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I N T E R V I E W
D O L L E N S & I G L E H A R T
23 June 2005
Grasping The Role Of Technology:
A Conversation With Ron Dollens
The CEO of a leading med tech firm promotes technologies
but also recognizes the cost conundrum
of the economy’s most robust sector.
By John K. Iglehart
PROLOGUE: The term “medical technology” encompasses a vast array of products that are employed to diagnose, monitor, or treat virtually every disease or condition. According to AdvaMed, the industry association that advocates on behalf of some 6,000 medical technology companies, the best is yet to come. Future innovations, it says, will reflect several broad trends: miniaturization of medical devices, which will allow for more targeted delivery of therapies; replacement organs and tissue engineering advances, which will provide radical new options for addressing many serious diseases; molecular and gene-based diagnostics, which will detect diseases earlier in their progression; and innovations in health information technology, which will allow critical medical data to be processed and transmitted over great distances.
The flip side of this cornucopia of technology is its cost. Many economists assert that the enhanced capabilities of medicine most likely account for the relentless rise of health care spending. Generally, they reach this conclusion indirectly by asserting that commonly cited causes of increased spending (such as the aging of the population, the spread of health insurance, physician-induced demand for care, high administrative costs, or care of the terminally ill), as Harvard economist Joe Newhouse wrote in Health Affairs (“An Iconoclastic View of Health Cost Containment,” Supplement 1993), “do not account for very much of the increase if the capabilities of medicine (medical technology in the broad sense) had remained constant.”
In this interview with founding editor John Iglehart, Ronald W. Dollens, chief executive officer of the Guidant Corporation, discusses both dimensions of medical technology: its rapid progress and the challenges that lie ahead for a health care system whose growth shows no sign of slowing. Dollens has been Guidant’s only CEO since it was created in 1994 after being spun off by Eli Lilly. He is a strong advocate of the medical technology industry, but he also recognizes, as the employer of a workforce of 12,000, that private companies and governments will not be able to afford the current health cost spiral forever.
ABSTRACT: In an interview with Health Affairs founding editor John Iglehart, Ron Dollens outlines the differences between drug and device companies in the current U.S. health care marketplace. He discusses at length the recent Medicare coverage decision regarding implantable cardiac defibrillators, one of his company’s major innovations. He sees a growing trend for cost-effectiveness to be considered along with a device’s safety and efficacy, and he finds this to be appropriate in an environment characterized by constrained resources. He believes that the United States must find a solution to the problem of uninsurance, if our health care system is to remain competitive in a global economy.
EDITOR’S NOTE: The marvels of medical innovation have produced miracles as measured in improved quality of life and greater longevity, but products that involve interventional treatments also pose risks to patients. On 24 May 2005, one month after the interview that follows was conducted (25 April), the New York Times reported that an implantable cardiac defibrillator (ICD) sold by the Guidant Corporation had failed to operate properly while a twenty-one-year-old college student who had the device implanted in his chest was suffering cardiac arrest. The student later died. Following this Times report, John Iglehart posed an additional question to Ronald Dollens, chief executive officer of Guidant, regarding this development. Dollens offered a brief response, which is incorporated in this interview (page W5-300).
On 17 June 2005 the Guidant Corporation issued a press release, which began: “Guidant Corporation…said today it is voluntarily advising physicians about important safety information regarding certain devices [three ICD models]. Guidant has apprised FDA [the U.S. Food and Drug Administration] of these actions, and FDA has indicated that it will classify them as recalls.” (The Associated Press, on 17 June, quoted an FDA spokesman as saying: “This is a voluntary recall. We’re in complete agreement that they need to do that.”) In its press release, Guidant said that it had received and confirmed forty-five reports of failure of its ICDs from approximately 63,000 devices implanted worldwide. Approximately 50,000 of the devices remain in service, including some 38,600 in the United States.
In the press release, Dollens said: “Patient safety is paramount and our highest priority. As a leading manufacturer of lifesaving technology, Guidant takes seriously its responsibility to create the most reliable products and services, enhance patient outcomes and limit adverse events to patients.” Dollens added: “Guidant is committed to establishing industry guidelines and processes to determine when, how and under what circumstances adverse events should be communicated to doctors and patients. Guidant hopes to work with FDA, other regulatory agencies and physicians to convene a panel to assist the medical device industry in establishing clear guidelines.” (Uniform standards do not now exist that stipulate when or if a device manufacturer must notify physicians or patients when one of its devices malfunctions.)
Background On Guidant
John Iglehart: Guidant was incorporated in 1994 and has grown to annual revenues of $3.7 billion with some 12,000 employees. Guidant was created as a consequence of a decision by Eli Lilly to spin off its medical device subsidiary. At the time you started Guidant, you were an executive of Eli Lilly. What opportunity did you see in the future of medical devices that Eli Lilly apparently did not, which persuaded you to start Guidant?
Ron Dollens: There are really two perspectives here—Lilly’s perspective and that of Guidant. Lilly had a new chief executive [Randall Tobias] at the time, and he asked the appropriate question: What business is Lilly in, and what is going to be important to the operation and to shareholders going forward? As Lilly reflected on that, its executives concluded that it was, first and foremost, a pharmaceutical company, and anything that contributed to that should be retained, because that was going to be in the best interests of shareholders. One of the most important elements of being good at that business, at least at that point in time, was new product flow, which comes down to biology and chemistry. But they were thinking about continuing to work in medical device technology. On the surface, pharmaceuticals and med tech might seem not too dissimilar—they are both about bringing products forward in the most timely manner. But what’s most important for a med tech company isn’t biology and chemistry—it’s engineering and software. So when you look at it more closely, the two have less similarity than one would think.
Also, the time frames are hugely different. In the pharmaceutical business, you’re thinking about product development over ten years or more. On the medical technology side, the time frame is three years at the most, but at any point in time, 50–60 percent of our sales are products that are less than twelve months old. A pharmaceutical company would ask, How often do we regenerate 50–60 percent of our sales? The answer would be five to seven years. And so there are very different orientations.
Ultimately, it was Lilly’s decision. They were the party best suited to evaluating these two entities, and they went through some novel financial transactions to make that work for their shareholders.
Source Of Innovation
Iglehart: Guidant has been at the forefront of intensive innovation in cardiovascular products, particularly the implantable cardiac defibrillators [ICDs]. On balance, where does the innovation come from? Guidant’s own research and development [R&D]? Mom-and-Pop innovators? Inventive physicians? Or Ron Dollens’ leadership?
Dollens: Well, it comes from multiple sources, the least of which is the latter. This industry is very dependent on early-stage investigations, risk capital being invested, venture capital being invested, and early ideas, mostly from the clinical community. That’s where hundreds of companies have been started. This diversity has huge policy implications. What’s interesting is that none of those companies really planned to grow up to be sustainable entities. All of them, in my view, planned to be acquired within three years or go public. So if you look at the innovations around Guidant, all of the entities that made up Guidant were these start-up companies originally, which then evolved. I believe that this highlights the importance of these early-stage companies. The key, going forward, is to be able to develop organic growth from within. You need to understand the product development process better than everyone else so that you can do this self-generation and are not dependent on making acquisitions.
Now, where do those ideas come from? They come from a close understanding of clinical needs and the clinical community. In fact, most of the ideas, especially the catheter-based systems—angioplasty, coronary stents, drug delivery stents—come from the clinical community or physicians themselves. On the cardiac rhythm management side—pacemakers, defibrillators, and the like—a lot of those innovations are from understanding the clinical challenge, but they happen a bit more internally in terms of understanding the technology and how it can be used as a solution.
One of the most original ideas—the implantable defibrillator—came from Michel Mirowski in collaboration with the Johns Hopkins Applied Physics Laboratory. People thought he was crazy. He was licensed by one of our competitors [Medtronic]. They gave him the license back because they didn’t think it would work. Then Mirowski approached a company in Pittsburgh called Medrad, which did the original development work. At that time I was president of the Medical Devices and Diagnostics Division at Eli Lilly. We approached Medrad in 1982 and made some investments in the firm, and then ultimately acquired the technology. When ideas like these come from the outside, the challenge for the organization is, Do we understand the product development process well enough to be able to continue to enhance those concepts?
Strengths And Weaknesses Of The Cardiovascular Device Industry
Iglehart: What do you think is the single biggest thing that the cardiovascular side of the device industry has done right while you have been one of its CEOs?
Dollens: I think this industry excels at bringing novel technologies forward to make a real difference in patient outcomes. If I reflect on just my years in the industry—and I’m fifty-eight years old—among the probably thirteen different therapies that are within our organization, pacemakers are the only one that even existed as a therapy before I started [in the early 1970s]. This seems extraordinary. From Guidant’s perspective and that of our competitors, we have all had a robust product development process directed at the same patient population—cardiac patients. So by listening closely to what the clinical needs are and understanding technology, and then linking the two, I think that the industry has done a superb job.
Iglehart: Looking at the flip side of it, what would you identify as the single biggest thing that has gone wrong during this period in terms of industry performance in general—whether it’s in relation to the marketplace or government or the medical community?
Dollens: There are a couple of things. One is, I don’t think we’ve done a good job of helping the broader patient community and society understand the value of technology. Very few people could articulate the value of medical technology as they try to weigh the cost versus the value. We haven’t expended the energy to have that conversation.
Related to that, I think that the industry was late in understanding that policy is probably its number-one strategic issue and that it needs to be engaged in the policy dialogue because it will determine fundamentally whether this is an interesting business, and, quite honestly, whether we will be able to continue to encourage the innovation process.
Iglehart: Having said that, Ron, are you of the mind that any midcourse corrections are needed to the general approach to advocacy that the industry has pursued over the past decade or so? Would you, if you were the czar, change the way of the industry advocates so that it could reach the broader population in terms of a greater understanding?
Dollens: I think that the midcourse correction has taken place. The industry has gone from being very internally focused—when it talked about policy, it was all about the Food and Drug Administration [FDA] and getting one’s product approved through the regulatory process—to taking a step back and looking at the larger picture: What is the health policy and does it encourage continued investment, and therefore continued innovation, in the field? So now I think that the industry is focused—although just recently—on the broader health policy questions, which is the midcourse correction that was needed.
Society’s Role
Iglehart: Let’s expand on that for a moment. What is the biggest single thing, in your view, that Washington just does not seem to get about medical devices—how they’re developed, paid for, and approved?
Dollens: I wouldn’t limit the misunderstanding just to Washington. I would say that within the broader society, we do not comprehend that the same forces that cause our consumer lives to improve because of novel applications of technology also exist in health. And so, if we establish certain policies that diminish these same economic forces that cause people that want to invest in health—if we interrupt those incentive systems—it will have a detrimental effect on the whole concept of innovation.
People don’t understand; they think that innovation in health is time dependent. And it’s not; it’s the same forces that exist in their everyday lives. We haven’t been able to make that connection. We haven’t really even worked at making that connection very well.
Iglehart: Could you give us a specific example of what you mean when you say it’s not time dependent?
Dollens: Yes. I think people would say that for all of the innovations that have happened—as I mentioned, all of these new therapies that have happened since I entered this field—just the passage of time and people’s intellectual curiosity would have caused those improvements to happen. My point is, that’s actually incorrect, because most all of those improvements, whether an implantable defibrillator or a stent or an orthopedic joint, can be traced back to somebody’s creative idea, which a venture capitalist or a risk capital investor ended up investing in and bringing forward. This would not have happened if investors hadn’t seen the opportunity for some kind of a reasonable return. So it had very little to do with time, and a lot to do with people deciding that something is worth investing in. What you always see is that intellectual capital—human capital—follows financial capital, so the source of all ingenuity and creativity is the human capital. If we break any of that linkage, then we won’t continue to have the innovation that we have gotten used to. This is the same innovation that happens in our consumer lives.
Iglehart: A recent New York Times story, which focused specifically on ICDs, raised broad questions relating to the inherent risk associated with invasive procedures and the understanding of various groups of that risk. Could you share with us your thoughts on the specific issues addressed in the Times article?
Dollens: The article focused on the communications issues surrounding the continuous evaluation of patient risk when using novel, life-sustaining medical technology. We encourage public debate and discussion about the pros and cons of broader dissemination of information about product safety. Guidant looks forward to participating in that discussion.
Evidence-Based Medicine And The Value-Cost Gambit
Iglehart: Turning to another subject, the era of evidence-based medicine has arrived, with many interests increasingly embracing its potential to improve the quality of care delivered and to make that care more affordable. What does this development mean for the medical device industry? Specifically, does the industry share this belief in the value of evidence?
Dollens: It absolutely does. The challenge ends up being, What evidence are we talking about? And I don’t like to say this in a suspicious way, but are we focused on the evidence, and is it evidence around quality, or is it evidence around cost without respect to value?
Sometimes the cloak of evidence-based medicine acts as a mechanism to not allow technology to be available to the clinician for the patient, because the concern is that the cost will go up. We see this in the form of technology assessment. If someone’s going to be a payer, shouldn’t they at least assess the technology? The answer is, Absolutely, that sounds correct. But when you look around the world at where it’s been done, it’s been done primarily for the purpose of not allowing technology to be accessible to patients, because of concern about costs.
Evidence-based medicine inherently, intuitively makes fabulous sense. We go through an FDA process, for instance, to be able to show evidence of safety and efficacy. It’s a way of life for us; we don’t think you can sell a product that isn’t based on strong clinical evidence, and I would say reasonable economic evidence, in the marketplace today. That has been the case since about 1985 for the U.S. when we put DRGs [diagnosis-related groups] in place.
Iglehart: But would you concede that the value-cost gambit continuum remains something of a conundrum for our society? For legitimate reasons, you as the head of a technology company are skeptical when payers raise cost questions that you think could impede the diffusion of a new technology, yet I’m sure you would concede that the payers have a point. At some point, we run out of resources.
Dollens: Yes.
Iglehart: But have we made any progress in trying to address that conundrum? Has the industry been a little bit reluctant to engage this in a forceful way?
Dollens: I think that the industry has been reluctant to participate in the dialogue in a constructive way because they’re concerned about what the ground rules are and about whether there are some predispositions around the outcome that are less legitimate than we would like to assume.
But I think that the big challenge, as people have tried to do some relatively robust research around this cost-value piece, is, How should society determine the value of an individual life and its quality as that individual ages? Is it different if an individual is age sixty-five and retired versus age fifty-three and working? I don’t want to say that the models aren’t robust enough, but I’m not even sure, conceptually, what we’re trying to chase.
That’s what makes it difficult. It really does get back to what we can afford to spend as a society, and I think that differs across societies. If you’re in a less developed country and you do not have clean water, clean water is incredibly more important than having access to an implantable defibrillator. If you’re in a developed society such as the United States, then the question is, What is the appropriate amount of spending for health? To me, if we could leave it up to the individual, I think individuals would say, it wouldn’t bother me if we spent 20 percent of GDP [gross domestic product] on health if the denominator is still growing sufficiently so that we’re still meeting other kinds of needs.
It is a conundrum, and industry has been slow in trying to bring solutions forward. Because that previously wasn’t “our job.” Our job was to bring the technology. In the last five years, we have said that that’s no longer enough. Not only do we need to move technology forward, we need to help understand the value of the technology and where it fits into the health care system.
Iglehart: By my question, I certainly didn’t mean to suggest that the payers have been any more enthusiastic about addressing the conundrum, either. In fact, I think, given the managed care backlash in the last five years or so, health plans have pulled back and decided they do not want to be in the business of delivering care, of interfering directly between the patient and his physician.
Dollens: But you know, it’s interesting, about managed care, we did go through about a four- or five-year period where health expenditures did not increase as a percentage of GDP. They stayed at 13.4 percent, 13.5 percent. In part that was driven by the fact that the denominator was growing, which is a great thing. But you’ve got to give a lot of credit to managed care efforts. There may not have been many supporters standing on the corner leading cheers, but it seemed to have a constructive impact.
Iglehart: As evidence-based medicine has been put into play by various stakeholders, and specifically by Medicare, is it what you expected it would be in the real world? Is it falling short, in your opinion?
Dollens: I think it’s falling short, and, to tell you the truth, we’re still very early in the conversation, so I don’t think one is well served by being critical in a binary way. Will evidence-based medicine be a fundamental aspect of the decision process going forward? Absolutely. So there’s no argument about that. It is about making sure that there is appropriate challenging. In conversations I had in the past with Medicare, the question would come up: “How many patients are we talking about?” In my opinion, the question wasn’t how many lives we were going to save; it was how much more we were going to have to spend.
But we don’t have that legitimate conversation, because on the other hand, Medicare will tell you that no, we don’t focus on the cost aspect in making our determinations. I just don’t believe that. It’s OK to focus on the cost, because, as we pointed out a little earlier, there are limits. And there should be a very robust discussion in that regard, but it shouldn’t be done in a backhanded way. I think that’s where we have been.
Medicare Coverage Decisions
Iglehart: The community of interest that manufactures ICDs and implants them was very upset in 2003 when the Centers for Medicare and Medicaid Services [CMS] announced its coverage guidelines on which Medicare patients should receive ICDs. One person I discussed this subject with said that Ron Dollens felt betrayed by the CMS when it announced these restrictions. What did you take issue with in this specific instance, and with the agency’s coverage process in general?
Dollens: The agency went through a coverage process and tried to get the best clinical thinking involved. They held an MCAC [Medicare Coverage Advisory Committee] meeting and took a unanimous vote that there should be coverage for the population as described in robust clinical trials. Then, to me, the agency arbitrarily made a different decision, supposedly based on some counsel they had gotten in nonpublic ways, which was not transparent to the rest of us. This was for one sole purpose: to limit the patient population, based on a lack of good scientific evidence.
We’re faced with a not-too-dissimilar situation today, where just a few months ago we obtained approval for carotid stenting, and then, in a very timely manner, the CMS decided that Medicare would cover that procedure, but for only 30 percent of the patients that were just approved by the FDA, I assume because they had concerns around safety or efficacy, which is really the FDA’s purview.
My point is that if there is no transparency and predictability in those processes, why would anyone invest the capital at the front end to innovate? For the risk capital community—which in medical technology accounts for, I would guess, in excess of 20 percent of all product development, or up to 30 percent, if we talk about private equity—why would they invest if there’s going to be something that looks like an arbitrary process, not based on the science behind the FDA approval?
Iglehart: More recently, CMS administrator Mark McClellan has been restructuring Medicare’s coverage process by requiring the development of patient registries that will collect data on the use of new technologies and their impact on patients. The CMS favors applying this general data collection process to all Medicare beneficiaries in a continuous feedback loop. Presumably, Medicare would cover new technologies more quickly. In exchange, Medicare would use information on the technologies’ performance in the real world to make longer-term judgments about value. Do you agree with the CMS that this approach would improve patient care?
Dollens: I actually do, which is probably a different position from the rest of the industry, or at least not a unanimous position within the industry. I think that McClellan makes a very good point in saying, “Yes, these randomized controlled clinical trials are important, and they do have an important place in determining safety and efficacy, but the real world may function somewhat differently.” The CMS, as the payer/insurer, would like to have access to more information, to create a continuous feedback loop that would feed information to a broader audience of clinicians in an effort to identify best practices. I am a strong advocate of that approach, especially if, as soon as the FDA approves a drug or device, it goes into this process in a conditional manner. And we understand that it does need to be conditional, because we may find out something down the road. We probably should even expose ourselves to a relook at some point—eighteen months, two years, whenever we have enough data. What’s making this evolving picture confusing now is that the CMS seems to change its signals in midstream, as it did with its decision limiting the availability of ICDs to only certain patients, after the results of a clinical trial that documented conclusively that this technology would provide substantial benefit to a larger number of patients. The recent CMS coverage decision regarding carotid stenting followed a similar pattern. That is, the CMS said that it would cover the cost of this technology for only 30 percent of the patients that the FDA said should be eligible to receive it. What is the logic in that regard? It ends up not being a predictable process, having longer-term ramifications for us. So I approve—I think McClellan’s absolutely right in that those narrow clinical trials don’t give you all the insight you need. There needs to be a process. But it should be predictable, used each time a new therapy comes forward.
Iglehart: What’s the fork in the road between you and other segments of the industry in terms of reluctance to embrace this approach?
Dollens: It’s really very straightforward. The industry has typically focused on the FDA and getting the product approved. Typically, if it was a product to be used by seniors in Medicare, those decisions would be made in the different localities. Very few decisions were national decisions. As I looked at that, I said, “That is not sustainable.” Why would our society stand for a different coverage decision—not the level of payment, but whether it was going to be paid for—in Albuquerque and Buffalo? So now Congress suggests that there should be more national decisions, but that the CMS has to make that decision based on what is reasonable and necessary, versus the FDA making that decision based on what is safe and efficacious, by statute.
The question is, Should those two decision processes start coming closer together, in collaboration? I’ve been supportive of that. The rest of the industry says—quite logically—once you start mixing the “safety and efficacy” decision with something as undefined as “reasonable and necessary,” you’re going to extend your clinical trials—it’s going to take longer, it’s going to cost more money, and it’s going to add more uncertainty. Anything that adds uncertainty to the process is something that you generally don’t get people to sign up for.
Iglehart: But is this—going back to the cost conundrum—another reflection of that subject rearing its ugly head?
Dollens: It is. Because we don’t know exactly what we’re chasing, or how to do it. So we are in a vacuum, even if we were trying to chase this “reasonable and necessary” piece, assuming that it is all legitimate. I’m hesitant to talk about it not being legitimate.
Let me take a step back. If you look at the larger picture—for instance, President Bush says that he wants to cut the budget deficits in half over the next five years. So it needs to go from, say, 3.5 percent of GDP to 1.75 percent. Where is that going to happen? Is it going to happen in the war on terror or defense spending? I doubt it. Is it going to happen in terms of some near-term decisions on Social Security and the other big entitlements? I doubt it. So that places Medicare and Medicaid in greater jeopardy as prime targets for budget cutting. I know it depends upon how much the denominator grows, but there’s going to be a huge amount of effort to not allow those expenditures to grow more than the economy is growing, if you’re going to make that kind of progress in the deficit.
How does that happen? We had the Balanced Budget Act of 1997, where we said we were going to try to take $100 billion out of the health care system, and we overshot—we took out $250 billion—and a third of the hospitals were in red ink. To someone who sells to hospitals, that’s a challenge. So we know we’re going to be under that kind of pressure. Then the message from the CMS is going to be, “We don’t want to approve anything that’s going to cause us to spend more money.” Then you get into that dual loop about evidence-based medicine. We need to try to define whether there is value in this technology; if the criterion is that the system has to spend less after it’s done, that is a tough one to chase.
Iglehart: In short, you seem to be saying, Ron, that you feel more comfortable trying to rationalize the FDA and CMS approval processes and make them, perhaps, more compatible and understandable to innovators and others, whereas the industry view is that the interests of the industry are better served by keeping the two processes apart.
Dollens: Yes. The industry’s position is an absolutely correct position. I just think it’s pushing a noodle up hill, trying to keep the two decision processes separate. Now, the question is, Do you want to participate in defining what that looks like, and help people understand what the implications are if it’s not done right? That’s really what I am saying—yes, there will be national decisions, because the logic of not having national decisions makes no sense to me. Then, when we’re doing clinical trials for safety and efficacy, there will need to be an economic component—a value component—in those trials if you want to have reimbursement by the CMS, as an example, or any other third-party payer.
Safety, Efficacy, And Cost-Effectiveness
Iglehart: Does this mean that in a decade or so we might see that the criteria for approval are safety, efficacy, and cost—or cost-effectiveness, or however you might want to label that?
Dollens: Yes. One could make a case that it already exists today, in the delay in terms of the review process, or what seems like an arbitrary decision around which portion of patients the CMS will pay for, which was different than the FDA had given approval on. So one could say we’re already in that mode, and if you haven’t done generally robust work on the economic impact and made that case, then you’re not going to get the full value of the technology.
Guidant As Employer And Insurance Sponsor
Iglehart: Let me switch gears a bit here. Guidant has some 12,000 employees around the world. As its CEO, have you been concerned that health care spending has grown most years at a rate two to three times the growth of the general economy for many years? There are several questions here. What kind of insurance coverage does Guidant offer its workforce? Has Guidant increased employee cost-sharing requirements in recent years? And do you believe that employers in the future should continue to sponsor health insurance for their workers, or should employers abandon this role in favor of letting individuals make their own decisions regarding coverage, or turning this task over, in some way, to a stronger government presence?
Dollens: Lots of questions there. From a practicality standpoint, I think that the system would work best if individuals took responsibility for their health insurance. But that’s not where we are today. So the employer process is not only functional; I think it makes sense, because who really cares about the long-term outcome of the patient? The managed care group probably doesn’t, because they’re not sure that that patient is going to be there three years from now. The patient obviously cares, but so does the employer, because I think of that person as being here for fifteen, twenty, or thirty years, so I’m willing to do some kind of up-front investment in their health, if I think that I’m going to benefit in the longer term.
We employers have been doing this absolutely incorrectly—all Fortune 500 companies have been. Historically we have told employees, “We will pay 90 percent of the expense.” And we offer employees different choices of types of plans—HMOs, PPOs, and so on. We have a huge number of employees in Minneapolis-St. Paul, which is very heavily HMO, and therefore a very, very high percentage of employees there choose that option. We also have a huge number of people in California. Exactly the opposite happens in California: People choose the PPO. So you’re saying, “Well, what’s it matter?” We pay 90 percent of each. One costs the company $500 a month; the other costs us $1,000. And if the employee’s only going to pay 10 percent, then what’s the difference—they’re paying $50 or they’re paying $100. That’s not enough differential for them to want to put any kind of pressure on which system to choose.
Why is that wrong? It’s because then the HMOs are not incentivized to continue to offer service or to be as efficient as they could be in delivering services. So what happens? HMOs’ prices go up faster than PPOs’ prices, so they are going to start to converge. Alain Enthoven has written on this pretty extensively, and Stanford University has embraced an alternative approach. What we should say is this: We will pay 100 percent of the HMO alternative, and if employees want a different plan, they will have to pay the difference. By doing this, we would encourage more efficient delivery of health care, and I think that would have broad cost implications.
So we’ve tried to start that process, but it’s a difficult thing to do, because then you start having people pay a higher percentage—maybe it’s only 13 percent now of the total health care expense, but people are very sensitive to that. We’ve tried to promote the idea to other Fortune 500 companies, but no one’s really doing it. Some intellectuals are advocating it, but we haven’t proved the need.
In terms of a robust government program, we ultimately end up talking about a single-payer system. What is the problem with a single payer? Well, once the payer wants to have a voice in the decision process, which is logical, that’s where you get into this conundrum. I use this analogy for our employees. Remember in your first economics course, they talked about the guy who was making lawnmowers, and the big department store came out and said, “We’d like to buy three of your lawnmowers,” and the guy was tickled. Next year they wanted to buy half the capacity, but they wanted them painted red. He said, “Not a problem.” And so he built a new plant, and then the next year, they bought everything he made. Then the following year, they told him, “We want to buy it at half the price.” The message here is that when you have a monopolistic purchaser, the supplier is at risk. And if that purchaser accounts for a large percentage of what you’re doing, then you’re at really big risk.
So, the concern today with the Medicare Modernization Act, which we were very big supporters of, is that Medicare will probably account for the purchase of half of all pharmaceuticals. If Medicare, as a monopolistic purchaser, ends up using that muscle in terms of its purchasing power, then it’s going to have a significant impact on the innovation process, especially with a company like Guidant.
Iglehart: Presumably, Guidant is not a heavily unionized workforce?
Dollens: It is not unionized at all.
Iglehart: So the decision about moving in the manner that Enthoven has suggested, in which Stanford and a few other enterprises have moved—in reality, it would be Ron Dollens’ decision, I suppose?
Dollens: That’s exactly right.
Iglehart: But you haven’t made it.
Dollens: No, I haven’t.
Iglehart: Is it just because of the concern about employee pushback?
Dollens: Yes. We’ve put ourselves on a three-year plan to make that decision. So we’ve taken the first steps and held “town hall meetings” around it. It’s not about the money. It’s about trying to be a role model, because if we want to save the health care system as we know it—a market-based, private-sector system—we’re going to have to have some impact on this cost situation. I don’t know whether we alleviated anybody’s concerns or caused them to feel better about paying an extra $100 a month for their health insurance, but we’ve expended a significant amount of effort.
Iglehart: I wrote on the future of the private health insurance industry several years ago, and the thing that has stuck in my mind was the deep antipathy of private business to having a larger role in health insurance. This is probably still the case. I’ve been struck at how slowly the private sector—businesses like yours and others—have moved to really reflect the market.
Dollens: Yes. Yes. But I would say quite the opposite of that. General Motors is an example. If you asked them what some of their challenges are, especially in terms of their cost structure, health comes very quickly. So if you were to ask me whether the traditional advocates of a market-based, private-sector approach to solving problems is the traditional base—which would generally be the business community—I would say, “I’m not sure it is.” Because large companies would like to get the expenses of providing health, especially the retiree medical piece, which has caused some of the older industries problems, off their income statement and balance sheet and put it in the tax rate for everybody else. It’s not like I’ve done a survey, but I think that’s what they would like. So we don’t have the typical advocates of private-sector market-based approaches behind us here, which is a bit scary.
But you said something about competitiveness. We haven’t really done a competitiveness piece. Michael Porter is writing some very interesting things about this. I’ll just say that health care in this country is not competitive. Now, if you went to a local hospital with this notion, they’d say, “How can you say that?” Or a local physician, who would respond, “How can you say that? We’re fighting it out every day for a customer.” But in a truly competitive model, quality goes up and costs come down, and that’s not what’s happening in health. Much of this is predicated on a lack of information. You do not know the quality of whatever you’re signed up for, and you don’t have a clue of what the cost is. Without knowing that, it’s hard for you to make a rational economic decision.
The Specialty Hospital Market
Iglehart: I wrote recently about the phenomenon of specialty hospitals and was struck that Indianapolis, as you well know, is a hotbed of specialty hospitals, particularly on the cardiovascular side of things. So when Guidant looks at the proliferation of capacity in Indianapolis through the specialty hospitals, particularly in your specialty, cardiovascular care, what’s your attitude? On the one hand, the employer pays for more capacity than needed. On the other hand, they’re buying equipment and devices that you manufacture. Where does Ron Dollens come down on this?
Dollens: Well, first of all, I would agree with Porter’s observation that, especially if you’re concerned about quality and cost, one shouldn’t expect to see a single hospital be the best at every service. Why would you think that St. Vincent’s Hospital has the best psychiatric service, orthopedic service, and cardiovascular service? There’s not really any great logic to that. But Porter said, “If that’s not true, why not have orthopedic and cardiovascular hospitals that specialize, with huge amounts of volume? All of us know, from a manufacturing standpoint, volume and quality and cost all serve together very nicely.”
Now, you’ve got the obvious problem: The general hospital is left with services that aren’t reimbursed as well. The only thing that makes cardiovascular or orthopedic services unique is that somebody has established a payment scheme that allows one to make money. So you’ve got the wrong drivers in that regard.
In terms of how it impacts us, it’s interesting. It causes a higher level of competitiveness, because now, all of a sudden, you have a cardiovascular hospital. You have the clinicians having some ownership—yes, it’s financial ownership, tied to the hospital’s success. They are able to get alignment of clinical communities much more easily than the hospital is. They can standardize therapies. So I would be willing to bet, if you go around to any of those kinds of carve-out specialty hospitals, their cost structures, at least in terms of acquisition cost, are the lowest in the country. So these for-profit kinds of ventures are able to deliver therapies at these incredible facilities and do so very well.
Views On The Health Care System
Iglehart: There is widespread agreement among interests of disparate views that the American way of delivering and financing medical care has some flaws that need to be corrected. As you know, there are a variety of approaches to reform. So, first of all, how troubled are you with the state of the current system? In your view, is it fundamentally flawed, or would incremental improvements solve most of the problems?
Dollens: I can think of many incremental improvements that would make it much better. For instance, we’ve got to solve the problem of the forty-five million uninsured people, and I do think there are ways to do that. I also think that if you look at the Medicare Modernization Act, we could use a model like the Federal Employees Health Benefits Program approach to get seniors into health plans. When you talk to participants in the FEHBP, they feel very good about it. I think it puts plans in competition. As an innovator, I feel good about it, because I think the basis of competition will be, “Yes, you as the patient, the senior, will get access to whatever the new technology is.” And so I think it probably would serve us well.
There are a bunch of incremental pieces. But I think that the fundamental piece is the information piece. If we don’t cause the individual to be able to be a rational consumer, then somebody’s going to have to substitute for them. I’d rather have the individual do it. As both quality and cost information becomes transparent to people, we’ll have a more competitive system.
Iglehart: One incremental approach to changing the system is generally labeled “consumer-directed health care,” which you seem to be a strong advocate of, for reasons, I presume, you’ve already said—cost-consciousness, greater responsibility. Does Guidant offer a consumer-directed plan as one of its options to employees?
Dollens: Yes. Our whole employee benefit structure is a cafeteria approach, and employees get many choices around health care. We’ve tried to add a stronger consumer piece to that in an organized manner.
Iglehart: You mentioned the concern about retiree health care and how it would be financed beyond Medicare. Do you envision the day, Ron—perhaps ten, twenty years out—when the baby boomers turn sixty-five and beyond, that a private employer such as Guidant, moving down this road of individual responsibility, might say to the employee, “Here’s $5,000. In the coming year, you can decide how that money will be invested on your behalf by your employer in terms of a pension benefit, a health insurance benefit, life insurance, disability.” Could you envision the individual responsibility imperative moving that far along, as resources become more scarce?
Dollens: I don’t see that. Because, if you think about it, it’s essentially saying that the employer has decided it’s going to transfer X amount of value to the retiree, and then it may provide the mechanism for the retiree to make different choices. This facilitating role is okay, but retirees can do that themselves. I would like to make sure that there are sufficient choices out there, whether it’s Anthem, CIGNA, or others. There is a niche here, whether it’s for some kind of additional insurance, catastrophic coverage, something that reaches people ages 55–65, especially, so that plans are in competition with each other to offer some set of services. I see it being more to their benefit than to the employer’s, so they ought to be expending more energy to make this arrangement work. If I see the employer doing anything, it’s retraction.
A Leadership Role
Iglehart: You have been a visible leader of the device industry, not just of Guidant. You headed the medical device advocacy organization, AdvaMed, and the Healthcare Leadership Council. You also served on an HHS commission on reducing paperwork and improving regulation. What insights did you take away from those experiences in terms of the device industry’s collective voice in Washington, or how you think government works?
Dollens: First of all, my own views have shifted 180 degrees. I have moved from being a cynic about the political process to thinking that people are working very hard trying to do the right thing, especially at the staff level. Their receptivity to you is not about a handshake and a pat on the back but, rather, whether you can help them with good thinking and create the right kind of legislation if that needs to happen. For me, that is a huge switch. That’s why I’m such an advocate of being an advocate, because I think it’s a legitimate process.
Iglehart: Did that change in your thinking occur rapidly, or over a period of years?
Dollens: It happened very quickly, because to those of us who sit on the sidelines and see how this plays out at the highest levels, it looks incredibly disjointed and dysfunctional, and it seems like decisions are made for the wrong reasons. Once you get involved and you see the people doing the work, and how hard they are working at trying to do the right thing, and that their arguments are generally legitimate, it doesn’t take you long to change your views.
One also has to understand, though, that their bosses—elected representatives—also have different constituents who aren’t just the people at home. And yes, a bit of it is who supports their activities, and ultimately, the decision has to appeal to them. Case in point: One of our early successes was to get some legislation passed, the Biomaterials Access Assurance Act. The issue was that raw material suppliers were dropping out of our industry. The Dow Chemicals, the Duponts, were saying, “We’re not going to provide you with polymers because you only buy about three buckets full, and we make no money on it, so why should we accept the liability risks associated with that?” As I thought about this, I thought, What about the people that supply us the circuit boards and the integrated circuits, the batteries? Why would they want to supply this industry? It’s such a small industry that, compared to the consumer product side, is just not worth their effort. So we wanted to get legislation passed saying that the raw material suppliers do not have to participate in some of these legal activities early on. We, as the end producer, will accept the product liability. The suppliers had never been held liable, but they were wary; it’s very costly to get into the deposition process. So we were able to get legislation passed. It was one of these times where we were able to get alignment with ATLA, the trial lawyers, as well as some of the veterans and consumer groups. During the process, one of the congressmen said, “We’ll hold hearings on this, but who can you get to come testify?” We started listing all these different physician groups, the plastic surgeons, the orthopedic surgeons, people using all these biomaterials. And he said, “Those are all Republicans. You need to get the other side of the aisle involved. Who are your consumer groups?” And so the light went off in our heads, in terms of that process. So yes, the process is generally legitimate, and people are working incredibly hard, but you do need to understand who the constituencies are.
The Global Industry Environment
Iglehart: Industries are often criticized as being only self-interested and too focused on their own narrow issues. Just as a hypothetical, do you wish, for example, that the device industry had devoted more of its energies and advocacy efforts to, say, expanding health insurance for the uninsured versus seeking higher payments for new technologies?
Dollens: Yes, but I would say that that is still incredibly self-serving. So it doesn’t move away from being self-serving. Think about the uninsured as a great example: You call it “uninsured”; we call it “uncompensated care.” Hospitals incur about $26 billion a year in uncompensated care. These are my customers; that’s a real problem for them, so they’re going to push back on me and ask for lower prices. Working on the problem of uninsurance, then, is only slightly enlightened. You have to understand second-order effects.
It’s the same with health policy more broadly. If you think about where the U.S. citizenry is today, especially on things such as reimportation of drugs from Canada, as I tried to explain it to our organization, you realize that different health systems obviously act differently, toward our company and toward the whole process of pricing, innovation, and development. The analogy, as I explained to them, is this: Last year we made $800 million in net income as a corporation. If we had sold all of our products at European selling prices, we would have lost money. We would not be able to function as we do today. So we would have to get rid of some reasonable number, say, $800 million, in operating expenses. In that environment, you’re not going to spend $560 million on R&D. You’re not going to spend $1 billion on sales and marketing.
That’s why policy is important, and not just U.S. policy. We have got to know the policy environment in Europe and Asia, too, so that we share a bit of this “burden” going forward, and so people don’t get a free ride. The U.S. citizenry is saying, “We are tired of financing the rest of the world’s innovation process.”
Iglehart: Do you see mechanisms that are realistic for changing that?
Dollens: I do. Mostly industry discipline. And again, one has to be very careful, because I don’t want to imply that there’s any kind of collusion in the activity, but I watched Johnson and Johnson, as an example, go to the European market with the drug-eluting stent priced at something like 1,800 or 2,200 euro. Realize that the bare-metal stent at the time was selling at 500 euro, so the differential was huge. In Germany it was selling at 280 euro. They’re essentially saying, “We’re going to try to go with generally global pricing.” Historically, we used to go to every country, and we could be held hostage by a single country, but the assumption was that the country was isolated—no information would flow out of it, or product couldn’t flow. Those days are gone.
So now, when we bring a novel therapy forward, we’re going to have to work very hard to try to have almost global pricing. That doesn’t work for less developed countries. They just can’t afford that technology, so that will be a little bit of a trade-off, and I think there will be a little pressure there. But when people can show huge differences of what you pay in Canada versus what you pay in the United States, consumers don’t understand why such a differential exists between countries that have the same level of development.
Iglehart: Is the price of a drug-eluting stent in the United States and Europe comparable?
Dollens: Relatively. I think that the price in Europe is around $1,800—because of the exchange rate; the euro has been so strong. But in the United States it’s down to $2,200.
The Power Of Industry Groups
Iglehart: One of the things that has struck me about the Healthcare Leadership Council is that you have all of the major stakeholders around the table when that council meets—the third-party payers, the device manufacturers, pharma, and hospitals, presumably. You said earlier that there are tensions and conflicts between the interests of these various stakeholders. But then when you come together in a group like that, it is almost too cozy to reflect the broad societal interests—consumer, payer, and so forth.
Dollens: Yes. The only one missing in that gathering is the consumer, even though some at the table would say that patients were represented in some way. But I do think that the consumer is the one advocate that’s not as strongly present. I don’t see it as a cozy thing. I think the common element among this self-selected group is that they all believe in a market-based, private-sector approach to delivering health care. And, as you can imagine, whatever solution that group poses will be a market-based, private-sector solution. We think that’s in the best interest.
For instance, on the uninsured, we point out that 80 percent of the uninsured are in working households. The other 20 percent probably qualify for Medicaid or another public program. So now the question is, How do you encourage the small employer, typically, to offer health insurance? Some work suggests that the small employer can’t afford it. But could those employers afford to pay a third? Then the individual might have to pay one-third, and then the government could pick up a third through tax credits. Those are the kinds of solutions that would come out of a group such as the HLC.
Iglehart: You have announced your plans to step down as CEO of Guidant. Will there be anything like a call to action from Ron Dollens to the industry that you’ve served?
Dollens: We’ve had some conversations about that, and different groups that are very much interested in this issue wonder whether I’d participate with them. Some have suggested that the retired CEOs who have been very active from a policy advocacy standpoint should try to take on some responsibility in that regard. However, nothing’s been formalized.
Iglehart: If you were the czar, what role could such a group play that might move the dial?
Dollens: I can think of a couple of things. First would be very self-serving, but the first piece would be to ask, What should be retained? My concern is that people don’t understand this innovation process; therefore, they’re not going to know, if they accept an alternative, whether it will get in the way of continued innovation. So that would be reasonable—trying to make sure people understand not only the value of the technology, but what causes innovation to happen. Next would be trying to look at individual solutions, whether it be support for the competitiveness piece—how do we get information out to people in a way that all the stakeholders feel fairly represented—or how to get those forty-five million uninsured people into the system.
Technology: Promise And Costs
Iglehart: You are an innovator and the CEO of a company that’s obviously a very successful innovator, a company that has introduced some of the most expensive medical technologies in the market today, and you’ve seen the impressive impact, clinically, of the better health that these technologies can bring. David Cutler, the Harvard economist, says that medical technologies have played a major role in the dramatic reduction in cardiovascular disease mortality in the past fifty years. Society now stands at the threshold of more advances from nano to molecular, and the potential costs of all these possible things that could be done to improve health are perhaps beyond our current comprehension. What would be your solution to the dilemma of our almost infinite capacity to develop technologies versus the finite resources available to pay for them?
Dollens: I would try to think of a mechanism that would allow people to make their own determinations. I know that has a chance to be very complex and maybe not practical, but don’t we face similar issues in the rest of our consumer lives? Don’t people have ideas of bringing forward products that can be done but are so expensive that individual consumers decide not to make the sacrifices that would let them obtain them? The question is, Can we set up a basic level of health care delivery? Well, maybe not one, but there’s going to be some standardized baseline to ensure that everyone has access to a certain level of care. Individuals then would have the opportunity to buy up to something else, higher than the standard of care. One might respond, “Yes, but aren’t you going to have divergent care across the community?” Yes, you are, but this would enable support for innovations that over time would dissipate to the broader community. My biggest concern is that I don’t want to cut off the funds that people are willing to risk to try to do these really interesting things, even though initially it may only be for a niche number of patients. Over time, it could end up being available to the broader audience. So the question then is, Can we as a society get comfortable with a multi-tier system of access?
Putting The Consumer In Charge
Iglehart: Indeed. Not to beat a dead horse here, but I’m struck by something. You have come back several times to the notion of individual responsibility and a basic level of care for the whole population, but when it comes to Guidant moving down that road, you haven’t moved. It’s interesting that for somebody who’s as committed as you are to it, you have encountered obstacles.
Dollens: Yes, but we are moving. Like I said, we’ve put ourselves on a three-year path to get much more responsive in that regard. But it’s this typical problem, which we’ll have as a society, that when something is perceived as onerous, it is a difficult act to get going. That’s why we have to reach a crisis mentality before anyone’s willing to make reasonable change. It’s the same reason the president is trying to convince people that there’s a crisis in Social Security. As the Federal Reserve chairman said, we’ve got more of a crisis in Medicare than we’ve got in Social Security.
Iglehart: Right. What year are you on in this three-year track?
Dollens: Well, we’ve done the first year, but we got a lot of pushback. So we’re back to discussing whether the contribution should be 90 percent, or 93 percent, or whatever. What will help employees engage and take responsibility? That is the question.
Iglehart: Do you think, if you were to do a survey of, say, the health-related companies—insurers, pharma, hospitals, et cetera—that you would find companies that are more willing to maintain the 90 percent or so because they’re invested in health?
Dollens: Well, yes. We try to explain it; we bring Alain [Enthoven] in to talk to groups of management, and we hope that they will say, Hey. Think of our customers. Selling to Kaiser is much more difficult for us, because Kaiser is trying to deliver this thing in a more cost-efficient way. They are a much tougher customer to us. So do we want to try to encourage them? But if we don’t have efficient delivery of health care, then we are faced with different choices, such as single payer, and suddenly the question becomes, How would you like to have all your business as one Kaiser?
Future Of The Industry
Iglehart: In terms of the future of the medical device industry, I have a couple questions. One, what prompted you to want Guidant to be acquired by Johnson and Johnson? You’re a large, successful company, making your way quite well in the marketplace. And then J&J comes along and acquires you. What’s the motivation?
Dollens: Well, there were three or four. One was trying to think about what the technologies are going to look like going forward, and what capabilities we need to have. There’s obviously no doubt about this integration of drug and device, with drug-eluting stents being the primary example. We also require the integration of device and information systems, communication systems. If you think about our implantable devices being able to “talk” to the referring physician, the implanting physician, and maybe the family through the Internet, as you think about this complexity of capabilities, scale starts to be a bit more predominant than it was. Early on, it was all about focus and accountability—being able to move very quickly in a flexible kind of way. That was going to define the competitiveness of the firm. Then we started to see, as the definition of the product started to get broader, that it’s not just about engineering and software. It’s about a lot of other things. Then scale starts to matter. So that was one reason.
Second, the value was right. We were going to get credit for whether we had already accomplished the things that were on our plate, and we were going to essentially get valued based on that. As I started thinking about the next three to five years, I wondered what the environment was going to be for health care vendors and providers. It’s going to be a very different environment, for the reason I talked about, as we’re trying to have an impact on the deficit. I think that could play out in such a way that market capitalization in the firms could be different from how it is today. Then the typical fundamentals kick in—the demographics, people’s concern about health. They’re great growth drivers. But if you look at the top 100 most valuable U.S. corporations today, I think every pharmaceutical company is there—a couple of biotech companies and a couple of device companies, too. Are those the largest U.S. companies? No. It’s because their profits are pretty substantial. Do I think that there’s going to be pressure on the margins going forward? Absolutely.
In addition, we’ve got an employee piece; we laid off some 600 people earlier this year because of the ebb and flow of the business. If you belong to a corporation like J&J, with 110,000 employees, they can handle this ebb and flow without a traumatic effect on individuals. So I think that’s a great condition for our people to be in. The only people who “lose out” in this merger are people who wanted to be the CEO of Guidant. You just can’t worry about two or three versus the 12,000.
Iglehart: Do you anticipate, Ron, that we will continue to see consolidation of the device industry, that this is the beginning of a wave?
Dollens: There will be some consolidation. It’s going to be limited, because the antitrust rules dictate that there are certain groups you just can’t put together when they’re in the same space. In the cardiovascular area, there are already so few players that it’s hard to consolidate there. I think there will be consolidation, though. I think that big pharma may take a step back and relook at its definition of what’s important in terms of participating in health. They may decide to follow the J&J model of being more diversified, and there may be more similarity on things such as clinical trials, policy, and payment, which are more important today than just the limited view that it’s all about the product development cycle, which is, I think, what caused the dissipation to begin with. So it might take a little while, and it might take a change in management, so that people don’t have to say, I’m making a different decision than I made ten years ago.
Future Of The Hospital
Iglehart: You said earlier that hospitals were your principal customers. What do you see in the future for the hospital? You’ve undoubtedly heard, as I have in the last five or ten years, that the hospital is going to become a large intensive care unit, with much more ambulatory care provided in various settings. Physicians seem to be increasingly disgruntled with the hospital for reasons of control and income, et cetera, and they’re moving out in a variety of ways. What’s your vision of the future of the hospital?
Dollens: Well, in the first place, you have to understand that they are huge institutions being run by very sophisticated management. In any given city, they’re the number-one or number-two employer. The CEOs of these institutions are very astute. What are they thinking about? They’re thinking about that continuity-of-care piece—where’s the business going to be? They’re looking at feeder hospital concepts, venturing with the clinical community. Hospitals are not going to go away. I think they’re a very strong regional force. On 60 Minutes on TV last night, I saw a piece on hospitals. There are hospitals in India and Taiwan that are attracting American patients for procedures at one-fifth the cost in the United States, even after they’ve paid to fly there. These are very sophisticated systems. Anyway, other than that, I still think that health care is relatively regional, so hospitals will end up being the focal point.
Iglehart: Any time I talk to a hospital administrator, it’s usually a very frustrated individual. I’ve always been struck by the fact that the major allocator of resources within the hospital is not accountable for the hospital. As a CEO, can you imagine having a ring of vice presidents around you who weren’t responsible to you?
Dollens: No, I can’t.
Iglehart: They are accountable to themselves, basically. It doesn’t work really well.
Dollens: These unaccountable parties have to be brought into the system. HHS [the U.S. Department of Health and Human Services] has started giving some latitude around some of this in gain-sharing arrangements. They’ve got to get the clinician to take some ownership for what the hospital’s trying to get done. And the Stark laws [governing self-referral and antitrust in health care], I think, have had a detrimental effect. The bigger issue is also to try to bring great manufacturing processes to the hospital—the quality systems—and get the same kinds of concepts going as in other industry settings. We think it’s going to be all IT [information technology]. We’re saying, If we put the IT in place, all of a sudden, that’s going to be the solution that will cause these efficiencies to happen. But as an old mentor of mine once said, “Be careful about automation as a concept, because if you don’t understand the processes and don’t have the processes controlled well, all you do is make scrap faster.” And so, with those two cautions, I do think that hospitals are going to have to incorporate some of the quality systems, principles, and good manufacturing practices, which you’d assume the for-profits had been hugely incented to do, and I assume they’re making some progress in that regard.
Future Challenges After Guidant
Iglehart: You announced, as I said earlier, even before the merger with Johnson and Johnson, that you planned to step down as Guidant’s CEO. You have a number of years even before you’re eligible for Medicare, and you’re presumably an individual with considerable wealth. Certainly you have ideas about what your next challenge would be. Could you envision yourself, for example, holding a high government post in the Cabinet or comparable, given that you now see the value of participating in the policy process? Or could you see yourself running for office, or pursuing another entrepreneurial adventure in the private sector, or perhaps moving into the academic realm? What’s Ron Dollens’ next step?
Dollens: It won’t be government. I’ve participated a little in academia, and one gets frustrated with that process. I think that government is probably orders of magnitude more frustrating, even though people are very well-meaning. I mean, the ability to get to decisions—it’s not a straight line. If you’re used to being in a business environment—especially if you have a chance to lead the business—you like straight lines in terms of getting from A to B versus all these other crazy pathways. So I would find that frustrating.
I’ve already accepted a chair at Indiana University in business and government. I’ve started doing a lecture series there and have enjoyed that, and I’ll do that for sure during the next two years. Then I’ll participate in some private equity venture groups where one gets to look at different technologies and either encourage or discourage the direction. That would be interesting, because you get leverage in lending your insights to a broader array. There also may be an opportunity to get involved with groups trying to influence health policy, as I mentioned before. I’d love to continue to participate in that.
DOI:
10.1377/hlthaff.w5.296
©2005 Project HOPE–The People-to-People Health
Foundation, Inc.
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