Mark Bertolini - Performance During Pain - [Invest Like the Best, EP.438]

Eighty years ago, this initiative began as soldiers returned from war. Concerns about wage inflation led to a policy: no wage increases to compete for talent, but benefits could be created. These benefits would be operating expenses, deductible for businesses and non-taxable for individuals. Health insurance was the first such benefit. With worries about a looming baby boom and the need for support, the Hill-Burton Act was established seven years later, in 1952. This act led to the construction of hospitals in every American community, ensuring facilities were available for the influx of babies. However, creating vast healthcare capacity and providing coverage without price sensitivity has, in essence, created a significant inflationary monster.

We need to eliminate employer-sponsored insurance and allow individuals to purchase their own. To facilitate this, we need a marketplace, which the ACA has created. This marketplace enables people to buy their own network and benefit plans for themselves and their families. Now, we must help them understand how to navigate this more effectively. It's similar to the shift from defined benefit to defined contribution in pensions. People asked, "What should I invest in? How do I invest?" This depends on age, risk profile, and future retirement needs. How do we hit that target? They often use financial advisors.

We currently cover about 2 million lives, all Affordable Care Act (ACA) members. These are individuals who require subsidized healthcare they otherwise couldn't afford. We're expanding into more markets, aiming to provide them with useful tools. For instance, we're launching a chatbot that helps people deeply understand their conditions through interactive conversations. On the backend, we've implemented nearly two dozen large language models, significantly reducing our operating costs. This has allowed us to lower prices. Our platform is digital-forward and cloud-native, the first new health insurance platform built since 1972.

On July 15, 2002, I made the horrible decision to put my son in hospice. I had to give up hope, accepting that he was no longer curable and we just needed to wait for him to die. After he entered his hospice room, I found a drug for him. They told me he would have to leave hospice if we used this drug. I thought, "Let's take the 'maybe living' route." He could go back to his room, and we'd work there. We discovered that in end-of-life hospice, where 60% of lifetime costs are spent, Medicare and most insurance rules require you to state you can no longer seek curative services and must give up hope, essentially saying you will die within a certain period. At ANA, we tried to change this. When I brought it up, they said I'd break the company. I argued we shouldn't require people to give up hope for curative services or declare they're dying soon. Instead, we should allow them to enter hospice early. It was amazing. Hospice enrollment jumped from 18% to 75%. We received letters praising how much better people's final days were, not waiting in a waiting room for a doctor. Costs were 75% lower in end-of-life care. Changing these rules shows how AI can help in such situations; some things just won't end well otherwise.

As CEO, I realized I was the problem. I asked my head of HR to identify our lowest-paid employees. I learned 81% were women, earning about $12 an hour. 20% of families received food stamps, and 25% of children were on Medicaid due to unaffordable dependent coverage. This was unacceptable for a now-profitable company. I decided we needed to raise their minimum wage. We started with 50-cent increments, but I pushed for $16 an hour, despite CFO concerns. When wages increased, benefits changed. As CEO, I paid 65% of my medical costs, while frontline employees paid 20%. We decided to cover all out-of-pocket healthcare costs for employees below 300% of the federal poverty level, provided they joined wellness programs. This program cost $75 million the first year. I announced it at a JPMorgan conference in 2015, without board permission, believing it was better to ask for forgiveness than permission. The initiative was met with applause and fostered a sense of mutual support. We expanded benefits, including doubling tuition assistance, paying up to $10,000 annually for student loans, and introducing pet therapy. The only limit was mini ponies; I drew the line at those. Our stock price soared from $39 to $80 a share. This empowered employees to care for our members, mirroring our care for them. My last five years at Aetna were joyful. We became a company on a mission, fundamentally transformed by this Eastern practice.

I was preparing to go to Switzerland to Dignitas, an assisted suicide organization. To qualify, I had to prove I had intractable, incurable pain. A doctor evaluated me and scheduled my death for February 15, 2023. I had wanted the 18th, but it was a Sunday. That was the day of my accident. The doctor performed tests and determined I didn't have intractable pain; I had neuroplastic pain, which they could fix. I thought, "Here we go again." I had spent seven days in the Hahnemann Hospital ICU, receiving 50 milligrams of ketamine an hour intravenously to reboot my system. It felt better for the first month, then the pain rushed back. I had worked with Mari to guide her through the process, and now I was ready to start this new treatment. Part of it involved cognitive behavioral therapy, requiring me to revisit my childhood. I was not well-treated as a child and constantly felt under threat. This constant threat assessment is detrimental with chronic pain because you're always anticipating pain, and then it spreads. They also explained that my 42 pain centers in my brain had wired together due to years of chronic pain, making any touch feel painful. Essentially, I was addicted to pain. They showed me MRIs of baseball hitters: the best hitters' visual, cognitive, and motor cortices light up instantaneously, with no latency. This allows them to see the ball in slow motion and hit well. They said I had a "baseball hitter's brain on pain"—no latency; if something touched my arm, I felt pain. They helped me understand this system. Then, they used transcranial magnetic stimulation, zapping my brain for 30 minutes to disconnect those pain centers. Finally, they put me in a virtual reality lab with a helmet to repattern my brain.

I operate on a servant leadership model. Every day, I reminded myself that 50,000 families at Aetna relied on me to be a good leader and to create future opportunities. For my first company, Sister Joyce DNO was on my board. She ran Providence Hospital in Detroit and was the ultimate chairwoman of the Ascension Health System, which she created from Daughters of Charity and Sisters of St. Joseph. I consulted her about our for-profit board, which was owned by management, doctors, and hospitals. I wanted to assure her about for-profit governance. She said, "Mark, we don't need to do this." When I asked why, she explained, "At the Daughters of Charity, we have one very important mission: No margin, no mission. If we don't make money, we can't continue to serve our people and extend our services." The only difference between a well-run for-profit and not-for-profit is that the for-profit pays taxes. I once said this at an investor conference, and a young lady in the audience, wearing a T-shirt that read "No margin, no mission," stood up and affirmed, "We believe this." At Oscar, when people ask about growth and profitability, I explain that we must make money to continue our mission and expand into more markets. The stock market's fluctuations often reflect bets on a company's competence. At Aetna, our 652% total shareholder return over eight years was only one-third related to earnings; two-thirds came from the price-earnings multiple, or the market's belief in our ability to consistently generate valued products and grow. This gain was largely driven by our employees. We created 2,000 new millionaires when we sold the company to CVS. It's about creating something valuable. I've always finished what I started and made it valuable. How it's perceived is up to others. As I often say, "What other people think of me is none of my business." Creating great companies means building great teams. I spend 60% of my time on people, doing great things, and solving big problems.