Aetna CEO Mark Bertolini on Leadership, Yoga and Fair Wages

Mark_Bertolini

In Part 2 of Knowledge@Wharton’s interview with Aetna CEO Mark Bertolini, he talks about his start in the health care industry and how he is blazing a path forward as a nontraditional CEO. He also shares his insights into leadership, which borrow from concepts he learned in Hinduism about treating people like yourself. In Part 1, Bertolini spoke about how his own medical experiences gave him ideas about how to improve the U.S. health care system.

What follows is an edited version of the interview.

Knowledge@Wharton: Beyond the payment equation, what else needs to shift for us to see change — in many ways with advanced technology, our demographics, etc., our outcomes don’t tell a great story, right?

Bertolini: IOM, the Institutes of Medicine run by doctors, puts the waste in our system at 30%. So, on a good day, there’s $900 billion that if we got it out of the system we could use it to pay for everybody’s insurance without raising the [premium] or tax revenue, right? So why don’t we do that?

Number two: People have talked a long time about racial and ethnic disparities in health care and Aetna was one of the first companies to come forward and say we needed to [close that gap]. In 2002, we did that. We collected the data. But the most recent study on middle-aged, white males and their rapidly rising rate of mortality is pointing to another important thing — and it’s a social determinance of health.

The reason that alcoholism, drug abuse and suicide are increasing in the middle-aged, white population is a socioeconomic problem. It’s not a racial or ethnic problem and if we look at that and then we look at countries around the world, the OECD nations, you’ll see that the total spending on health care and social programs as a percent of GDP is about 30%.

For [the U.S.,] it’s about 30%. We’re ninth — health care’s 19% and social programs are 11%. We’ve got the balance wrong. There’s no safety net. And so back to the exchanges. When we look at the people that are buying our policies, they’re not buying our policies so they can get a health care card and run [up] health care costs …. They’re buying our policies because they’ve worked hard to achieve a standard of life for them and their children that they don’t want to lose if they get sick. They’re buying peace of mind.

Knowledge@Wharton: When you work with emerging economies where are you seeing the most innovative spirit?

Bertolini: The Middle East, interestingly enough. We went into Qatar four years ago at the request of Sheika Moza bint Nasser, the Queen, to help build out a maternal health program as the first program for universal health care in Qatar. … We’ve now grown that program to a full blown health care system that we’re working with them on. We’re finding a lot of innovation in the Middle East. We’re finding some spontaneous innovation in China, but it’s not quite there yet.

Knowledge@Wharton: In the community centers?

Bertolini: Yes, the local provinces have seen a lot of interest. I think Western Europe, the United States and South America suffer from very big entrenched economic and political interests that are going to be very difficult for us to change and I would actually proffer that we’ll probably do something in the Middle East and China and in India before we get something done in the United States or the Western developed countries.

“The ladder to the top is in building followership, being selfless for the organization and the people you lead, and having the courage to make decisions in spite of how difficult that may be.”

Knowledge@Wharton: You were in the news recently when you tried to make sure that every employee of yours could afford your programs. So why did it take this long?

Bertolini: First and foremost, it was working with my own team to get it done because in any large organization there is a very strong resistance to dramatic change. And there are a lot of people in a very large organization that try to protect the company from the nut in the corner office.

Just getting the data and going through the analysis was a very difficult thing to get done … It took us almost two years. But we got it done and now we have a way of approaching it. We’ve shared it with other companies. Other companies have followed us and used our material and worked on it. But it was a long time coming, too long for me. Income equality was not as big a deal in the economy [as other issues] but as it became more pressing …people were finally receptive to the idea. Then when I pushed it, it happened.

Knowledge@Wharton: I had the pleasure of working with Jack Rowe, who was CEO before you and who brought you into Aetna. [In the past decade or so, I remember] your employees had been around an average of … 20 to 25 years. Is that still the case?

Bertolini: No, it’s not, interestingly enough. I did an early retirement program when I took over in 2010. We had about 3,900 employees with more than 20 years [tenure]. About half of them left at the time and then it’s dwindled from there. So out of 50,000 employees, we probably have less than 1,600 employees who have been with the company longer than 20 years.

Knowledge@Wharton: It must be refreshing to have people with different insights?

Bertolini: There’s always this fine balance between having institutional knowledge and a strong support for the legacy of who we are as a company. You have to find that right balance and when we did the ERP program in the beginning of 2011, there were some people who put their hand up and we said, “Oh, no. You can’t leave.” We actually paid them more.

Knowledge@Wharton: You’ve lived your life in this highly regulated industry. Have you ever dreamed or woken up thinking, what if you weren’t this regulated? Or has it been invigorating to innovate in this kind of space?

Bertolini: In 1983, as I was coming out of graduate school, I was at the top of my class in finance and I had lot of opportunity on Wall Street. I was looking at that, and then a friend of mine called and he says, “You know, we have $12 million dollars of other people’s money. Do you want to start an HMO?” And I said, “What the h— is an HMO?” And he sent me the red herring from U.S. Health care’s prospectus when they went public.

I said, “Well, this is pretty cool. I can go home to Detroit (which is where I was raised) — and we started the company and my friends in graduate school said, “You’re crazy. The big insurance companies control 97% of the market. They have all of the political and economic capital. They’ll crush you guys.” A decade later, most of the large insurance companies were gone. You could feel at that moment that there was going to be this tidal change in the industry. This moment feels like that again. You’re lucky if you get it once in your career. If you get it twice, it’s really cool.

“It’s criminal that this country has people that don’t have coverage for health care.”

Knowledge@Wharton: Is this all about the big data play? Is that what’s going to be the driver?

Bertolini: I think it’s really about personalized medicine. It’s about understanding the consumers of health care. It’s about a fundamentally different service model. It’s a whole lot of things.

Very rarely do you see an industry go from B2B [business-to-business] to B2C [business-to-consumer] pretty quickly, but we’ve got some good lessons. Medicare Advantage is largely a B2C customer market. Prescription drug programs are a B2C market. Medicaid to some degree is a B2C market. We have a lot of test beds out there that have worked pretty well.

Instead of trying to create level risk pools, getting paid for the risk you’re assuming is a whole different model in health care. If you pay me for the risk, and I really am about improving quality, then I should be willing to take it. So it’s a very different way to run the business because you could actually say, “This is what happened with Medicare Advantage — 75-year-olds with three kinds of comorbidities could be very profitable if you just took care of them.”

Knowledge@Wharton: But are your stakeholders willing to go there? Are the doctors and hospitals getting there?

Bertolini: We’re getting there slowly but surely.

Knowledge@Wharton: And the consolidation of hospitals — how is that affecting your own business?

Bertolini: Everybody is consolidating because number one, we have too many hospitals. We don’t have enough doctors. And so, doctors are going to work for health care institutions and I’m not quite sure that’s the right model. We’ll see. But I think in the end analysis – a patient-centered retail market place will generate a very different delivery model.

I see a time when — if you think about this and this is a Clay Christensen idea — the cheapest place to provide health care is in the home. And the cheapest person to provide it is the family or a neighbor. If we were able to create an Uber economy at the local community level and we were able to have nurses walk around the corner to take care of a neighbor and get paid for it as an independent contractor instead of having to go to work for a home health agency and collect a paycheck and pay taxes, why couldn’t that work for health care? And why couldn’t that be a great way to reestablish community at the local level?

Knowledge@Wharton: In a world where people are talking about 3D printing pills and ZocDocs and all of that, how do you manage risk and manage quality?

Bertolini: It’s about managing quality. In the past we’ve created level risk pools that allowed us to have a cross-structure that gave a price to clear into the market and allowed us to grow a little bit, right? So it’s about balanced risk pools. Today, what we have is a model and in that model you controlled incidents — so it is utilization management. In the new model, it’s about accepting the incidents as it is and managing the severity. So it’s a longer-term investment in the individual.

Knowledge@Wharton: What does Mark Bertolini, himself, do to keep the innovation spirit going? What is it about your personal habits that keep it?

Bertolini: I have a yoga practice. I get up in the morning and I do Viniyoga. My partner trained with [Tirumalai] Krishnamacharya in Madras back in the day. She helped introduce me to the eight limbs of yoga, which is not about exercise. It’s about motion initiated by breath to still the mind and the body, to be able to sit in mediation for a long period of time, to reach ultimately samadhi [or a heightened state of awareness].

I read the Upanishads [texts that contain the central concepts of Hinduism], the Geetha [Hindu scripture]… and all of the Tantric texts and all of those sorts of things. In this journey, I now understand that all of this is illusion. You and I are the same thing.

The journey is an inner one and if I understand that inner journey well and I treat others well, I’m treating myself well — and in that it makes me stress free. It makes me be much more considerate of others and their needs. And there is no good or bad. The idea is to find out what that person is trying to teach me that I don’t understand. In that whole way, you come to your work very differently as a leader and as a person. The joy of my journey has been trying to help other people see that and engage in it and learn from it.

“I wanted to reestablish credibility in corporate leadership in the eyes of the American public and I was going to do things and behave in ways that probably wouldn’t fit the mold.”

Knowledge@Wharton: Are there other things that you want our audience to think of and do as they think of their own industries?

Bertolini: The secret to leadership and to being successful has nothing to do with who you work for and how you fit a mold. There is no prescribed ladder to the top. The ladder to the top is in building followership, being selfless for the organization and the people you lead, and having the courage to make decisions in spite of how difficult that may be. And in doing that you come across as authentic and authenticity builds followership and creates leaders.

A lot of people don’t think that way. They think you’ve got to wear a tie everyday and you’ve got to shave. … When leaders become too aloof and too remote and they’re surrounded by security and they live these very sheltered lives and don’t interact with the world around them, I think it’s a mistake.

I would also say that in the educational environment we’re not educating our business leaders really well because we’re focusing on the short term, on a set of metrics that are not really relevant in the long run. And they don’t really create value in the long run.

I think also we focus too much on the STEM [science, technology, engineering and math] skills of business and not enough on the liberal arts and the whole idea that having a heuristic in your head, an aesthetic in your head that’s built on a level of worldly knowledge — that is beyond the numbers that you’ve been taught to manipulate and the spreadsheets you’ve been taught to build — is really the most important thing.

Because in the end, it’s not the numbers. It’s actually your ability to see the world in a very different way. And when you see it in a different way, then you can start moving the numbers to help support that, and then build a followership and make the tough decisions necessary to make it happen.

Knowledge@Wharton: What was it about the Aetna board that when they saw you walk in the door they said, “Fantastic leader.” How did that happen? Because it’s not the average board, is it?

Bertolini: No. I said to them that I wanted to do three things when I became CEO. And the company was 160 years old back then. I’ve been CEO for five years. So I’m sort of getting long in the tooth for CEO’s, but I wanted to make sure the company was around for another 160 years. Part of my responsibilities, my accountabilities should be making sure that the company is on a glide path to do that and I give it the very best shot.

The second was that I wanted to make health care reform work and so we were going to have to make investments and take risks. I thought that that was important because it’s criminal that this country has people that don’t have coverage for health care. Twitter  The third was, I wanted to reestablish credibility in corporate leadership in the eyes of the American public and I was going to do things and behave in ways that probably wouldn’t fit the mold. If they were comfortable with all of that, then I was willing to do the job. Now performance matters, right? So the company was at $29 a share when I took over and we’re at $105 a share today. We were $120 three months ago. That performance matters.

That gives me a lot of latitude and a lot of room to be able to do the things I want to do because I’m delivering. We can’t underestimate that and my team’s a great team to be able to help me do that.

 

Image: “Mark Bertolini (cropped)” by Mark_Bertolini.jpg: World Economic Forum from Cologny, Switzerlandderivative work: Eustress – This file was derived from  Mark Bertolini.jpg:. Licensed under CC BY-SA 2.0 via Commons

 

 

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