Aetna Mark Bertolini

Former Aetna CEO Mark Bertolini Talks Medicare For All

CNBC transcript: CNBC’s Sara Eisen interviews Former Aetna Chairman and CEO Mark Bertolini from the CNBC Evolve Conference in NYC in the present day

WHEN: In the present day, Wednesday, June 19th

Following is the unofficial transcript of a CNBC interview with former Aetna Chairman and CEO Mark Bertolini reside from the CNBC Evolve conference in New York Metropolis on Wednesday, June 19th.

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Watch CNBC’s full interview with former Aetna CEO Mark Bertolini

Obligatory credit: The CNBC Evolve convention.

Realtime Transcription by www.RealtimeTranscription.com

SARA EISEN:  Mark is in higher footwear than I’m, rather more snug.

It’s very applicable that we’ve Mark here to kick off this superb occasion, talking about reworking businesses and evolving throughout good occasions and dangerous occasions, because Mark did that.  He wrote a ebook on it; he wrote a Harvard Enterprise Evaluate paper on it, that’s what I learn final night time; and he speaks very eloquently.  Mark, when did your evolution of Aetna start?

MARK BERTOLINI:  Uh, nicely, it truly — I spent the higher a part of 2002 — late 2001, 2002 and part of 2003 with my son in a hospital, preventing T-cell gamma-delta lymphoma, which had never been cured.  He’s immediately 33 years previous and has a daughter and another one on the best way, however he’s the one one to survive this disease.

And so I noticed, as a result of solely 47 individuals had ever been recognized with it, that I wanted to interact personally in what was happening.  So Harrison’s inner drugs tax, laptop computer pc, met with the medical staff every morning.  I was a nightmare for them:  What are we doing at the moment?  What are the priorities?  Et cetera.

For sure, because of that journey and spending time with him, once I went to Aetna instantly after he got here house in 2003, I started to say, We need to change the system.

One of many things we targeted on was compassionate care, finish of life, which is a large driver of health care costs in the USA.  Virtually 25 % of prices in Medicare relate to end-of-life care.

And what it’s a must to do in the Medicare program immediately is you must admit you’re going to die in six months, and you may’t seek care or providers when you’re in hospice.

I did that with Eric.  I needed to signal a bit of paper that stated he’s going to die, and that to maintain him snug, and that — and he can’t seek any curative providers.

And once we discovered a drug for him, he had to depart hospice.  He needed to sign out of hospice.  They stated, Do you need to depart hospice, or do you need to give him the drug?  I stated, Let me take into consideration that for only a minute.  And so we left, and that drug saved his life.

And in that moment, what we did at Aetna is we stated, Let’s do this.  Let’s not require individuals to confess they’re going to die.  Let’s permit them to seek curative providers.  All they need to do is accept hospice early.

The those that died in hospice within the management program, which was two years long, went from 24 % going into hospice to 74 %.  Hospital days went down 85 %, medical costs went down 70 %.  And the letters we acquired from individuals concerning the quality of life of that individual as they neared dying have been superb.

So we introduced it to President Obama’s administration and stated, We have now this really great concept.  Right here’s the info.

They usually stated, Oh, no, they’re speaking about demise panels.  We will’t do this.  Why don’t you’re taking it to the Institutes of Drugs, maintain a conference, which we did.

The program acquired killed because there was a conversation happening about, nicely, Obamacare goes to create — the ACA is going to create a dying panel.

So Aetna offers that for all its shoppers right now.  It’s a tremendous program.  It’s free because it truly reduces prices and improves quality of life not only for the individual, however the household.  And that started the experiment.

Okay.  What more might we do to —

SARA EISEN:  That was earlier than you have been CEO?

MARK BERTOLINI:  Earlier than I used to be CEO, yeah.

SARA EISEN:  You turned CEO in 2010?

MARK BERTOLINI:  Yeah.

SARA EISEN:  What was Aetna like then?

MARK BERTOLINI:  We have been an organization that was crawling out of a deep gap, that we obtained into hassle in 2009 when the market went dangerous, the financial system went dangerous.  And I was President throughout that, so we had to rethink the best way we considered our firm.

And the important thing variable we got here up with at the time was that for every 50 basis points, we modified well being care costs, there was $480 million improvement in underwriting margin and one other 480 million for our shopper.  And so what can we do to improve that margin?

And about that time, a couple of years earlier, the Bush administration had put Medicare Advantage in place.  What we found within the process was if we truly invested in individuals, they really acquired better and the well being care prices went down.

So we developed this mannequin and this workforce of folks that did nothing however look for what are the things we might do to improve the standard of care, to improve the quality of life to scale back another 50 foundation factors.

Yearly we went after 350 foundation points.

And so in 2010, we added 8 % operating margin.  The street stated we couldn’t maintain it.  We truly grew it to 9.1, and that was by actually in search of methods to enhance the quality of care and enhance the quality of life to people and scale back the prices by nearly maintaining them away from medical-industrial complicated.

And that turned the secret.  That was the CEO metric, for those who needed to have a CEO metric.  The CEO metric was, The place do I find the subsequent 50 basis factors.

SARA EISEN:  Have been you the one one doing that in the business?

MARK BERTOLINI:  Yeah, after which that began to catch on.  Medicare Benefit was the place to see it most obviously as we paid for the danger of people.  Then we began to convey it to Medicaid, began bringing it to our business inhabitants, and it confirmed great results.  We stated, Wow, take a look at this.  We’re not denying stuff.  We’re truly making sure individuals get the most effective care; if we will do this, we will truly scale back the cost of care and improve their high quality of life, they usually’ll like us.

And that’s the place we began the experiment with our staff.  I used to be utilizing yoga and mindfulness.  And my arm — neuropathy in my left arm.  Right now it’s burning like crazy, because of the weather outdoors.  It’s going to storm at present.  Day-after-day, it never stops, 24/7.  So I exploit yoga and mindfulness for it.  So I came to work and stated, Let’s do yoga mindfulness for everybody in the firm.  They usually stated — everyone in the assembly nodded.  Then the chief medical officer got here to me later and stated, Mark, that is craziness.  This is voodoo drugs.

SARA EISEN:  How many people be just right for you?

MARK BERTOLINI:  Complete, up till the final two years, I had 14 individuals reporting to me, instantly.  I feel that flat organizations are higher together with your hand on the wheel, you understand what’s happening.

And so he stated, That is voodoo drugs.  Everyone thinks you’re crazy.

I stated to Lonny Reisman, who is our chief medical officer, What wouldn’t it take for you to consider?

And he stated, In the event you do a double blind research.

And we did.  Pre and submit – variability and cortizol levels and stress levels are in the prime 20 % of our staff — in the prime quintile of stress, at $1500 more a yr in well being care prices, yr over yr over yr.

And publish, those ranges dropped in half.  And then next yr, our well being care costs went down 7 and a half % as a company, went down.  That reduction in development, prices — the greenback prices truly went down.  I stated, There’s something right here.  Spend money on our staff.  Let’s discover a better approach to deal with them.

Once we seemed at the stress degree drivers, there’s compensation, you had staff who have been working two jobs, we had — a lot of the frontline staff have been — 81 % have been single mothers, that they had 20 % of their households on food stamps and their youngsters on Medicaid.

I stated, We’ve to vary this.

So I purchased everyone a replica of Thomas Piketty’s e-book for Christmas that yr.  I stated, Learn this.  This is the choice.  What ought to ours be?

That’s once we raised the wages from 12 to 16 dollars for our frontline staff and worn out the well being care costs of beyond 300 % of federal poverty degree.

Our engagement scores went up 1200 %, retention of consumers went up, our inventory prices went down with $62.50 and we accommodated the transaction with CVS at 208.  So we in all probability spent, we had — after that, the corporate just went loopy, from a cultural standpoint, where all the workers started coming in, Can we do that?  Can we do this?  We had pet therapy.

And the one factor I stated no on pet therapy have been the mini ponies.  We had canine, cats, guinea pigs and rabbits, and that may come into our constructing.  Individuals would line up at lunchtime to pet the animals, to reduces the stress.  We paid individuals to sleep seven and a half hours —

SARA EISEN:  Does that work?

MARK BERTOLINI:  Huh?

SARA EISEN:  Does that work?

MARK BERTOLINI:  The pet therapy?  Oh, yeah.  I adore it.  Do you have got a dog?

SARA EISEN:  I don’t.

MARK BERTOLINI:  Nicely, I’ve a dog.  She is the most effective drugs for me every night time, you recognize, a German Shepard, Keeva.  I ought to have brought her.  I ought to have brought her this morning to return alongside.

And we did — we paid individuals to sleep seven and a half hours an evening.  We might pay them — in the event that they did it 20 nights in a row, we might give them $300.

After which we doubled our tuition assistance.  We paid again scholar loans.  None of those have been my concept.  None of it was in a plan.  But what we did was we turned on the organization culturally to say, Oh, wow, we will care for each other.  It doesn’t harm the corporate.  So by the point we closed the transaction, we had $120- to $125 million a yr more in employee bills associated to all these experiences.

We had PPO banks, the place we donated free PPO to people who wanted it so they might still get a paycheck and be with their families.  We moved all our staff out of harms method in any natural disaster before it got here, if we might that, with hurricanes.  We put them in lodge rooms with their households and their pets.  We took care of one another.

And the cultural power that was created in the organization in consequence was the facility that we might never measure.  Selections have been higher, individuals have been more engaged with our clients, and we obtained a very excessive return out of that.

SARA EISEN:  By the best way, I am going to open it up for questions.  So begin considering of — I’m positive you guys have many questions for Mark.

It feels like what you did was a mixture of altering the enterprise financially —

MARK BERTOLINI:  Uh-huh.

SARA EISEN:  — changing the business when it comes to your clients, actually focusing inward and changing all the culture.  Is that how you consider it?

MARK BERTOLINI:  I feel the two tsunamis headed our method as enterprise individuals are human capital — right now, for those who take a look at the level of schooling in most communities, we’ve got a huge human capital drawback.  And it’s going to hollow out the essential infrastructure of our financial system; in another decade, we’re going to regret it.  And the opposite is climate change.

Between those two, we are headed to catastrophe.  And there are answers to unravel this, however we need to start doing them now.  And so for years, we, as enterprise individuals, have been educated in our schooling to — scarce assets and to put in danger plentiful assets.  For a variety of years the scarce resource have been capital, and the plentiful assets have been individuals; simply put one other individual within the machine.

That’s flipped.  15, 20 years ago, our scarce resource is human capital and our plentiful useful resource is monetary capital.  It’s falling out of timber.  So we must be placing financial capital in danger within the curiosity of human capital, however it has to begin all the best way back in elementary faculties.

My spouse and I worked within the Harlem faculties with urban farming across from elementary faculties.  85 % of the youngsters in Harlem are under reading degree for his or her grade in second grade and third grade, starting of the jail pipeline.  40 % of the youngsters in Harlem, after faculty are in homeless shelters.

With all these vacant strip malls we have now around America, let’s construct some houses for them, everlasting houses, not shelters.  Encourage Mark Benioff don’t construct shelters in San Francisco, build houses.  All they need is a studio house.  That’s an opposed childhood occasion that units off a sequence reaction in schooling that finally results in the jail pipeline.  That’s our schooling drawback.  All these charter faculties and all these STEM packages, incorrect argument.  Help individuals to read.

The second half is climate change and what’s going on within the deep oceans.  I don’t know when you’ve appeared on the research — I take a look at them each day — is that we’re hollowing out CO2 consumption.  Have you learnt that shellfish have five occasions the CO2 consumption degree of crops on land?  We’re hollowing out as a result of kelp is being farmed, and the kelp goes away.  Let’s build kelp farms.  It’s low cost.  Let’s replenish the shellfish population.

All of this stuff can be found for us, eat carbon in several ways.  However we maintain putting it mañana as a result of we’ve got more essential issues, like tariffs.

SARA EISEN:  Nicely, additionally I imply, To be truthful, there’s share worth return, if your stock worth isn’t working, your small business isn’t working, the chief, you’re not going to be building kelp farms, are you?

MARK BERTOLINI:  No, but we will put our organizations — apparently enough, firms have the very best credibility degree of institutions in America.  We’re at 28 %.

SARA EISEN:  That doesn’t sound very high.

MARK BERTOLINI:  Each other institution, including media, is under that.  So one can say we actually have a chance to vary the dialogue in the best way we interact with the communities we’re in.  Our social and economic ecosystems are so giant now — that is within the guide — that our government can’t deal with it anymore.  So we attempt to increase authorities, make more control, which can never repair it.  Want to go back to group, have to go virtually again to an agrarian society the place no one falls via the cracks in our group.  That’s the place we will cope with city farming, we will cope with farming within the oceans alongside the shores of Maine where I’m headed to subsequent week.  Let’s construct kelp farms.  Let’s create city farms.  Let’s spend money on those, as a result of for us, as corporations, the financial system is actually essential.  Proper?  If the financial system doesn’t work because we’ve a human capital drawback, the local weather change is destroying the setting within which we work, we now have a much bigger drawback long run.

Now, it gained’t be us.  Is perhaps a few of you.  It gained’t be us because we’ll be — I’m retired.  But when we don’t do one thing about it, the longer term is gone and our financial system is gone; it doesn’t matter what your enterprise does.

SARA EISEN:  You speak so much about constructing a tradition and investing in our individuals, pet remedy, yoga, enhancing their high quality of life —

MARK BERTOLINI:  Yeah.

SARA EISEN:  — did you’ve got reservations about promoting the corporate to CVS and whether all of that might be maintained?

MARK BERTOLINI:  So there are four levels of Taoist Management.  Degree 1 is your individuals hate you; Degree 2 is your individuals worry you; Degree three is that they respect you; and Degree four is you’re invisible.

What I worked actually exhausting was to get to Degree 4 in order that the organization did it.  The strategy is so profound in the best way we get back to the group and locally to enhance the quality of life in our group, that if I had to give up the job — which I didn’t need to do, however that was a part of the deal — if I had to surrender the job, I had to rely on the folks that I brought along and make their evolution in the four levels of Taoist Management and carry it forward.

SARA EISEN:  Does that mean you got guarantees?

MARK BERTOLINI:  Part of the deal was they couldn’t change our worker compensation for a yr.  But I’ve a workforce of people which might be very robust that work there, that had been on my group and hopefully have been capable of create some osmotic shift in the best way they considered tradition.  I feel we did, they usually have to hold the ball forward now.  Their flip.  In order that’s the hope, that they will carry it ahead.

SARA EISEN:  You stated you’re retired, but what else have you received happening when it comes to how you’re going to deliver these leadership classes to the broader corporate group?  And did you ever think about going into government?  As a result of we’ve a well being care system that would use some transformation.

MARK BERTOLINI:  You realize, I’m helping two of my son’s buddies from high school scale a microgrid group firm.  We actually have bought some giant accounts.  We now have loads of revenue on board, and we’re now in negotiations to boost sufficient capital.  But they’ve found out the right way to take solar battery and the exhaust coming off a natural fuel engine, turning it into CO2 and create a third-generation platform that reduces carbon footprint by 75 % and reduces power prices by 30.  And we constructed the plant — and I financed the first one for them — and it hooks into the grid to promote power again to the grid.  And that is a tremendous know-how.

So we’re doing vertical farms throughout America, we’re doing pot farms in locations the place it’s authorized, and we’re doing universities.  And we’re also taking a look at, you realize, knowledge facilities and hospitals and nursing houses.

So these two guys are sensible, and I’m simply helping them to construction a corporation so it will possibly develop, so spending some time there.  I’m on a couple of boards, including the CVS Well being board, I’m on Verizon and Mass Mutual, Thrive International with Arianna Huffington.  And I’m performing some undertaking work with corporations within the space, I’m building governance and management process.  Because concepts are all the time great, however it solely actually issues for those who can execute towards them.  So you need to build the staff and the metrics and the “nitty-gritty on your belly in the mud,” crawling by way of the mud, making it work daily.  That’s the facility within the concept, it’s not within the concept itself.

SARA EISEN:  Before we confide in questions, you didn’t answer my government query.

(Laughter.)

MARK BERTOLINI:  You recognize, I have been requested.  I’m unsure government’s useful enough to make any headway.  And I feel we’ve obtained an issue.  We’ve obtained to figure this out, but I feel, you recognize, individuals of — it was that folks that have been successful then gave time to the federal government to help the country to be successful.  Nevertheless it doesn’t appear we’ve a structure at this time, with the instability, the poor behaviors of numerous individuals, and the polarization of the ideology within the events the place something can get actually accomplished.

And you understand, I might relatively work on the group degree and construct up from the group, versus making an attempt to beat my head towards the wall on the government degree.  I just don’t know that — there must be a whole lot of modifications and totally different management on a lot of levels in order for me to even contemplate that.  However my spouse has informed me that she would love to observe me on TV, and she or he’ll all the time ship me good notes.

SARA EISEN:  Seems like she’s not on board.

Anybody have a query for Mark?  The microphones are round in the front.  Please introduce yourself.

TARA JONES:  Hi, I’m Tara Jones.  I’m Vice President for Effex.  So we are partnering with manufacturing businesses across the country, they usually’re actually making an attempt to survive this local weather.  How is it you and your workforce — are you able to share the way you and your staff decided what spend you needed to — how did you spend your money to provide back to the workers to vary that tradition?  Because you listed off a number of things, which I noted down, but loads of these manufacturing corporations, their margins are smaller.  They will’t spend that money, so it might be very calculated as to what they’re going to spend it on.  How did you guys decide what your staff needed?

MARK BERTOLINI:  So you must change the spreadsheet.  Spreadsheets are poison.  Spreadsheets and PowerPoints are poison.

So again on the first spreadsheet, you had to hit autocalc after you changed the number.  Now, you get these five-deep, twenty-deep spreadsheets with all these numbers.  And any person goes to go, Properly, what can I do if I modify this number?  And abruptly as a pacesetter, it’s essential be a forensic scientist to seek out out what quantity obtained modified to get that reply.

I stated to my individuals, I’m completed with this.  For those who give me a spreadsheet, I’ll spend time with it.  Once I find the place you probably did it, it’s going to be actually painful for you.

But when you do it a special means, so should you say not what’s fact based mostly on the numbers, but you say:  What are the five key assumptions driving numbers in this spreadsheet that we need to understand, the range of danger?

After which, once we understand that uncommon danger — let’s take these dangers and line them up and stand back as a group and say:  Based mostly on this set of risks and the range of outcomes that would come on these key numbers in our spreadsheet, what do we have to consider as a staff to take this danger?

It’s a very totally different dialogue than what does the enterprise spreadsheet say we will do.

That then forces you to build a administration course of around your concept that forces you to guage those risks each day, and to recalibrate your spreadsheet and your strategy every method.

So that you take a look at actually successful corporations in this country, the unique concept wasn’t what made them highly effective; it was this concept with the ability to iterate towards an concept by having sufficient perception into what was happening together with your creation.

So take the spreadsheet, make individuals put the assumptions out there on the five key gadgets in the spreadsheet.  Don’t take a look at the underside line and say:  Based mostly on these dangers and the vary around them, what do we have to consider as a group as a way to take this danger?

That’s exactly — the spreadsheet never worked on elevating worker wages or decreasing medical costs.  We couldn’t make the number work.

We raised that, after which we put gentle advantages down and stated:  What do we need to consider as a workforce to do that, to assist our staff?

It was so much easier determination.  Truly, the CFO at the finish was going:  Is that this enough?

In order that was the turning level.  PowerPoints — don’t let individuals offer you PowerPoints.  They spend all types of time determining font, words, colour; don’t do it.  Make them are available and speak to you.

SARA EISEN:  All proper.  We’re out of time.  However I need to try to get yet one more question, if we might.  Is there one down here?

AUDIENCE MEMBER: Just to — the whole lot you say, the whole lot you do is what I feel my era needs in a pacesetter.  So how can we clone you?  How can we scale you?  How do I get you into my firm so that we will do what it is that you simply all did?

MARK BERTOLINI:  This — I consider that is the position of the company in making a extra sustainable capitalist mannequin for America.  We’ve a wage financial system, a wealth financial system.  The wage financial system has been flat since ’72.  Wealth financial system has been growing.  Individuals thought that they had wealth in their houses, and that each one modified in 2008.

So, for us to create wealth, it starts with companies like yours, and I have all the time on the planet to spend time with individuals to figure it out.  So, when you need assistance, let’s attempt to figure it out.  You possibly can reach me.

SARA EISEN:  Do you will have a business card?  Is that okay?

MARK BERTOLINI:  My e mail is [email protected]  And that’s my foundation.  Mari and I put the vast majority of our proceeds into Anahata to do group sustainability, schooling and surroundings.  That’s our focus.  “Anahata,” for those of you who don’t know, is the guts chakra in yoga.  And so that’s…

Should you need assistance, let me know.

SARA EISEN:  Lots of people took that e-mail down.  Mark, thanks a lot.

MARK BERTOLINI:  Thank you.