, Apple, Microsoft and Tesla, all of which create a positive, even exciting experience. Blankenship once told The New York Times that at Tesla showrooms, the goal was “to never sell a car from there.” He wanted people to ask to buy a car. It’s a similar concept with Apple. You enter the store and you’re so engaged in what you’re seeing, so mesmerized, you want to buy something from Apple. Apple doesn’t need to sell you anything.
A CVS store will never sell an electric car or a smartphone, but it can still be a place people want to visit and say, “Wow, this is cool.” As we envisioned this future CVS store, it will continue to sell health and beauty products and have a robust pharmacy, but most consumer items will be cleared out, and the space will be devoted to improving the health of the community.
When you walk in, a greeter will ask, “How can we help you today?”
If you say, “I want to start running again, but I need a brace for my knee,” the greeter will say, “Great, let me take you over here to get you fitted for one.” We’ll have a durable medical equipment area, and we’ll have a professional who can fit you with a knee brace. We’ll have a partnership with a retailer like REI, and we’ll have stairs that you can practice on before leaving.
CVS MinuteClinics already provide a wide range of health services, but the new stores will expand those and also offer procedures or exams that have long been done in hospitals. For example, when a woman receives a mammogram, her doctor sometimes orders a CT scan. But the patient may have to wait two weeks, as the CT scan operators are only available from eight to five. The CVS stores could have a 24-hour CT scan available.
Women could receive the scan sooner, and because it’s close and accessible, women would be more likely to get it in the first place. The same is true for other kinds of X-rays, with infusions or even dialysis. Aetna has oceans of data about our members, and we’re developing models that tell us where the greatest opportunities are for investing in their health, be it through digital communication, personal visits or other outreach efforts. As we continue to expand these efforts, the CVS locations will become an accessible front door for the system at large.
The conversations between Larry’s team and mine continued into the fall of 2017. Our focus remained on the strategy, and we agreed that the best way to achieve our goals—a shift to lower-cost sites of healthcare services, improved quality of care and improved care management—was for CVS to acquire Aetna.
We next talked about whether the cultures of the two companies would support those efforts, and finally we talked about price. On October 11, I received a formal offer from Larry for CVS to buy all the shares of Aetna.
News of our negotiations leaked to the press, but we continued on, with a small army of investment bankers and lawyers trying to iron out the many details. Merger agreements are always a bear, and we were nearly complete when my team came to me and said that CVS wanted the ability, starting in May 2019, to change our benefits package for our employees. That included everything from healthcare to tuition reimbursement to yoga.
They asked me what I thought. I told them I didn’t care about the benefits for the executives—they would be fine—but I would not sign any agreement that changed the benefits for our frontline employees. That was a commitment that we had made, and we would not renege on that promise. I was willing to walk away from a $69 billion deal on that principle. CVS retained the benefits.
On December 3, the announcement was issued that CVS would be acquiring Aetna for $207 a share in a deal that could “reshape the health industry,” according to the Times.
That’s certainly the goal.
Convulsive change has always been part of capitalism, but technology and globalization have accelerated the shocks. Artificial intelligence alone could have the same effect, in both economic and social change, that electricity or computers once had. All manner of companies across all kinds of business, from manufacturing to finance, from publishing to retail, adhere to business models that may soon be obsolete, if they aren’t already.
Who wins and who loses? It starts with the courage to challenge the status quo, even if that displeases existing stakeholders or puts the business itself at short-term risk. The role of the CEO is to paint a clear picture of what the future holds, and that includes an honest assessment of the company’s capabilities, a catalog of the changes necessary to be relevant tomorrow and a willingness to make the difficult decisions to proceed.
That was our mindset at Aetna. During our negotiations with CVS, my board asked me why we should sell a company that was performing so well and was delivering to its customers and its shareholders.
I told them that it wasn’t about the past or even the present, but it was about the future, and the future of healthcare is a huge unknown. No one likes the system. Big insurers are routinely blamed for its ills, and we don’t know what changes or reforms are coming that could dramatically change our business model. I also told the board that I believe our healthcare system is fundamentally broken, and all the players involved—hospitals, providers, drug and device companies, regulators and insurers—fight to maintain a status quo from which they are benefiting. While Aetna has figured out how to prosper in that system, we should be leading the inevitable change, not responding to it.
“If we’re not influencing healthcare and are just paying claims,” I said, “we’re dead.”
Skeptics of the CVS deal understandably wondered how we could truly transform such an ossified, complicated system. We’ve been receiving healthcare the same way for so many decades, it takes some moxie—or maybe blind faith—to imagine that it could be done any other way.
I have absolutely no illusions about how difficult the task will be, but I’m tired of people talking endlessly about “healthcare reform,” drafting white papers, holding conferences and expressing dismay. It’s time to act. If leadership means anything, it means seizing the moment, embracing a bold strategy to solve big problems and executing on it. That’s what the CVS deal was all about. It may take a generation, but it’s an opportunity to redefine how we deliver care and reconsider the very meaning of health and wellness.
For the effort to succeed, the implementation will be critical. A thousand details will have to be monitored, and you’ll need a maniac with the focus, the tenacity and the urgency to resolve them all.
I won’t be that maniac. There was only room for one CEO, and Larry Merlo was it. He had the bigger balance sheet, and his is the acquiring company; so he deserves to lead the new organization. If the Humana deal had gone through, I probably would have been in that spot, and I would have relished the opportunity. But that’s not how the cards played out. I could have maintained Aetna as an independent company and continued as its CEO, but it’s not about me or my legacy, and it’s not about what my predecessors had built. It’s about the future.
I spent 15 years at Aetna, and I consider my departure one more example of how sometimes leaders have to lose attachments for the greater good. It may hurt, but it was the right thing to do. New challenges await.
Read more: Former Aetna CEO Mark Bertolini on the CVS Deal, Yoga and Employee Wellness
You can buy Mission-Driven Leadership: My Journey as a Radical Capitalist here
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