The Most Complex Ecosystem of All? — Bernard Tyson, CEO Kaiser Permanente

Systems Leadership — April 25, 2019

Bernard Tyson knows how to command a room.

In 16 years of teaching I have had the good fortune of seeing leaders from all over the world speak to our students. Sometimes their message and personalities resonate with the class — sometimes not. After 40 minutes teaching the Kaiser Permanente case and wrestling with the challenges of the United States’ healthcare market, our analysis seemed soft, uncertain and disjointed.

The students didn’t have a good solution for a way to address the opportunities and challenges of US healthcare.

I had no idea on what to do.

Jeff kept imploring all of us to realize that this will be a great business to be in because it is such a large part of our national economy.

And then Tyson came to the front of the room and held us all spellbound as he discussed the challenges of working with government, identified the incentives which currently exist which create many of the country’s problems, and spoke passionately about the human side of what he and 250,000 employees do every day.

Government Needs a Lot of Attention

A common challenge for a Systems Leader is knowing where to spend one’s time, and Tyson deals with this at an extreme level. Clearly, he needs to spend time with his employees, and in particular the doctors and nurses who provide healthcare services on the front lines. His facilities are a part of the communities in which they operate. He must be fluent in key partnerships (technological, business, etc.).

But like Steve Mollenkopf from Qualcomm, government plays an oversized role in the day-to-day activities of Kaiser Permanente. Government is both one of his company’s largest customers as well as the implementer of regulatory oversight — both at the federal and state levels. In the context of Tyson’s time, government is likely the biggest single influence on Kaiser Permanente’s business and patient experiences.

Tyson stressed the importance of needing to work with all sides of government — with every party at every level. Regardless of one’s opinion on how best to manage healthcare, Kaiser Permanente cannot be seen as partisan in any capacity, or the company’s ability to deliver its services would be extremely compromised and constrained. In a world where Silicon Valley companies, in particular, must increasingly manage and respond to both leaderships’ and employees’ opinions and goals, Tyson must always have a line of communication with every major player in government, regardless of political party or point of view. When managing a company with over $80B per year in revenues, Tyson must perform a delicate dance to ensure that his company can thrive in a world of extreme cost pressures, technology pressures, and political pressures. And while Tyson has some very clear opinions on what he sees as the key attributes for delivering effective healthcare (and what won’t), he must constantly act as a Systems Leader in understanding what forces are pushing and pulling others that will impact him and his company.

Tyson does not shy away from rendering insightful and strong opinions on the plusses and minuses of various ways to deliver healthcare, but he must do so without being caught on either side of a political battle.

It’s not an option his company can afford.

Understanding the Difference Between Affordability of Coverage and Affordability of Care

Tyson posited that two of the main drivers of the United States’ current healthcare situation is the result of a couple of key incentives that exist in the country.

First, he talked about the behaviors that are created in a Fee for Service environment. When providers (hospitals, doctors, etc.) are rewarded financially for performing medical tests, having an increased number of patient visits, etc., they are simply responding to the economic reward system that is in front of them. Tyson asserted that this economic model is what is driving up the cost of care in the US — people are actually behaving rationally by responding to the incentives that have been been put in front of them.

Additionally, Tyson discussed the difference the between the affordability of coverage vs. the affordability of care. The former is ensuring that people have access to coverage — “the front door to healthcare” in our country as he called it. He pointed out that over 93% of Americans have healthcare coverage today, but that is neither necessary nor sufficient to deliver great healthcare. The biggest challenge for the country is actually the affordability of care. If once a person enters the healthcare system his/her family has a $5,000 deductible, and most American families cannot afford this cost in addition to their insurance premiums, this creates a negative reinforcing circle where costs spiral out of control, people cannot to get the care they need and satisfaction with the whole systems erodes.

As Tyson noted, the insurance companies are simply responding to the incentives that they were given — they have created affordability of coverage. But if the country does not solve the affordability of care challenge (as driven largely by the Fee for Service model) the US runs the risk of being caught in an infinite loop of increasing costs from which it cannot escape.

Literally surrounded by giants

Inspire the Change

“In our brief time together, you might agree with me, you might disagree with me, but you will never forget me.”

As Tyson came to the front of the room he opened our discussion with the above quote. And as he began to talk about our analysis of the Kaiser Permanente case and healthcare writ large, you could hear a pin drop in the room.

A key responsibility for a Systems Leader is to inspire the change required to succeed, and listening to Tyson as he gave his opinion on the challenges of his business and industry, and what he would do to fix it, it was clear that we were not getting simple “marketing answers.” Rather, we heard some of the most insightful analysis of the opportunities and challenges facing his company, his personal experiences in leading Kaiser Permanente, and also the complications of solving the healthcare crisis for the country.

Tyson mentioned that healthcare is simultaneously both a noble calling and also a business — and he laid out that he understood both the ethical and moral responsibilities required of his company, as well as its obligation to balance that imperative while being a well-run company that can economically serve its customers and patients at the same time.

The ability to understand the changes impacting one’s industry (the forces, the technologies, etc.), the metrics required to align constituencies (e.g. Kaiser Permanente’s goal of measuring success in the healthy life years of its patients) and the ability to communicate in a clear and inspiring way are the hallmarks of a great Systems Leader.

And Tyson was that person last Thursday.