Aetna’s Mark Bertolini on Creating the Next Generation of Capitalism and an Uber for Healthcare


  • Mark Bertolini, Aetna

    Mark Bertolini, Aetna

  • From left, David Kirkpatrick, Mark Bertolini

    From left, David Kirkpatrick, Mark Bertolini

  • From left: David Kirkpatrick, Mark Bertolini

    From left: David Kirkpatrick, Mark Bertolini


Mark T. Bertolini
Chairman and CEO, Aetna Inc.


David Kirkpatrick
Founder and CEO, Techonomy

Aetna Chairman and CEO Mark Bertolini’s Big Ambitions

Kirkpatrick: Mark Bertolini is one of the greatest CEOs on the planet and Aetna, which is the company he leads, was a big important company long before he got there but he has really done an extraordinary set of things to refocus it and to reorient his priorities there and now he’s got even more big ideas which you’ll hear about. I mean, he is trying to buy Humana, what’s it, a $30 billion dollar deal?

Bertolini: $37.2.

Kirkpatrick: $37. something billion dollar acquisition he’s in the middle of trying to get approved. So that would buy Humana. That’s a big thing. And we’ll talk a little bit about that. Even more specifically, he is really rethinking how healthcare ought to be delivered and I think he’ll probably have some thoughts on these issues of jobs and the future of the economy that have been coming up throughout the day.

So you are thinking different about healthcare?

Bertolini: Yes.

Kirkpatrick: What would you say is the main reason why you have to think differently?

Bertolini: Well, what we have doesn’t work, number 1. Nobody’s happy with what healthcare costs, what they have to pay out of pocket. It’s an incredibly wasteful and disconnected system. I often use a rat maze on a screen when I describe how it works. And so the only way to fix something like that is to sort of stand out in the future and look at what you think it should be and look back at the current situation and say, “How can I get that mess over here?” versus standing in the middle of it and trying to increment your way toward changing an industry.

Kirkpatrick: Now I know when you were at Techonomy in Arizona, two years ago, you were talking about turning Aetna into a sort of systems company in effect where a lot of what you did was technology backend for the entire American healthcare system and you’ve made a lot of progress on that, I know. Now you’re buying Humana, which is a very labor-intensive hospital-oriented people kind of business. What’s the idea of combining those two together? What are you trying to achieve?

Bertolini: Well, if you think about the way we should all define health, which is a healthy individual is productive, a productive individual is economically viable and an economically viable person is happy.

Kirkpatrick: That sounds good.

Bertolini: Isn’t that a better deal than the absence of illness and fix it when it’s broken. So if you think about that as the definition of health and you do that person by person and community by community, then you need to have all the tools in the kit to sort of rebuild the healthcare system from the community up. And so one way to think about it is we need to have single payer by community, right?

Kirkpatrick: Single payer by community, explain that.

Bertolini: From the bottom up, so instead of the government imposing a labyrinthine administrative system like they’ve sort of had this adventure with the Affordable Care Act—which is an action-forcing event and a good starting point—we really need to get back to communities as the basis for work, communities as a basis for health and it’s that focus. I think if we were think about it from a community standpoint, we could get more done quicker.

Kirkpatrick: So how does Humana plus Aetna make that possible?

Bertolini: So Humana has a very strong focus on improving the quality of care as a way of managing the cost versus holding back or putting in gatekeepers to control access to care as a way of controlling cost. So in the past, health insurance—and I don’t want to get too technical with this audience—but in the past, health insurance used to be about creating level risk pools where you could create a price, so you had healthy people and sick people, you had all sorts of people, you could create a price that could sell a product in the marketplace. The new model is that we should go after the risk and instead of trying to control use, control severity, which means improving the health of the population, going after disease burdens. And that really has to be in the basis of the people you’re taking care of, that community.

Kirkpatrick: Keeping them from getting sick in the first place.

Bertolini: Right. So what is the disease burden? What are the economics, socioeconomic, cultural, environmental trends of that community and how would we build a healthcare system to take care of that group of people versus trying to design some utopian system and impose it on everyone? It doesn’t work that way.

Kirkpatrick: And I know you, even inside Aetna, you’ve gotten all kinds of new things that you tried there and you’ve extended to some of your clients, whether it’s yoga or meditation.

Bertolini: Mindfulness.

Kirkpatrick: Mindfulness, things to keep people healthier. But going to this issue of a single payer for a community, that could sound to some like monopoly business stuff, right? I mean, how do we avoid it feeling like one company’s taking too much control?

Bertolini: It’s not going to be one company, it’s going to be each community taking control. It shouldn’t be companies taking control.

Kirkpatrick: How does it work?

Bertolini: So think of a community where the health system is designed to meet the needs of that community. So if they have a higher burden of diabetes, or they have a higher burden of cancer or it’s a generally well community, the systems needed to take care of those individuals, the doctors, the technologies, the facilities, where they’re located, how they’re accessed all need to be designed to fit the specific needs of that local community. What happened with the Industrial Revolution is that we lost the sense of community in this country and in a lot of places around the world. So people are hungering for that. Seventy percent of the American workforce is disengaged. Twenty percent actively disengaged.

Kirkpatrick: You mean from their work.

Bertolini: From their work.

Kirkpatrick: Now you’re tapping into the last two discussions.

Bertolini: Right. And so if you have that level of disengagement, it’s because corporations and organizations are designed to create obedient acquiescence to rules. “We have rules, if you follow them, you stay here.”

Kirkpatrick: This is not your typical CEO. Keep going.

Bertolini: And so what you have to do is you have to move to a human operating system, which is really community-based. You have to self-govern. You have to give trust. And the only way you get trust is you have to give it first. It’s like love, you give love to get love. You give trust to get trust.

Kirkpatrick: Be concrete though, in the healthcare system that you, Aetna plus Humana in the American economy, achieve, how will that work?

Bertolini: We should provide for individuals, and this is what Humana does, whatever they need in order to stay healthy and out of the hospital. So if they need a ramp in front of the house, get them a ramp. If they need a ride to the grocery store, get them a ride to the grocery store. If they need groceries, diapers, give them to them.

Kirkpatrick: So that’s the kind of system you think you could help create and still have a good business and possibly inspire other systems like that to emerge also?

Bertolini: Humana’s doing it today.

Kirkpatrick: Right, so you just want to get in on that?

Bertolini: I want to take that and I want to leverage that technology to a broader population.

Kirkpatrick: Now another thing you told me, you sort of said on the phone, if I understood you correctly, was you used that word Uber, which is such a boogeyword in a lot of businesses, that you sort of were trying to make an Uber for healthcare. What did you mean by that?

Bertolini: So we think—go back to this community-based model—and population health is the technical term used for it. If we were able to instead of having people get jobs at hospitals or at home health agencies or at corporations, we said to them, “We’ll create the logistics to allow you to make your skills available to your community so that if you’re a nurse, you can go around the corner and take care of somebody in your neighborhood, at a time and on your schedule that you’re available,” then it’s not about the job, it’s about the work you’re doing. And we have the technology to do that, to create those logistics and to allow people to work in their own communities. Aetna has 22,000 employees that work from home fulltime. They never come to an office. Last year we saved 48,000 metric tons from going in the atmosphere. They’re 20% more productive, they have 2% turnover, they’re 100% quality in their work. They’re home for their families, they’re there with their kids. And all they have to do is get eight hours of work in in a 24-hour period. So if you take that model writ large—and healthcare is the perfect industry for it, because it’s a community-based local model, healthcare is all local—why wouldn’t we try and make that happen.

Kirkpatrick: So the equivalent is the nurse is the driver and the patient is the passenger of Uber?

Bertolini: Right.

Kirkpatrick: It’s a very interesting and exciting idea that I’m happy to see you attempting. And you know, you really are thinking differently about business and just to broaden it a little bit, you raised the salaries of the lowest paid employees in all of Aetna in a fairly dramatic move not very long ago and you’ve gotten tons of applause for that, which I would like to applaud you for right now. Because he did do that. What was the statistics, how did you do it, real quick?

Bertolini: We took everybody from anywhere from $12.50 to $13.00 dollars an hour up to $16.00. But in realizing that when we raised their salaries they would have to pay more for their healthcare because we have a salary-determined contribution system, we said for everybody who was under 300% of the federal poverty level—determined by an outside firm, we don’t need to know that, we’ll just find out if you’re eligible—we’ll wipe out your out-of-pocket cost sharing. As long as you engage in your health in a way that you take care of yourself, we’ll take of you. And so for 7,000 people, we’re going to impact personal disposable income by up to 33%

Kirkpatrick: So you not only raised the salaries or the hourly wage of the lowest people, but for an even larger group you eliminated their healthcare costs.

Bertolini: Well, out-of-pocket costs.

Kirkpatrick: That’s a very cool thing. Now to take that a little further, and before we get into some of the other radical ideas you have, I have to just point out, you’ve got the black onyx skull ring. Right, isn’t that a skull?

Bertolini: Yes.

Kirkpatrick: And you’ve got beads that I can see through your shirt.

Bertolini: My mala beads.

Kirkpatrick: And what’s this thing around your neck here?

Bertolini: That’s Sanskrit for Sohum, I am that. We are all one, all of us are the same thing.

Kirkpatrick: I love that. I don’t know, you have long sleeves on but usually you have some bracelets.

Bertolini: I have bracelets and I have tattoos and stuff like that. I didn’t want to show all the tattoos.

Kirkpatrick: There’s no watch? Come on. Anyway, and you’ve got the alligator boots.

Bertolini: Yes.

Kirkpatrick: So you’re not thinking like your typical CEO, that’s a given, which we love that. That’s one of the main reasons you’re sitting here instead of, I don’t know, some…

Bertolini: Every once in a while somebody graduates from Wayne State University after eight years and sneaks into the system.

Kirkpatrick: Which he did. He went to Wayne State.

Bertolini: Eight years. That’s how you know I was serious. My brother was a year behind me, he used to say, “Mark was a sophomore when I joined Wayne State and he was a sophomore when I graduated.” But I had fun.

Kirkpatrick: I think you made something out of yourself. So you now have been talking to leaders in Washington, not just about how to get Humana approved because I know that’s something you’re talking about, but about a whole lot of ideas you have about making the economic system different and we called this “Creating the next generation of capitalism.” You used that phrase when we were talking on the phone. What do you mean by creating the next generation of capitalism because I think a lot of people here would like to figure out what that means.

Bertolini: So there is this book by Thomas Piketty on capitalism in the 21st century.

Kirkpatrick: On inequality.

Bertolini: On inequality, income inequality. And you know, I grew up on the east side of Detroit, the city of Detroit here, and grew up in a family that worked hard. My parents both worked. My dad was a pattern maker in the auto industry. My mother was a nurse. We didn’t have insurance some of the time. As a family there were six of us in seven years, I was the oldest. And we lived in a 1,200 square foot house with one bathroom. So it was a very different life. So we grew up in that kind of environment and I said, “Now that I’m in charge of this big company, maybe I could start to have a conversation about doing it.” So one of the goals I had when I became CEO of the company was to reestablish the credibility of corporate leadership in the eyes of the American public.

Kirkpatrick: Oh, that’s all?

Bertolini: That’s all, just kind of easy.

Kirkpatrick: Come on, do something hard.

Bertolini: I’m working on it. And so we had, I got the copy—

Kirkpatrick: You have a long way to go on that, but keep working.

Bertolini: Yeah, I know, I’m working. And so I got a copy of the book for everybody for Christmas on my leadership team and said, “Read this.”

Kirkpatrick: Piketty’s book.

Bertolini: I got Piketty’s book.

Kirkpatrick: That’s not typical CEO reading.

Bertolini: And I said, “Why don’t you read this book because this is the alternative.”

Kirkpatrick: This was the radical book that really elevated the discussion about inequality on a global basis, really criticizing capitalism as a fundamentally unfair system, is more or less one of his—

Bertolini: Well, I think it’s a dated system. And so I think we have an opportunity to change it. And so I’m part of a group of CEOs that started with a handful of us, there’s now over 40 of us called Higher Ambition Leaders, that talk about how corporations can do good and also do well. And it’s not an original concept. Yvon Chouinard from Patagonia actually wrote a great book if you want to read it, it’s the bible I use, I have copies of it in my office I give to people, called “Let My People Go Surfing.” And it was about how he thought differently about the workplace and how he could make it a better place. And so we’ve begun this dialog about what are all the things we could do? And one of those was increasing the wage and personal disposable income of our employees.

Kirkpatrick: Something you could do, but how do we broaden that action?

Bertolini: Well, so Doug McMillon from Walmart was up on a stage a few months ago and they said, “You are raising your wage for Walmart, why did you do it?” And he said, “That guy!” and he pointed at me in the audience. He said, “I can’t get to $16.00 right away, but I’m working on it.” So I think we’re talking about it as groups of CEOs and saying, “How do we get at this issue?” Because why should we let capitalism reinvent itself? It won’t happen by itself. Why should we let income inequality grow? Why shouldn’t we do something about it and try and find a better way. So for our employee population and I think a lot of employee populations, bringing everybody along with the economic recovery is cheap compared to what could happen if we have continued disengagement among our workforce and the quality of our products and services.

Kirkpatrick: Now I know you have some specific ideas of policy changes you’d like to see. Could you just talk about a couple of those?

Bertolini: Sure, so we treat machinery from an accounting and an economic standpoint better than we treat people. So when I invest in computers or technology—and we invest a lot, over a billion dollars a year as a company—I get to depreciate that machine and that investment over time. And so its impact to my earnings is over a longer period of time. When I train a person, I have to expense all of it immediately. So when it comes to should I invest in a machine that could do that person’s job or should I invest in a person and make them better, make them happier, make them a better part of my system, get trust from them, the economic rationale would be that the machine’s cheaper to do. “Well, I can tell the machine what to do and the machine will do it.”

Kirkpatrick: That’s what the government policy makes you do now, in effect?

Bertolini: That’s what the financial accounting standards cause you to do. So why shouldn’t we look at capital investment in people the same way we do in machines and make us indifferent to that investment?

Kirkpatrick: That’s a wonderful way to look at it.

Bertolini: The second is that we have assets that when they go from day 365 to 366 and we sell them, they become more valuable because we get capital gains tax treatment. It goes from ordinary taxes to 20%. Why shouldn’t we have a sliding scale from 100% down to 0% over eight years so that we make longer-term investment and a longer-term view of how the market should cause us to invest over the long term? So we no longer give quarterly guidance as a company, we just stopped doing it. We said, “We’re not going to do them. We’re not going to talk about doing that.”

Kirkpatrick: Hate quarterlies.

Bertolini: I’ve asked shareholders who have been unhappy with our policies because they want higher dividends that maybe they should get out of our stock.

Kirkpatrick: And they did.

Bertolini: And they did.

Kirkpatrick: Yes, a lot of big investors got out of your stock, that’s a real endorsement.

Bertolini: So you can have a conversation that says, “Here’s what we stand for as a company, here’s why our people are important,” and I have to tell you, the people that applauded the loudest when we did this for our employees were our shareholders.

Kirkpatrick: The real smart shareholders understand.

Bertolini: And our stock’s up 38% since we did it.

Kirkpatrick: Now I know you’ve been talking to people in Washington, including Hillary Clinton, about these kinds of ideas. Are you advising her?

Bertolini: No, we’re advising a lot of people. So we’re trying to get people engaged in this conversation as the kind of dialog we should have in this election versus all the other bullshit that goes on on TV.

Kirkpatrick: People on both sides of the aisle.

Bertolini: Yes, right, from both sides.

Kirkpatrick: Well, there’s a lot of bullshit, but you’re talking to Republicans and Democrats?

Bertolini: I’m talking to both sides and saying, “Why don’t we talk about something that’s real for people and important? Why don’t we just have a debate about that? Let’s talk about income inequality and what we’re going to do about it. And let’s get rid of the rhetoric of pointing fingers and the incivility of blaming people and say, ‘How can we make this actually work?’ and put some real ideas on the table, like changes in accounting policy, changes in the way we treat people.” The minimum wage increase for us wouldn’t have mattered because we didn’t have anybody making less than $10.00 an hour. So how does that help by just telling everybody you’ve got to have $10.00 an hour? Why shouldn’t it be you should be paying what you can afford and you should take care of people?

Kirkpatrick: Well even when Doug McMillon says he can’t afford $16.00, you’ve got to ask why is that? what is it you’re prioritizing over that? But anyway, that’s another matter.

Bertolini: Well, I think he’s got a lot more people.

Kirkpatrick: He’s got a lot of people and he’s got a lot of shareholders and he’s got a lot of other issues. But the thing I like about you is you’ve been willing to take some hits just because it was the right thing to do. I mean, of course, you’re a much smaller company than Walmart so I’m not really trying to hammer them.

Bertolini: No, they’re a good company.

Kirkpatrick: But I love the way you have just sort of said, “Certain things are right and we’re going to do them differently.” I mean even the mindfulness at work. It’s really interesting. And we’ve got a little more time. I want to get audience in on some of this but let’s see if there’s any other major thing. You were talking—well, let’s see if anybody in the audience has some questions or comments. Anybody want to ask this amazing business leader a question or a comment. Please identify yourself.

DeHaven: Jill DeHaven [ph] from Sante Fe, New Mexico, not Detroit, sorry. Happy to be here though, this is great. Is there a size city that your community-based healthcare works in? Is there a scope of that or is any town anywhere open to this?

Kirkpatrick: That’s a great question.

Bertolini: That’s a great question. Any size will work as long as all the parties are willing. So it requires a conversation. And so we have three towns that we’re trying to do it in. I won’t pre-announce them yet but we will be launching—

Kirkpatrick: So you’ve picked the towns? These are the sort of test beds?

Bertolini: We’ve picked the towns. They’re test beds. We’re actually going to provide products for sick people. So we’re going to offer a diabetic health plan for people who are diabetics to try and get them engaged. And so we’re going to make these kinds of investments because we believe that if we actually go take actually care of people who are chronically ill better, we create more room in the system to make investments in wellness, because wellness is a 20-year journey that we never take because the payoff’s too far away. But if we can create more room in the current system and make that investment at a community level, because Santa Fe is going to be very different than midtown Manhattan.

Agadima: Hi my name is Alice Agadima [ph], I’m a junior here at Wayne State, double majoring in business marketing and PR and I actually have your healthcare insurance. So I just want to thank you because it’s really good and just to hear your views and your standpoint and your vision, just how you just continue to keep it flourishing and blooming over the years is just really great to know.

Bertolini: Thank you.

Kirkpatrick: Comments are fine just as well as questions, so thank you for that, especially when they’re comments like that.

Lililand: Mats Lililand [ph], entrepreneur, live in Boston. Great comments you were making there. I’m just curious when you, I was very interested in the depreciation of people versus machines. When you brought that up in D.C. what was the reaction? And somehow the lobbying side that I would completely agree with you are running various companies, but what about the accounting lobby, would they go against it? Are there any lobbying factors against something like this?

Kirkpatrick: Yes, what are the oppositions?

Bertolini: The opposition is very much a Washington thing. If you open up one part of the tax code, everybody will want to open up the rest of it. And so you can’t just tweak one thing without opening the whole thing up and nobody wants to take the whole thing on, which we need to. It’s labyrinthine, it doesn’t work well, it needs a lot of work and nobody’s been willing to take that on for a long, long time—’83 or ’84 I think was the last time we touched the tax code. And then there’s this whole issue of corporate tax versus personal tax and whether you do both of those at the same time and all these other sorts of things and so people get caught up in the process—sort of like the Vietnam war talks, should the table be round or square—and nothing gets really settled in getting into the work and actually putting frameworks together.

Kirkpatrick: One of the things about this odd political season we’re in is that certain things are getting on the table that have not been on the table in a long time. I think Bernie Sanders’s success is quite interesting and dovetails with some elements of what you’re talking about and a lot of things even Donald Trump is talking about have resonated because he’s putting things on the table that have not been in the dialog. And the other day when he for example said that CEO pay is obscene, that’s not something that you hear national political figures talking about. I’m curious, CEO pay from the standpoint of many non-CEOs is an issue that underscores some of this inequality thing. Now you’re a CEO that makes quite a bit of money, what do you think about this?

Bertolini: So my salary hasn’t increased for eight years. And I’ve made all of my money on the stock of the company. So when I took over, the stock was at $29.85 a share and today it’s at $118 a share.

Kirkpatrick: Now for that you should make some money.

Bertolini: So that’s where I make my—

Kirkpatrick: That’s what you get paid for.

Bertolini: That’s what I get paid for, but my salary has remained the same and hasn’t gone up. And when I took the job I said I didn’t want my salary to go up.

Kirkpatrick: What about the culture of CEO pay? Does it upset you?

Bertolini: I think the dialog is an important one. I think we need to talk about income inequality. I think the pay ratio thing is going to create all sorts of noise that’s not going to be meaningful to folks. I think if we took care of everybody it wouldn’t be as big an issue. But as the income inequality divide grows, you’re going to look at the people at the very top and say, “Well, why should they make that money? What did they do to deserve that?” And I think it gets villainized in a lot of ways and people don’t understand the structure of it and don’t care to.

Kirkpatrick: What about Sanders? I’m just curious what your perspective is on his astonishing progress. I mean, that somebody who is an avowed socialist should be getting crowds of 30,000 people coming to fill stadiums in the United States is a big change from the way it’s been for really since I was like 20 years old and even then it was like somebody else, not a national politician. What does that mean to you?

Bertolini: So I have a home in Vermont and I love Vermont. And sometimes I joke that Vermont is Cuba with snow. And the tax structure is very heavily weighted against people who are not residents. But when I go up there, the roads are clean, they’re paved, the place is beautiful, everybody’s happy and you know what, I’m willing to pay for that and I should be willing to pay for that. And so if we all are willing to pay for a better quality of life, then those that have it, should. And so I think his dialog is a reasonable one. I think when we get to the how do we actually make it happen is the harder part. Because no sooner do you have these great ideas, you get to the fact of okay, now I’ve got to take my really great idea and actually do it, that’s when you really learn how difficult it is.

Kirkpatrick: Just to stick on this politically one more, your group of 40 CEOs, are you talking to people like Jeb Bush too?

Bertolini: We’re talking to everybody. We had Al Gore in to talk about sustainable capitalism and how we think about the environment. And so we, Aetna last year started 119 urban farms in communities to eliminate food deserts. We dedicate, we now have a cookbook on how to create urban farms and we fund each one, including how to connect to farm-to-table, farm-to-market and farm-to-school so that it becomes sustainable after the first year. And these things are doing great.

Kirkpatrick: I’m just curious are you getting into vertical farms too, the indoor farms?

Bertolini: No, we’re doing just urban area, inner city, urban farms, extra land, just to try to eliminate food deserts.

Kirkpatrick: We have time for one more question or comment.

McBryan: Hi, Mike McBryan [ph] with Salesforce. Mark, welcome back to Detroit. I was so excited to see you on the Slow Roll.

Bertolini: That was great, the Slow Roll is the best party in town. If you have not done the Slow Roll, do it, that is a party.

Kirkpatrick: What is that for the people who are watching our Livestream?

Bertolini: The Slow Roll is a bike ride that started with a bunch of guys, like 100 people, one of my friends is one of the original 42 that started, got involved in it. Last night we had 4,000 bicycles.

Kirkpatrick: Last night?

Bertolini: Last night, that’s why I came here earlier.

McBryan: Every Monday night.

Bertolini: It was 15,000 bikes last Monday. Four thousand bikes and they roll through Detroit and they have the Detroit police department block off the roads. It’s a two-hour ride.

Kirkpatrick: I think the roads are all blocked off anyway.

Bertolini: Well, it’s construction season. But the Slow Roll is very cool.

McBryan: Well, we take a different route every Monday and it’s really cool. It’s a great way to see the city.

Bertolini: Were you there last night.

McBryan: Yes.

Bertolini: It’s a great ride.

McBryan: I’m just curious, you were born on the east side, same with me. You’re back in Detroit now, you spend some time here, obviously you have a lot of family. How do you think we’re doing in Detroit and what’s your perspective on how we’re doing and what do we need to do to get over the proverbial hump?

Bertolini: So I live in New York City and my daughter lives in Brooklyn and I go back and forth, Mari [ph] and I, my partner and I, go over and see her often. There’s two billboards now in Brooklyn that say, “Next stop on the L train, Detroit.” And so there is a huge transformation occurring of people that have gentrified Brooklyn and can no longer afford it coming here and starting to gentrify Detroit and you can see it. It is palpable. I was on my bike this morning riding around downtown and out to Belle Isle for a ride this morning and you can see the difference just up and down Jefferson Avenue, which used to be life-threatening at times to be able to go on that stretch of road. So I think it’s really cool what’s happening here and I’m excited by it. And you know, we’re going to be taking a look here to see what we can do in town to help as well as a company. It’s a great place. So it’s coming back.

Kirkpatrick: That’s a great way to end. Mark, thank you for coming.