When Mark Bertolini took over as Aetna’s CEO in April 2011, shares of the health insurance company were trading just over $30. When the company was sold to CVS in 2017, the pharmacy giant paid more than $212 a share in a $69 billion acquisition.
One secret to this success: Bertolini began letting his employees take yoga and pet dogs during their lunch break.
“What we found … was that if we actually invest in people, they actually got better and health-care cost went down,” Bertolini, the former Aetna CEO and author of “Mission-Driven Leadership: My Journey as a Radical Capitalist,” said at CNBC’s Evolve event in New York City on Wednesday.
This transformation began when Bertolini noticed how far a focus on prevention rather than treating medical problems went.
An internal Aetna study found that employees in the top 20% of stress levels had $1,500 a year more in health-care costs.
To help fight this, Bertolini pitched a company yoga program. Although some upper-level management thought he was crazy, many of the employees responded positively.
“The company just went crazy from a cultural standpoint, where all the employees started coming in, ‘Can we do this? Can we do this? Can we have pet therapy?'” Bertolini said. “We had dogs, cats, guinea pigs and rabbits that would come into our building. People would line up at lunchtime to go pet the animals to reduce stress.”
Bertolini suffers from neuropathy in his arm and practices mindfulness and yoga. He has a pet, too.
“I have a dog. She is the best medicine for me every night, you know, a German Shepard, Keeva. I should have brought her. I should have brought her this morning to come along,” he said.
One of the factors Bertolini wanted to focus on most was ensuring employees got a sufficient amount of sleep every night. To encourage this, Aetna began paying $300 for employees who received 7.5 hours of sleep at night for 20 nights in a row. The company also doubled their tuition assistance program and increased their efforts to pay back student loans.
He said at the time of the CVS deal, the company was spending $120 million to $125 million a year more in employee expenses related to all those cultural changes.
While the holistic health alternatives were key, there also were serious socioeconomic factors at work in stress levels of employees, Bertolini said. Compensation, for one. Many employees were working two jobs. And most of the frontline employees were not being paid enough — 81% were single mothers, and 20% of their families were on food stamps and their children on Medicaid.
“I said, ‘We have to change this.,” Bertolini recalled.
Aetna raised wages from $12 to $16 for its frontline employees.
After the crash
After the financial crash, Aetna was “was crawling out of a deep hole. … We had to rethink the way we thought about our company,” Bertolini said.
The key variable the company came up with at the time was that for every 50 basis points changed in health-care costs, there was $480 million improvement in underwriting margin, and another $480 million for the client. So it developed this model and team of people that did nothing but look for ways to improve the quality of care, to improve the quality of life, to reduce another 50 basis points.
“Every year we went after 350 basis points,” he said. “And so in 2010, we added 8% operating margin. [Wall] street said we couldn’t keep it. We actually grew it to 9.1%, and that was by literally looking for ways to improve the quality of care and improve the quality of life to individuals and reduce the costs by virtually keeping them away from the medical-industrial complex.”
“What we did was, we turned around the organization culturally and said, ‘Oh, wow. We can take care of each other and it doesn’t hurt the company,” Bertolini said.
The impact of this cultural change was immediate. Health-care costs in the company went down 7.5% and engagement scores skyrocketed 1,200%.
It also created a new way to measure leadership. “That became the secret. That was the CEO metric, if you had to have a CEO metric. The CEO metric was, ‘Where do I find the next 50 basis points?'”
Bertolini credits this cultural shift for being one of the main reasons the company’s stock price soared more than 600% during his time as CEO. “The cultural energy that was created in the organization as a result was a power that you could never measure,” Bertolini said, but he added, “Our people were engaged with our customers, and we got a really high return on that.”