The United States has gone through a wrenching debate over the reform of health care. The new bill cut to the essence of the United States as a republic and the sole of its citizens. This has been high stakes change management. What can the business world learn from this as a case study?
I have been in the change management business for more than 30 years. I have worked with large and small companies all over the world to help them transform their organizations. During my work I have settled on some fairly basic, but clear principles of change management. For example, you’d better choose the right thing to work on and match that with the right leadership style. Without such basics resistance will win.
Knowing this I thought it would be interesting to review the health care debate that has consumed the United States over the past year. How closely did it follow good principles of change management? How did resistance influence it? How did leaders make their marks?
The following article is meant to be apolitical. My interest is in management, not politics.
There is an alternative to Private Insurance
The first step in implementing change is for the leader to articulate a vision – what will the new world look like? President Obama’s vision a year ago had tenets such as “single payer and public option”. This is not idealism; it is real life practice that is the norm in most western democracies. It is an alternative; but what is it and why was it attractive? The Canadian system is worth some exploration.
I am Canadian. Yes, I was naturalized as an American citizen in 2000; however, my experiences growing up are rooted in Canada – not the least of which is my experience with health care.
I came to the US in 1995. One of my first meetings with my new employer was an all employee event about the changes that were being made to our companies health plan. We were about to be HMO’d. We were entering “managed health care” to control costs. I was totally befuddled by the rhetoric around co-pays and doctor’s networks – not to mention the forms that I had to fill out.
I asked the meeting facilitator a question that prompted her to ask: “well in Canada what do you do?” My naive answer was that “in Canada when you get sick you go to the doctor.”
That’s still the case. Everyone in Canada is covered through universal health care. Yes, it’s paid through taxes – but you have to pay somehow. In the US we pay through insurance premiums that rise faster than the Canadian health taxes. And even with this higher cost Americans get poorer outcomes at the system level.
That’s right; Canada wins the value for money equation at the system level. By now we all know the big picture metrics. There is lots of room for debate, but the strategic picture comparing the United States to Canada looks something like this:
. Spending as a % of GDP 15% 10%
. Spending per capita $6700 $3700
. Life expectancy – age 78.5 80.5
. Very satisfied 25% 57%
. Very dissatisfied 44% 17%
Why is there such a gap? Well, Canada saves resources through all steps in the health care value chain. Here are two primary places:
Administration: Canada has a single payer system. That means that when you go to the doctor the bill goes directly to the government – usually one of the 10 provincial governments. As a result you don’t need complex and layered administrative structures to check insurance plans, do billings, and run down receivables.
I think this is the biggest source of saving. This administrative activity in the US constitutes about 1/3rd of the cost of health care. In Canada it’s a little more than 1/10th. In other words, the single payer approach would save the US about 20+ percentage points on cost. That adds up when you’re talking about trillions of dollars.
A consequence of this public system is that doctors may file tax returns as “independent businesses”; however, the reality is that they work for the government. Most of their income comes from the government as set through fee schedules that are determined in collaboration with medical advisors. It is too complex to compare doctor salaries in the two countries, but American doctors expect to earn more than their Canadian colleagues.
Treatment: In Canada there are fewer medical resources than in the US – people, equipment, supplies, facilities. This means priorities are required in the allocation of these scarce resources. In the US, where there has always been a luxury of supply, this idea of “allocation” is interpreted as “rationing”.
I’ve heard lots of urban legends about Canadians not getting the treatment they need or coming to the US to buy it. I’m sure that some of these stories can be documented, but they don’t fit the experiences of my family and friends.
Sure I had a friend that was jumped twice on the priority list as he waited for a heart bypass – he’d been on the list for months and was even in the hall outside the OR when he was wheeled back to his room. Someone one the verge of death took his spot. He had the operation the next day and after 20 years he’s still doing just fine.
On the other hand, my mother was in severe need of a hip replacement. Within three weeks she had gone through all of the consultations and she had her operation. She probably hopped over several people in the line.
These allocation (rationing) decisions are made between doctors and patients in consideration of available resources and the needs of other patients. Sure, the government keeps a handle on this through its fiscal management; however, it does not make medical decisions.
America was looking for a new model for health care. Canada provides an alternative, but Americans didn’t choose it. They came up with a framework that is uniquely American; a solution that does not look like the starting vision that included single payer and a public option. Erosion of the vision is a common result in the change business. What happened?
I tracked the ups and downs of the debate by watching advocates from the right like Glen Beck and Bill O’Reily and their progressive counterparts like Keith Obermann and Rachel Maddow. What a circus. If you did a content “compare and contrast” analysis of their television programs over the last year you would think that the left and right were on different planets. Rarely did they deal with the same issues, and when they did their perspectives were 180 degrees apart.
The great thing about “talking head cable TV” is that it let us see change management at work. As a case study it validated some of my major ideas, such as:
. Change depends on organizational DNA
. Change is either continuous or discontinuous change
. Change requires a complementary leadership style
Change Depends on Organizational DNA
Most changes fail. We’ve been schooled to believe that failure is a function of not having a compelling business reason to change. The idea is that if you’re on a burning platform, you will jump. You will change because the status quo is not an option.
Well, I can buy into this to a point, but not all of the way. We all know that the trend line on health care spending cannot be sustained. Forecasts show that by 2020 nearly 20% of GDP will go to the health sector. That’s one dollar in five. Illogical projections even show that by 2080 we’ll spend 95% of GDP on health. If we don’t bend the cost curve we could become a nation of people solely consumed by providing health services to each other.
If all you need is a compelling reason to change then the US Congress would have quickly passed a bill with the cost savings implied by single payer and public option provisions. However, radical cost containment did not carry the day – even though there is a national consensus that costs must be controlled.
Well there’s something else going on here – and it’s something that most change leaders wish to ignore. Change is doomed to fail if you’re working on the wrong thing. Change will fail if you’re swimming against the organization’s DNA, its history, legacy, myths and legends of the past. Often change leaders ignore this because it’s messy business to change the past before moving forward. Leaders just want to get to their vision. The President’s starting point of a “single payer system/public option” is a classic example of swimming against organizational DNA.
This whole health care debate cut to the core of what Americans believe their country to be. The United States is not Canada. Just listen to the Declaration of Independence that calls for “…life, liberty, and the pursuit of happiness.” The first Canadian constitution (the British North America Act) called for “…peace, order, and good government”. The difference is not accidental. It goes to the heart of how people see themselves and their relationship to government.
The British Parliamentary system is rooted in the Magna Carta that started the process of the citizenry wresting power away from the entitled Sovereign. Ultimately the people gained representative government to guide the sovereign nation; however, the idea of sovereignty – the transcendent, ongoing existence of nationhood remained with the Sovereign. Governments come and go, but the nation remains – and the symbol of that continuation is the Sovereign – the Queen in England and her representative in Canada, the Governor General.
The Sovereign symbol is not a person in the United States. The innovation and miracle of the American government system is that it found sovereignty without needing a Sovereign. How? It put sovereignty in “the People.” The relationship of the “citizen subject” with their government was literally turned on its head.
The DNA of the United States is fiercely individualistic. What’s good for the individual precedes that of the collective body. This is followed by the natural selection of capitalism as the underlying economic system. Individualism and capitalism become allies in the creation of wealth. The accepted role of government becomes one of facilitating these two powerful ideas. But what happens when these two ideas don’t resolve issues of social injustice such as: slavery, lack of civil rights, and barriers to health care? When the government intervenes it does so at its own peril.
The Democrat’s health care reform ran right up against the genetics of the American republic. The American DNA says that private health insurance has a right to make profits; and that individuals without health care have all the opportunity needed to pull themselves up and earn the money required to provide for themselves and their families. It’s a classic bipolarity of privilege versus entitlement. The lines were drawn before the debate began.
Choose Between Continuous or Discontinuous Change
The Executive branch had a vision for health care reform that was outside of the box. It could see a future state that was not a straight-line projection from the current state. It saw a world where health insurance companies had to make room for an active government.
Although the Executive was swimming up stream (working on the wrong things according to DNA analysis) it didn’t have to lose its vision of a new tomorrow. But, it needed to implement the change unilaterally – something that is as unnatural for President’s as it is for most CEO’s.
Change comes in two forms: Continuous and Discontinuous. Continuous change is the idea of incrementalism. It’s the idea of clearly knowing who you are and then pushing the edges of the envelope to be better. The vast majority of change in government, business, and personal life is continuous. You set a goal and define a migration path to implement it.
Discontinuous change is different. It’s a break with the past. Something is happening in the external world that cannot be combated by current state experiences and competencies. A rupture is required to get to the new place.
Usually when organizations die it’s because they did not adequately manage discontinuous change. Polaroid couldn’t handle the opportunity presented by digital photography. The legacy ATT&T now exists in name only. We all have to do taxes but nothing links the tools that we use to do them: pencil, adding machine, calculator, computer, and Turbo Tax. If you were making pencils 60 years ago you had to make a discontinuous change to get into the business of making adding machines. This had to be done with callous action and foresight to separate from the past. One foot in front of the other would not get the job done.
Why does it have to be callous; some might say tyrannical? It’s because everything goes against the secure worlds that people have built for themselves. There is not a step-by-step guide to get to the promised-land. The current world must either be broken or left behind. This takes a conviction that is counter to our culture of consensus building and participation.
The President’s vision of health care was discontinuous, yet he treated it as continuous change. The Democrat’s interpretation of the external environment was that a single payer, public option plan was needed to provide universal health care that would bend the spending curve. This could not be accomplished through bipartisan consensus building.
Change Requires a Complementary Leadership Style
To re-cap, a single payer – public option health system goes against America’s history. Incremental implementation of this idea was doomed to fail. Success could only have come from strong, directive leadership.
Democrats had to believe in their health care vision and their electoral mandate to make changes. From the beginning they had to use their majorities to pass a bill that reflected their vision – even though the vision may have been imperfect. Then they had to go about the messy job of breaking the old if they wanted to implement the new. This would have caused no end of “ramming it down our throats” controversy; but it would have produced a platform for fundamental change rather than incremental.
This didn’t happen. The ideals and expectations for consensus building and bipartisanship opened the doors to incrementalism and its subtle goal – the provision of time and space to release the forces of resistance. These same forces are always at play during organizational change where we hear: the change is too big; we’re doing this at the wrong time; why don’t we just start over.
Even the tactics are the same in the corporate world: misinformation leading to disinformation; throwing everything possible at the wall to see what sticks; communicating not for clarity, but to cause doubt.
These resistance strategies and tactics peaked at the Health Care Summit where the President believed he could straighten the record; others saw that he wasn’t listening. This rancor continued as the debate got back to Congress where the leadership used parliamentary rules to move the legislation forward – the opposition saw this as tyrannical, devious, and malicious.
In the end the bill that was passed into law satisfied no one. It’s seen as the best that the parliamentary system could produce. Not one Republican voted for it; and both the left and right on the Democratic side held the passage hostage as long as they could.
I’ve seen this movie dozens of times in the corporate world. A new CEO rides into town with a change mandate from the Board. Resistance is cloaked in the language of continuous, incremental change; the leadership style that starts as consensus building morphs into autocracy.
Most changes fail – even when the sponsors don’t admit it. This result comes from not understanding the nature of change and the leadership style required to implement change.
The US health care debate highlighted principles that CEO’s should take to heart.
. Know your organization’s DNA. Resistance is directly related to how hard you swim against the organization’s heritage.
. Know the type of change you seek – continuous means incremental, discontinuous means breaking with the past.
. Know your leadership style. Don’t attempt discontinuous change if you are a consensus builder.
In our culture it is unnatural for leaders to adopt a harsh style. Everyone wants to be loved. That implies that most changes will be incremental. CEO’s should know this before they set their visions for change and underlying migration paths.