Why DaVita returned $250 million to the government during the COVID-19 pandemic

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Transcript

Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.

Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Alan Murray.

Michal Lev-Ram: And I’m Michal Lev-Ram.

Lev-Ram: Alan, I was kind of blown away realizing that kidney disease is such a widespread issue. So widespread, in fact, that there’s a Fortune 500 healthcare company that’s dedicated to supporting people who are living with this disease.

Murray: It’s a terrible disease, often caused by diabetes or high blood pressure, which obviously are prevalent in our society. And if your kidneys fail, you have to get your blood cleaned on a regular basis through dialysis. That’s what this company does. DaVita, the name is an Italian phrase for give life. It provides treatment to people who have kidney problems or whose kidneys have failed. And the CEO is Javier Rodriguez, who is our guest on this episode of Leadership Next.

Lev-Ram: And Javier is going to give us some specific stats on just how widespread kidney diseases but I’m going to throw one stat out there in the intro, just to give our listeners some context. So 30 million Americans live with some form of kidney disease. It’s a disease that is chronic and that needs chronic treatment, like you said, Alan.

Murray: To use big numbers, DaVita runs almost 3,000 outpatient dialysis centers across the country. And Javier talks about DaVita’s goal to transform from just a dialysis company which frankly, is usually dealing with the disease after it becomes irreversible, except by transplant. He’s trying to make DaVita into a holistic kidney care company, helping drive prevention strategies and also facilitating transplants. But kidney disease is not the only reason we invited Javier on to Leadership Next. One, he really is a unique leader. He was born in Mexico. He is very authentic in his style, and very thoughtful about where the healthcare industry is going and where it needs to go.

Lev-Ram: Totally, Alan. He was a panelist, by the way, at this year’s Brainstorm Health conference back in April, alongside Karen Lynch from CVS. And they spoke on a panel on the future of integrated health care. So a lot of good nuggets from that conversation as well. We were able to dig into some of this, dig deeper into his thoughts on the industry, in this Leadership Next conversation. Also talked about healthcare staffing shortage, and of course, you can’t have a conversation with a CEO today without talking about A.I.

Murray: Yeah. And we also talked about how Javier turned down a $650 million government aid bailout during COVID, which is pretty extraordinary. And also his story about a patient named Jack who took a shot of an eponymous liquor before every round of dialysis. So let’s get into it, Michal. Here’s our conversation with Javier Rodriguez of DaVita.

Lev-Ram: Javier, thanks so much for joining us and I’m going to start with a pretty basic question. You’re focused on supporting people who are affected by kidney disease. Before we jump into some of the specifics of that and what DaVita does, I just want to ask and better understand what is it about kidney disease in particular that an entire healthcare company is focused on it? And just share with us why it’s such a big problem and how big it is.

Javier Rodriguez: Thank you. I mean, the biggest part of the trick here is there’s over 30 million Americans that have a form of kidney disease, but roughly 600,000 or so have their kidneys fail. It is a chronic disease, meaning that you cannot survive without it being treated. So there’s different stages of kidney disease. So it’s like a continuum. Stage one through three, you are in what’s called CKD. And then when you get through stage five, your kidneys don’t work. And if your kidneys don’t work, what what that means is that you, in essence, can’t urinate and get rid of excess fluids and toxins in the body. So you need a constant process to actually cleanse your blood. And so therefore, while there is not a big population, there’s a high frequency of the exchange in order to keep your blood clean.

Murray: And these people come to you for the dialysis process on a regular basis. They’re repeat customers.

Rodriguez: Well, there’s three ways you can get your dialysis. You could get it either, A, in a clinic, B, you can actually do it at home—there’s different ways of doing it at home—and then C is you can be in the hospital. And the great majority of do it in a center in one of our clinics or other competitors that have clinics.

Murray: So the big question I have about that is, you know, and it gets to the issue of, of our healthcare system broadly, my guess is most of your patients come to you after they are already in deep trouble, and so you’re keeping them alive, which is a great service, but you’re not curing them. And so how do we get to a point where we’re actually addressing the causes of the disease? And also how are you incentivized, I mean, if they come to you, you make money. The more people who have kidney disease, the more people who come to you, the more money you make. How do you as a business person create a a system where the incentives are to actually cure people, not to treat them?

Rodriguez: You’re on to a huge question, of course, in healthcare. And you’re absolutely right, by time, we get the patients they’re in a pretty complex situation and we do our best to be the safety net. But our strategy is absolutely about moving up in the continuum and get to the patients before and identify them and really, really invest in them so that their continuum doesn’t continue. And so the hard part of this is that it’s very silent, kidney disease is very hard to detect. But if we can put you on a monitor and put our A.I. and our intellectual resources to work, we can start to say the difference between patient A and patient B is that one is actually going to progress. And then we can do interventions to slow down that progression. 

Murray:How do you get to them? 

Rodriguez: And that’s what we’re trying to do with, with the payers and with the government. We’re doing a lot of demonstration projects where we’re starting to say, Hey, can you give me the population x years in advance so that we, in essence, don’t get them once their kidneys failed, but rather when they have kidney disease. 

Murray: But the economic model, it’s a fee for service. If they come to your clinics, you make a lot of money. So once their kidneys have failed and they start coming to your clinics, you’re making money. How do you get the incentives in place for you to find them early on, and help them then so they don’t have to come to your clinics?

Rodriguez: Right. Well, one of the things we’ve done to try to get those incentives to be a lot more in line is we have a bundled treatment, one treatment for everything that’s involved in your session. So that’s taken a lot of the utilization and specialists out of it. And then number two is if you go to an insurance company and say, Hey, if you invest, you know, before they come to kidney disease, and so that’s called, you know, total cost management, if you will, of a life, you will be better off. And so if you think of anything that you do, that you consume, if you prevent it, if you take maintenance, it of course lasts longer. And so what we need now is the insurance companies to care about the life overall, and not about chapters and episodes of illness. And we’re working with a lot of payers and they’re really enthusiastic about solving it.

Lev-Ram: So this is a good segue. I wanted to ask you to share this story. I know you’ve shared it a few times about this one particular patient who had been coming for dialysis for, I think, 46 years, maybe. Was it in Iowa? Can you share the story and just, you know, maybe that’s emblematic of a bit of how people are using this.

Rodriguez: You know, we have all sorts of amazing stories. And this particular one that you talk about, a patient named Jack that when it came to my attention, I was a brand new CEO, and they said, Hey, Jack has been dialyzing for 40-plus years. I said, Oh my gosh, I’ve got to go meet this person. And basically,  one of the things that he did, it was a little in where you were going, Alan. The real secret sauce was that he took care of himself. He literally took a lot of ownership. His kidneys failed through an accident, no fault of his. And then he said, how can I make the best quality of life that I have? And then the other thing is he formed a family within our care team. I mean, people love Jack. The doctor knows everything about Jack, the nurses, the technicians. When I went to see him, they were so excited to show me all about Jack, tell me stories about him, etc. And he’s a character, fun full of life 80 plus year old that didn’t say, oh, dialysis is going to take over my life. But instead he said, I want to be an active participant and make the best of my life.

Lev-Ram: So and  I understand that he because he said his name is Jack, he also has a shot of Jack Daniels every day, and that apparently helps out.

Rodriguez: He said that was part of the trick. I kind of omitted that. He was a really, really funny guy. But you know, we have story after story. Next week we’re meeting with 600 nephrologists. And we have a patient speaker, his name is Marco, and he was so inspired by the care team, that he actually went on to be a nurse and he got a transplant and now he works for us. So this is where you see, you see that the humanity and the connection really matters. 

Murray: Which gets to another issue that is affecting society broadly but is really critical, I would imagine,  for your business, which is the the people shortage, thetalent shortage. Getting the nurses and the health care workers you need to … how many clinics do you have?

Rodriguez: We have over 2,500. 

Murray: So how many people do you have operating those 2,500 clinics?

Rodriguez: We have over 50,000 caregivers.

Murray: And with the unemployment rate down below 4%. 

Lev-Ram: And the push for automation, of course, all of these trends? 

Murray: Yeah. So how do you how do you deal with that? 

Rodriguez: You know, it’s a challenge for all of us. To say that it’s not a challenge would be, would be untrue. But, like any other CEO, what I want most is to be a differentiated place to work. I want you to have purpose. I want you to really belong. I want you to be connected to your work. And in order to do that, we cumulatively have to co-own our work environment. And so we have a lot of things to really do wrap-around so that you say, on average, if I could work at DaVita or I could work somewhere else, I choose DaVita. And so instead of technology being something you have to do, we want to make it as simple as possible so that it’s the right information in the right place. And so you have so many passionate caregivers that are losing their sparkle, their passion for life, because we’re making them do all of these tedious things. And so what we’re trying to do is literally say, can we get the heart of the caregiver to shine through? And so what can we do? And we have literally hundreds of eyes and ears to say how can we make your life better? And so we have all kinds of trainings and other things.

Murray: Is automation a part of that? 

Rodriguez: Automation is not so much part of it. We want to standardize a whole bunch of things that people don’t find value or fulfillment in. But on average, what we want is a human touch. Because if you or I or Michal wants to get dialysis, let me just tell you what you want is respect. You want empathy, you want caring, all of these words that a machine or standardization will not fulfill what you want.

[Music starts] 

Murray: Jason Girzadas, the CEO-elect of Deloitte US, is the sponsor of this podcast and joins me today. Welcome, Jason. 

Jason Girzadas: Thank you, Alan. It’s great to be here.

Murray: Jason, our ideas about work, where we work, when we work, how we work, all of those have continued to evolve since the pandemic. Is that a problem for business? Or is it an opportunity for business?

Girzadas: It’s a massive opportunity. Although I think the answer is less clear, it is a profound set of challenges, to be sure. But in the end, it’s an opportunity to create a workplace, particularly in the face of more long-term systemic talent-workforce constraints and limitations that brings out the best of a workforce so people can be their genuine self at work, can have heightened levels of productivity and feel supported in all that they do. But I don’t think the models are clear. And we’re seeing lots of experimentation, whether that’s around hybrid and what does it mean to actually co-locate and what degree of colocation matters. It’s also a function of how does technology get embedded into the workplace such that employees and workforces feel supported and enabled. Then also the cultural elements related to diversity, equity, inclusion and feeling supported to be your genuine self at work? It’s the combination, Alan, of all those factors that leading companies will innovate around and find novel ways to bring together, that will be highly desirous of leading talent and will be a differentiator in terms of businesses using their workplace and their work processes to win in new and different ways.

Murray: Jason, thanks for your perspective. And thanks for sponsoring Leadership Next.  

Girzadas: Thank you. 

[Music ends]  

Lev-Ram: So I want to ask you, just on the on the business side and some of the growth there, Berkshire Hathaway has an almost 40% stake in the company, in DaVita, and I think we’re just curious to hear how did this come about? Is Warren Buffett really concerned and sees the opportunity here in kidney care? And how has it evolved since their initial investment several years back?

Rodriguez: So yes, Berkshire owns over 40% of DaVita, and they made a certain kind of investment, and as you know, they are the long-term thinkers. And so the way that they accumulated to that position is DaVita kept buying back its share so their position grew. But if you are going to ask a CEO who is the best shareholder out there, I would tell you it’s Berkshire because, number one, their long term vision. Number two, they’re just very wise. And then number three, the way that they guide a CEO is incredibly thoughtful. So I view them as a true partner and a great owner.

Murray: It says a lot about the company that they’re invested in the stock. But you have other people out there, Jim Chanos, the short seller, has been critical of the company for gaming the Medicare system and all of that. What do you say to those critics?

Rodriguez: You know, look, at the end of the day, you never know what the incentives are, right? When someone goes on CNBC and says something and they’re shorting the stock, obviously, they want it, they’re playing game, they want to make money. The good news on that one is it didn’t pan out very well for him. And so over time, you just try to focus, do the right thing for the patient, do the right thing for the team. And we think that the results will follow.

Murray: You mentioned earlier your venture fund, can you talk more about the venture fund and how you use it? What are you trying to do with it? What change are you trying to drive?

Rodriguez: You know, what we want most of anything is to transform from a, literally, a dialysis company to a kidney care company. And in order to do that, at the center of it all has to be the patient. And so then you say, gosh, the patient has a lot of needs, from cardiovascular to diabetes care to, you know, you can go, on the list goes on. And so what we’re saying is, Hey, we need a venture group that can say, When are we a great customer? So please find someone that we can align with and build bridges from a technology perspective and other things. And when should we be a buyer and integrat it into our suite of offerings. But what that task of that entity is to do is to supplement and so for example, we made an investment in a transplant software company. And we said why? Well, our patients, the only way that they can get cured is to get a transplant. And if you get a transplant, it’s sort of quote unquote, the dream come true. Well, the transplant centers aren’t connected to the clinics. So we went out and we said, What’s the best software out there that connects to over a third of the transplant centers in the United States, and we acquired it. And what we want to do is make sure that our patients know where they are in the in the process, because it’s very hard and very tedious to know where you are in the process of a transplant.

Lev-Ram: Are there interesting innovations also on, just more strictly, on the dialysis front? We saw such an explosion in health tech, digital health investments, and new startups enter the space in the last few years, and I don’t feel like I’ve seen much on the dialysis side. I just I don’t know what innovations there are there. But are you seeing startups interested in the space?

Rodriguez: You know, the startups are unproven. They have a lot of hypotheses and we love their hypotheses, because we’re trying it as well, and we think that we are best positioned to actually perform in a significant way. But if you’re talking about dialysis, it’s one of the only services that has had incremental improvement overall. So that over 25 years, the life expectancy has actually changed more than in breast cancer, if you can believe that, through all the innovation. So through literally the service, our mortality has improved dramatically over a 25-year period. And the quality of life has improved. So we’re very excited. We literally count the days that we saved in the hospital from last year to this year—now we have a bunch of COVID noise in there—but in general, our hospitalization, our patient is spending like another 55,000 nights at home, they would have been in the hospital a year before that.

Lev-Ram: What’s the average amount of time that a patient spends on dialysis?

Rodriguez: Life expectancy, roughly six years and there’s variability, like Jack, forty-some odd years. And there’s some that are of course, come and it’s a very short stay, because they’re quite ill.

Murray: Changing the subject a little bit. 

Rodriguez: Yeah. 

Murray: I want to talk about your personal story. You were born in Mexico, where they knew how to correctly pronounce your name. 

[Laughter]

Murray: And you immigrated to the United States. Can you talk about how that experience affects the way you lead as a CEO? 

Rodriguez: Absolutely, it is at the core of who I am. Because when you live in Mexico, you’re exposed to a level of poverty that doesn’t exist in the U.S., although, of course, every country has its challenges. But in Mexico, it is really, you know, very visible in day-to-day life. We came to the States because my dad didn’t like the corruption and the ethics of the country, and it has impacted my opportunity. And sort of my dad said, you know, I’m going to give you a chance of a lifetime to live in the best country on earth and make something of it, and I do feel a big obligation because they sacrificed a lot. My dad and my mom came, they put all of the resources into a business that failed. 

Murray: How old were you? 

Rodriguez: I was 13. And so we went from having some resources to having no resources. And that was also very formative that you say, Okay, you do what you think to be right and sometimes you end up on the wrong side. But seeing the character of my parents just getting up the next day and working hard. And I just wanted to make that opportunity count.

Murray: And how did you end up at DaVita?

Rodriguez: You know, I was at business school, and I went to be a consultant for the summer. I thought it was going to be my calling. And I said, Oh, my gosh, I’m going to be the world’s worst consultant. And so then I changed, I pivoted, and I met some people in the recruiting process, and they were just so happy. And I said, you know, Why are you so happy? And they said, My work really matters. And then that’s, you know, I was too young at the time, I just wanted to get out of my student debt. My wife was pregnant. I just wanted to make a living for ourselves. And then all of a sudden, you say, Gosh, I got to think about, how’s my energy going to be day to day and how am I going to be my best self? And, and I felt the distinct difference between professional services financial of nature and healthcare. So it just kind of caught my attention.

Murray: Fascinating.

Lev-Ram: Continuing on on your leadership journey. Your predecessor was in the role for 20 years. What kind of shoes does that feel like stepping into? And you’ve been with a company for a long time as well.

Rodriguez: Yes. So I was by his side. So I started actually… 

Murray: Waiting for him to go and create the opportunity for you? 

Rodriguez: I was a successor for a little longer than expected. How’s that? But look, it creates a bit of self doubt, right? When you when you come to these podcasts and you talk about character, I think one of the things that you’ve done such a nice job of and the ones that I’ve heard is, you see that there wasn’t a linear path to the top. There’s insecurities, there’s doubts, all the human emotions that go through through this process, I had all of those. And when you get the calling after someone that was a big known name, you wonder, are you going to be able to rise to the position and fill in the shoes, if you will. And one of the things I found is the organization has been incredible. I became CEO and the pandemic hit. And so there was no, what’s your voice? What’s this? You just buckle down and say, we’re going to do what’s right. Because as opposed to everybody else that had months to get used to remote working and this and the other, we had to take care of people the next day. The next day or they will die. And so to mobilize over 50,000 people around the globe in 12 countries to go to work when they’re scared, but they do it for their neighbor that needs them. It really, really brought the heart of the company to life. And frankly, my voice became just authentic, imperfect, less articulate, etc. but people forgave it because they saw that my heart was in the right place. 

Lev-Ram: So I guess, natural next question sort of here, this might be an oversimplification of what happened, but my understanding is that you turned down government money that was part of the pandemic relief package, and we don’t see companies turn down free money, quote unquote, very often. So can you explain a little bit about what actually went on there and why you made that decision?

Rodriguez: You know, business leaders right now talk about ESG all the time, and what’s right and what’s in vogue, and what what should you say as a CEO. When that money came to us, which was over $250 million, we sat down and said, What is the spirit of that money? And the government literally said, the health care system is going to melt down? We have hospitals, rural hospitals, and people that need care and so we’re going to inject a safety net. And to me, it was, We do not need a safety net because we’ve been preparing and we’re a strong company, and this money should go to someone that needs it. I really believe that the intent was to save the country from panic and chaos. And if you didn’t need the money, to me and to our board and to our shareholders. The board conversation was this was like getting food stamps and you have a pantry. And it just didn’t feel right to use the food stamps. So we said someone else will need them. And oh, by the way, it wasn’t an easy decision because $250 million is $250 million. And then as the pandemic dragged on and our costs and inflation came, a lot of people scrutinize the decision and said maybe you should have kept it. And I’m not debating philosophically whether they’re right or we’re right. But at the end of the day, it felt consistent to our values.

Murray: Wow, I’ve got to tell you I mean, I, there are a lot of companies out there that are proud of their efforts to do good in the world. But if you’re talking about $250 million on the table, and they choose not to take it, and not because they’re a bunch of strings attached, but because they don’t think it’s right for them to take it. I mean, it’s kind of like companies that moved to Ireland because they can or to the Bahamas or whatever, because they can escape tax liability. 

Rodriguez: Right. 

Murray: What you did is not as common as it should be in business. Why not?

Rodriguez: You know, I won’t speak for others. What I can tell you is what I said at the beginning, we want to be a different company not to be different. We want our spirit and our ethics and our lifestyle to be reflected in the enterprise that we work in. And at that time it felt like a very, very sensitive time in humankind, literally in our history. Now, we’re all past it and we can all talk about and maybe people are like, what an idiot, he should have taken the $250 million, etc. But at the time, it felt like, Boy, we, we are all coming together as humanity here, and we should all pitch in. 

Murray: Did the board push back? 

Rodriguez: The board had an incredible dialogue, and was very, very proud to make the decision because the board had to make the decision and endorse it.

Lev-Ram: I’m still kind of blown away by this. Pandemic aside, I mean, we talked about the the workforce challenges. What else do you see on the horizon that you’re concerned about? Or excited about when it comes to the health care industry? And I know, that’s, there’s probably no end to the answers there. But is there a particular challenge that you see, that you think will impact your business specifically, that’s coming up?

Rodriguez: Well, there’s a lot of things on the horizon both, let’s call them scary and exciting all at once. I think you’ve spoken to other podcasts and or in your healthcare conference, we spoke of the wide range that healthcare has to deal with right. On the one hand, we have glimmers of what the future looks like and how exciting it is and how intuitive it is. And on the other hand, you have realities of boy, I can’t even get a doctor’s appointment without waiting six weeks type of thing. So we are in a bit of an intersection point. I think the nice part or the good part of the pandemic for the healthcare segment is everybody’s paying attention now. Everybody wants a solution. Everybody was living their life and saying, I’ll worry when I get sick. All sudden is like, Wait, maybe we should be paying more attention to it now. Because we need this healthcare system to work. It’s one of the only things we’re all going to use. So all eyes are on us as a community. And we have to solve for a lot of things now.

Murray: Yeah, well, so let me ask you about that. I think we’re probably about out of time so this may be the last question. And apologies if it feels like a ridiculous question to you. But if you could change one thing, as you say, we’ve got a lot of problems in our healthcare system. We have a lot of good things going on but we have a lot of problems. If you could change one thing, if there were, were, there’s no silver bullet, but at least the kind of shiny  10 ullet something that would help?

Rodriguez: I’d be taller and more handsome. Oh, you’re talking about healthcare? Okay. No, look, there’s so many things. But if I had to do one thing is that you had your personal health record on your phone and you would never have to fill out another darn form that says that you waive this and what are you allergic to? And what did your mom have and what your dad have and blah, blah, blah. And all of those forms, not only are they tedious and inefficient, they’re literally a problem for all our health connectivity. So that we could say Boy, this is Alan and this is what we know about his parents and this is what happened to his brother and sister and da da da da da all in one click

Murray: And all the people caring for you can have access to it if you give it to them.

Rodriguez: Right and you don’t see a contraindications of medications, etc., that when you go to one doctor they don’t know what the other doctors did. 

Murray: It’s a great piece of advice.

Lev-Ram: Amen to that. Thank you so much, Javier. I appreciate you coming on and talking to us. 

Rodriguez: Thank you.

Murray: Leadership Next is edited and produced by Alexis Haut. Our theme is by Jason Snell. Our executive producer is Megan Arnold. Leadership Next is a product of Fortune Media.

Leadership Next episodes are produced by Fortune‘s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.