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Podcast

Podcast

Harvard Business School Professors Bill Kerr and Joe Fuller talk to leaders grappling with the forces reshaping the nature of work.
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  • 27 Apr 2020
  • Managing the Future of Work

Covid-19 Dispatch: Kent Thiry

Kent Thiry is a veteran healthcare executive with decades of experience observing public health policy and administration at both federal and state levels. He shares his assessment of why the US was slow out of the blocks in responding to Covid-19. Looking at the virus’ likely effects on the healthcare market, he anticipates that the crisis will accelerate adoption of tele-medicine. More broadly, he foresees a shift of more manufacturing to domestic locations, a speed-up of automation, and prospects for a greener, lower-carbon economy in the recovery from the current slowdown.

Joe Fuller: Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. This episode is one of the series of special dispatches on the sweeping effects of Covid-19 on our economy, society, and the future of work. In addition to our regular podcast episodes, we will be bringing you shorter and more frequent interviews with business leaders, policy makers, and leading scholars on the coronavirus. Kent Thiry is the executive chairman of DaVita Kidney Care and its former CEO. DaVita is one of the largest kidney-care companies in the United States. A Harvard Business School alum, Kent has taken a keen interest in workforce development, both in his home state of Colorado and within the four walls of DaVita. Today Kent and I are going to focus on the Covid-19 pandemic. We will discuss the implications for the US health care system and some of the long-term impacts the learning that has taken place might have on the way we deliver health care in the future. So Kent, welcome to the Managing the Future of Work podcast.

 

Kent Thiry: Thank you very much, Joe.

 

Fuller: Kent, you have been intimately involved in the senior management of DaVita for, what now, over 20 years?

 

Thiry: It’s been just a little over 20 years.

 

Fuller: So you’ve been on the front line of health care over an incredibly dynamic period and, of course, none more interesting, and none more have the attention of the whole nation, than this Covid-19 crisis. Let’s start with that. What are your observations of that from the perspective as a longtime CEO and now chairman in the sector, and of some of the controversies that have come out about our level of preparedness and how much of this is just something that no one could have anticipated or versus something we should have been more out in front of?

 

Thiry: Well, I think on two levels, we don’t get a very good grade. First, strategically, we’ve known for some time—and we’ve had the SARS warm-up and some of the other warm-ups—we’ve known for some time that there was this potential. And so, strategically, one gets a little disappointed that not more had been put in place—not necessarily to prevent, because it’s so difficult, but to deal with. I’m willing to cut some pretty significant slack there, because people that work in the government have pretty big, a lot of agendas, a lot of things going on. And so that’s modestly disappointing. But it’s hard to run a country, and it’s hard to run a country to be highly anticipatory of stuff like that. I think more significant criticism is justified for our lack of preparation at both the federal and state level once the China experience began, because the extreme contagiousness was obvious from literally week one once China started disclosing. And when you have something that is that mobile, you know there’s non-trivial risk.

 

Fuller: Once it became apparent we are going to have a problem, how about the delivery system more generally?

 

Thiry: Yeah. I think, again, starting at the state level in this case, had there been more of an exclamation point put on this by the state and federal governments, then the delivery system would have been able to trigger a whole lot more change—I mean, everything from manufacturing capacity to resolving import-export issues to developing clinical protocols. And so I think most of my peers would have been highly responsive had there been any kind of alarm bell ringing.

 

Fuller: Talking to some other executives in different sectors, one thing that you do get a consistent message of is that a lot of our supply chains are really very balanced—very fine-tuned—and they just frankly aren’t able to flex very much in the face of non-linear growth of demand or changes in the pattern of demand. Is that also true here? And how much is that affecting our ability to respond?

 

Thiry: Yeah, it is quite interesting that so many supply chains became hyper-efficient and very much designed with the principles of low inventory, of scale, and technological focus in single buildings, single-country reliances. And so, it’s as if the old risk scenario work discipline was lost, because so many of these supply chains were built, basically, implicitly, on a premise that there wasn’t going to be an event [inaudible 00:05:27] that disrupts it. And so the level of concentration and vulnerability is historically unique—and not just on difficult things like ventilators, and not just on low-cost, labor-intensive things like masks or gowns, but even in other subtle ways, where you have sophisticated equipment that’s reliant on some very simple components. And because they’re simple, they’re low margin. And because they’re low margin, they’re scale sensitive. And you end up with a very small number of plants making a very large number of a simple component. But they operate near capacity, because that’s how to maximize profitability. But that also means there’s no surge capacity.

 

Fuller: Well, that type of an ultra-lean supply chain with attenuated delivery cycles and whatnot has certainly served a lot of industries very well. But their resilience in the face of unexpected results—whether it’s an earthquake or a tsunami or in this case a pandemic—has really been exposed. And it’s going to lead to some very interesting thinking, I think, about where sites are located and what’s required from a regulatory point of view in terms of being a valid supplier to federal programs going forward.

 

Thiry: Well, that’s totally true. And so it’s one thing—we can look at this by company and how some of the supply chains became quite narrow and vulnerable. But as a country, it’s even more dramatically true—the number of things that have essentially been 95 percent outsourced to other countries in a world of geopolitical uncertainty. And so, when you think about the government’s starting to stare at that, that will begin to affect the actual conversation between business and the government, because if it is legitimately lower cost for me to manufacture in country X in Asia, but the government doesn’t want me to because of national security reasons, well, how does one have that discussion? What incentives does the government offer? What mandates does the government make? What should be done just as a good citizen? This all gets pretty interesting as to how we wrestle those to actual conclusions.

 

Fuller: Yeah, especially when you think about MNCs [multinational corporations], which are really citizens of lots of countries, it’s been very, very interesting to watch the tension between some big US-headquartered multinationals saying, “Gee, we’ve got commitments to Canada, we’ve got commitments to Germany, we’ve got commitments to other national markets. And merely because we’re headquartered here, you shouldn’t treat our capacity as something that’s exclusively available to the US, irrespective of our desire to be of as much support and service as we can be.”

 

Thiry: Well, and I agree totally. And I think it’s true on about three different levels that, first, it actually hurts geopolitical relationships permanently, and we have dependencies going in the opposite direction. Second, it creates so much uncertainty for planning by US companies or international companies—if there’s no code of conduct of that nature, you end up having to make really a radically different set of decisions about where you put manufacturing, how you handle distribution. And so I worry that many of the conversations on this topic and many of the threats to insist that companies of a particular flag don’t export any product have been terribly shortsighted, not only for that company, not only for that industry, but literally for country-level planning.

 

Fuller: Well, it is going to broaden the definition of how the constituents you have to think about and what one is optimizing for. Let’s talk a little bit about DaVita. It’s obviously one of the leading renal-care companies in the world, runs dialysis centers all across the United States. Can you just tell us a little insight as to what you’ve had to do inside the company to continue to serve your patients, many of whom, of course, have some of the comorbidities that make them especially vulnerable to Covid?

 

Thiry: The good news for us at DaVita is that we had to make infection control a priority many years before other people, because most of our patients have multiple comorbid conditions and are highly vulnerable. And so, that for us has been a muscle that was built to unusual strength over the last 20 years. Having said that, at the same time because of that vulnerability, we had to take it to an even higher level, which is actually, if you were allowed in one of our centers right now, you’d be incredibly impressed by the discipline with which you see infection control managed from every point of view: procedural, technological, PPE, et cetera. And it certainly has done two things that are noteworthy. One, added to operating expenses. It’s going to be interesting for America to see how many businesses have significantly increased operating expenses or lowered customer yield because of distancing rules or anything else. But second, you’d be incredibly impressed, because you’d see 65,000 people showing up for work to touch patients who are ill and could be infected and doing so because they want to help take care of human beings.

 

Fuller: That makes good sense. Is that the type of expertise you’ve been able to pass on to other health care providers or points of care during the crisis?

 

Thiry: We have had some calls and, of course, our physicians not only practice at our clinics but also in hospitals and the rest. And so some of our process discipline, procedural discipline, has wonderfully been imitated by people who never had to go to DEFCON 4 before.

 

Fuller: Well, Kent, it’s a now a standard phrase to trot out whenever we have something like this going on, that you never want to waste a good crisis. And so, when we clearly have a crisis on our hands, what do you think of the types of responses we’re going to see in the health care system and beyond going forward as a consequence of this? I know from studying under our Managing the Future of Work project the response of employers to the ’08, ’09 financial crisis. And there are all sorts of long-term changes to things, like the mix of part-time workers or full-time workers, that started getting implemented, because under duress companies learned, got new insights, and made them part of their standard operating practice. Do you think we’re going to see interesting consequences of this that might actually be of long-term benefit to the health care system?

 

Thiry: Absolutely, and I’m going to even broaden that a little bit beyond the health care. But I’ll do four quick examples. One, the cause of telehealth medicine will be advanced 7 to 10 years because of this. Number two, more manufacturing will return to America than we’ve had in a couple of decades. Number three—I think this is a mixed blessing—the cause of automation will be accelerated. And number four, I think it’s an opportunity for instituting more green growth, because there’s always quite the rebound after these crises. And hopefully we’ll do it without having the proportionate—or even disproportionate—increase in carbon footprint and all the rest.

 

Fuller: Let’s focus on telehealth. I mean that’s a phrase that’s banded around—telemedicine, telehealth. And to me, it’s always come across as one of those—I can’t think of the right phrasing—but one of those things about, it’s always going to be an idea for the future, it’s always right around the corner, but it never seems to happen. When you think about telehealth and you think it’s going to expand as a consequence, what do you have in mind, specifically?

 

Thiry: Yeah. I think three things are going to drive big acceleration. One is customer reticence—we’ve literally had millions of people who would’ve resisted trying it, have been forced to and liked it. So, unique acceleration of customer experience, customer inclination, customer willingness. Number two, we’ve had thousands of doctors who would not give it any serious effort before, because of the capital investment or behavioral reasons or intrusions on their home, et cetera. And we’ve had hundreds of thousands of doctors now forced to do it, and a significant subset of them like it. And then the third one has to do with scale and technology. In the same way that video-conferencing capabilities are going to be advanced through this experience period, the same is going to happen in health care. So the quality of the technology, the ability to transmit images, the ability for people to take pictures at home and send them and have high acuity for the doctor on the other side, the ability for manufacturers to dramatically increase the scale with which they build some of these and, therefore, the same percentage of revenue equals a lot more R&D dollars. So customer reticence, physician reticence and technology/scale have all had barriers broken this month.

 

Fuller: It’s very interesting how many sectors have experienced that and how, in some ways, we’ve gone to this fast-forward stage—whether it’s anything from retailing, where obviously massive increases in volumes for the on-time retailing sector, to delivery services and fields like this. And the happy coincidence that it comes at a time when we’re about to really start seeing a significant launch of so-called 5G advanced wireless service might really be something that leads to much more widespread adoption, with the barriers taken down that you described, as well as this availability, hopefully, nationwide more quickly of an advanced technology that can handle all that image and high-reliability real-time communications.

 

Thiry: Yeah, I think it will move the cause of 5G forward in general, also the cause of broadband access in rural areas. Also the sense of technology equity those populations that don’t have the ability, even in cities, to participate or to be taken care of in this case. And so I think on all those dimensions, broadband/5G is going to be something that gets funded and supported from a policy point of view more than ever.

 

Fuller: Just as we wrap up, what should we be looking for in terms of empirical data, as opposed to pundits on television or political leaders trying to reassure us? What are the hard data we should be looking for so we can anticipate that this thing is beginning to get behind us and we can try to put the world back on its axis?

 

Thiry: Well, this is certainly turning out to be a data-intensive experience, as we grope for the right way to assess an asymptomatic person who may, in fact, be infected—and particularly when there’s still a shortage of tests. So, I just believe that—maybe this won’t be directly answering the question—but one of the big holes that slowed down our progress on figuring this out is the poorly developed mechanisms for interacting with people—on a random basis, on a sampling basis, on an experiment basis, on a focused geography basis—to get a better handle on the contagion dynamics. At what point does a person become contagious? What are the different degrees of exposure that are likely to lead? Our capability to get that early—the data on the early days of this—has really gotten in the way of developing behavioral protocols and clinical protocols to help deal with it, because we end up not finding out what the key events were or that a person is infected until too late.

 

Fuller: And have you looked at all at the antibody testing? And what can we expect on that?

 

Thiry: Yeah, I think my exposure has been way too superficial. What’s neat about this is that a good old-fashioned American ingenuity and entrepreneurialism is really enforced here. And the number of places that are looking at that area, as well as others—I mean there’s hundreds of groups across the country looking. So I’m very bullish on what we’re going to find out about antibodies quite quickly, much faster than many people think, because we’ve never had this many talented people and organizations and the amount of capital being focused on it.

 

Fuller: Well, it’s nice to end on a bit of an optimistic note, and it’s great to hear from someone with such extensive experience in the sector, and that you’re hopeful that we might actually see some long-term good out of all this.

 

Thiry: Yeah, I absolutely am a believer in that—not that I’m glad it happened, but they are going to be quite a few silver linings.

 

Fuller: Well, Kent, thanks a million for joining us on this episode of the Managing the Future of Work podcast, one of our Covid-focused episodes, and we look forward to walking me back to the Harvard Business School campus in the future world. We’re hoping to be opened up again soon.

 

Thiry: Yeah, that will be good, Joe, and thanks to you and the team for all your good work.

Fuller: Thank you for listening to this special episode of the Managing the Future of Work podcast. To find out more about our project on the future of work and for more information on the coronavirus’s impact, visit our website at hbs.edu/managing-the-future-of-work and sign up for our newsletter.

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