What Wall Street Gets Wrong About Healthcare | DaVita CEO Javier Rodriguez

0:00What do you think that Wall Street just like doesn't get about health care? In our space is that something that's probably undervalued is the human care. And so it's very easy to get into questioning about like, oh, please tell me about AI. Tell me about X or Y statistics. And so you try to put everything in a spreadsheet or something. But the reality of life is that the secret sauce is do you feel more confident? Do you feel more comfortable, et cetera? are all those type of metrics are hardly ever talked about in the relationship between the caregiver and the person. Hello, listeners, and welcome back to the show.

0:41I'm your host, Hallie Tecco, and today I am speaking with DaVita CEO Javier Rodriguez. DaVita is one of the largest kidney care companies in the world providing dialysis to nearly 300 ,000 patients across more than 3 ,000 outpatient centers globally. And as an Italian-American, I have to mention the name. De Vita comes from the Italian words, dare vita, meaning to give life.

1:10Welcome to the Heart of Healthcare podcast. I'm Halle Teko. I'm Michael Esquivel. And I'm Steve Krause. And every Monday, we bring you the latest in healthcare innovation as we sit down with entrepreneurs and industry experts. So buckle up and join us as we figure out how to improve healthcare for all.

1:40Javier, welcome to the show. Thank you. It's a great privilege to be here. I'm a big fan. Thank you. Well, let's get in it and let's talk kidneys. When someone's kidneys fail and can no longer filter their waste and their toxins, they go to DaVita for life-saving care called dialysis. And my mother-in-law was a nurse at a dialysis clinic, so I know a little bit about it. But this is a very intense treatment. Three times a week for about four hours per session is pretty typical. Basically for life or until you get a kidney transplant. help us understand the patient experience for people in kidney failure.

2:22Yeah, well, as you said, well, first of all, thank you to your mother-in-law. All the professionals that do this have an amazing heart to take care of this population. Look, at the end of the day, what happens is our kidneys are amazing organs that purify all the toxins and get rid of excess fluid in our bodies. For those people where their kidneys don't work, they basically have that buildup. And as you said, because it is chronic in nature, i.e. you have to go 12 hours or so a week, it is more of a life decision. So when most people think of being in a hospital or getting care, they think of an episodic or acute setting as opposed to something that becomes a big part of your life that really matters how close it is to your home, how close it is to your work, and that you have to, in essence, integrate as part of your life.

3:17Yeah. Do you guys do anything to make it fun or just like bring some levity to the situation since they're spending so much time with your providers? Yes. And that's actually it was a little controversy back about 15 years ago, because in our core values, we have the word fun. And people said, gosh, this is a lifesaving therapy where it's pretty serious stuff. Can you have fun? And what we said is, hey, anything that you spend 12 hours in can be made fun. And at the end of the day, humanity is about an experience. It's about feeling the joy of life. And you don't have to take it away just because you're doing something seriously.

4:02Yeah. Maybe you guys could help people like earn degrees or something by having lectures all week. Because it's such a time-consuming part of someone's life, they could do so much during that time. Yes. We have little things like even, you know, we call it the wall of fame where we put personal things about you so you get to know the person that's sitting next to you. We have bingo and we have obviously all kinds of holiday parties and that kind of thing. At the end of the day, the hope is that it becomes more of a community than a care setting that you feel support from one another. And we try to do that.

4:40All right, let's talk about the demographics. Correct me if I'm wrong, but 82 % of dialysis patients are on Medicare. Nearly half of those patients are also dually eligible for Medicaid. What does that tell us about who ends up with kidney failure in the U.S.? Well, mostly the patients are mostly government paid. And that's nuanced. There's a bunch of rules. But when your kidneys fail, you become Medicare eligible. So there's something to that. But at the end of the day, I think where you're getting to is that we're at the intersection of healthcare and some socioeconomic dynamics, meaning this patient population in general has had issues engaging with the healthcare system.

5:25And over time, it leads to further kidney diseases. And so there is a dynamic there that we have some socioeconomic challenges with our patient population that make it a bit more challenging. Yeah, so we figured out how to keep people alive when their kidneys fail, but we haven't figured out how to keep enough people from needing dialysis in the first place. Is that a fair characterization? You can obviously grab some of those in the edges. We do this therapy 30 million times a year, so we have become experts at it, and we take enormous pride in doing these sessions to the level that we do. But as you said, to keep someone from getting dialysis, there's a lot of comorbid conditions and a lot of things that you have to address.

6:12Yeah. So do you think there'll ever be a cure? Because right now there's obviously just a lifelong treatment, but no cure yet. Look, my hope is that I am doing something different with my life. I've been doing this for 30 years, and we would love, love nothing better than a cure. Right now, it is not in the horizon, but never say never, of course. Is it something you guys are working on? We are not working on that because it is not in our expertise. You would need some biopharma and some other things that is not in our expertise, but we are service providers. And we, of course, want to make sure that we unite other sites of care so that our patients get more services in an efficient way.

6:56But that's about it. But a cure for kidney failure would be really bad for your existing business. Oh, yes. But, you know, when people tell me that, I understand the question. They're like, oh, what about your motives or whatnot? But at the end of the day, the heart of a caregiver is to make sure that we give life, we take care of the person there. And just like if you talk to an oncologist and they said they cured cancer, we would all be thrilled from a society perspective, from a quality of life perspective. So please don't worry about that. We want everybody to get a transplant that can, and we facilitate that.

7:32And we would be thrilled if there wasn't dialysis. Why aren't there more transplants? What's holding us up from giving a new kidney to everyone who needs one? At the end of the day, what's the most shortage is the availability for organs, that there's not enough people giving living donations. So we don't have enough people that when they pass, they're donors. So that is the challenge right now. Yeah. So like much of health care, there has been a steady and very deliberate shift towards more at-home care, and in your case, at-home dialysis. And your home care program is growing a lot faster than in-center care, which I think says a lot.

8:16Tell us about this move for you guys. look if you have dialysis or if your kidneys don't work what we want to do is meet you at the point where you're at if for some reason you must have it in our center because you need more care you need that support we want to be there if for whatever reason you're able to do it at home and that's your preference we want to be there so at the end of the day our job is to meet the patient where they're at. What we find is that many people feel more comfortable at the beginning getting the support from a professional team that has done it before. It just calms them down.

8:56And as they shift their life, they start to consider their alternatives and get the confidence to maybe go home. And when they do it at home, is there a provider that gets them set up and then they can manage the equipment on their own? Can you just like talk us through how that works? Sure. So if you were going to go home, we would train you. Usually it takes about two to three weeks to get you to feel comfortable. Then we would have a nurse go to your house and make sure that you feel confident and comfortable. And then we would have monitoring. And so you could at any point, of course, call a nurse if something is not feeling right.

9:36But after your treatment, we can tell if your machine alarmed what was going on in your treatment. And now with the power of AI, we're trying to see if we could get some interventions to see if we can prevent some hospitalizations or if you're doing something wrong and that we can intervene before something makes you leave home. Are you finding that the patients who are choosing in-home care versus center care have the same outcomes? Is it on par with the in-person program? You know, it depends on what literature you look at. In general, people at home have better statistics, but there's always been a debate on a chicken and egg.

10:15Is it a healthier population that chooses to go home? Is it a younger population? Sure. And therefore, that's why they have the outcome, or is it the therapy itself? At the end of the day, I think that the therapies are both very proven to be appropriate in both settings, and it's just a different way of doing it. But the reality is once you go home, there's a lot of dynamics to unpack. So imagine that your loved one, your husband or your son has kidney failure, and then you live in a small apartment. And there's now a bit of a clinic, if you will, a machine that alarms and whatnot. And it does it usually at night.

10:57So we have to tackle a lot of dynamics. It's not as easy as like, oh, okay, I'm just going to go home. We have to make sure that you can be monitored, that you feel confident, infection control is handled, and that you have the support to do the therapy at home. Yeah. I hadn't really thought about that in terms of you're turning your home into a clinic in many ways and not everybody's home can accommodate that. We hear a couple of people come back to the clinic. They say, gosh, I miss my colleagues. I felt a relief. I miss the bingo. Yeah. And I felt the relief not having to concentrate so much, worried that I was, was I setting up the machine right or wrong, et cetera.

11:39I'd like to give it to someone else. So, you know, at the end, as you know, different people, different strokes, we want to make sure that we're there for you. Yeah. I mean, the best, the best treatment's always going to be the one that you can do. Correct. Yeah. Yeah. Okay. So you're solving all of these problems while also running a publicly traded company. We've had a lot of publicly traded company CEOs on this show, and it sounds really fun. I'm curious, what do you think? Oh my gosh, none of them. What do you think Wall Street misunderstands about healthcare? Because we do track on this show, we track how at least digital health is performing on the stock market compared to general tech stocks.

12:21And it hasn't been favorable in terms of digital health. I think that a lot of these companies are undervalued. But what do you think that Wall Street just like doesn't get about healthcare? In our space is that something that's probably undervalued is the human care. And so it's very easy to get into questioning about like, oh, please tell me about AI. Tell me about X or Y statistics. And so you try to put everything in a spreadsheet or something. But the reality of life is that the secret sauce is do you feel more confident? Do you feel more comfortable, et cetera? All those type of metrics are hardly ever talked about.

13:00in the relationship between the caregiver and the person. So I'll ask you, you know, when was the last time you went to your caregiver and you were just worried about statistics, right? You talk about bedside manner, you talk about other things, culture, and the things that we really try to do here at Davida. Yeah. Yeah. I mean, I don't feel like there's enough talk about outcomes, probably more talk about gross margins and not enough talk about outcomes. Well, our space is unique. I think we have the largest repository of data. Our outcomes are pretty standard across law providers, and they're tracked pretty maniacally.

13:37And so we don't have that issue. Yeah. So let's talk about this new proposal. The SEC has a new proposal that is allowing public companies, that would allow public companies to report financial results twice a year instead of quarterly. And there are pros and cons given from each side. I'm curious, do you think this is a good idea? Well, my first reaction was sweet, you know, a little less work. Yeah, and expense. Bring it all together, yeah. Right. As you think about it, though, we have to be fair. I'm an investor, of course, in many companies. And I like to take their perspective and say that might be too long a period of time to knowing what's going on in a company.

14:18So I believe in transparency and I believe that we owe it to our investors to let them know what's going on in the company, good, bad or indifferent. And so I'm a proponent of more is better. And I also understand that there's companies where that doesn't make any sense. If you have a biopharma company as an example that has one molecule, it's going to take seven years to develop and you've got to get on every quarter. It's got to be probably really painful. So I think we should just say there's certain companies that this is the right model. But for most, I would argue that more disclosure is healthy for everyone.

14:57I mean, we could leave it up to the CEOs, perhaps. And maybe that would change the way investors, how they invested. But at the end of the day, at least there are options. Because I'll say the counterpoint to that and what folks are saying is that healthcare is actually not great for these 90-day sprints. and let's say preventing kidney disease or changing how patients are cared for. These sort of investments that you make can take years to show results. And 90 months isn't really necessarily a fair time to push a company's stock price in one direction or the other. Do you have any examples of something that you've had to do, you've had to invest in, that you were like, Wall Street's not going to appreciate this in the short term because the payoff is so far away, but I'm going to do it anyways?

15:44Well, look, at the end of the day, I had a mentor that said a slogan that I'll never forget, which is you get the shareholders that you deserve. And so I think there's a lot of depth in that comment that we can unpack. But one of the things that we really like to do is just say it how it is. We know that sometimes it is not popular or well received, but at the end of the day, the truth shall set you free. And so I'll give you an example. We really wanted to make sure that we combined a lot of comorbid conditions that these patients had. We call it integrated kidney care. The government had a model to work on.

16:22And we knew that the investment was up front and it was incredibly significant. And we also told the street that we weren't going to give him much of an update because the delay of the outcomes would be long. So we gave five-year guidance at that time. We said, this is the trajectory of it. You're not going to like the first two to three years. We think you'll start to like it in year four and five. And that's what we did. And we were right. Where are you on that? What year are you on that? Yeah. Has it been five years already? It's been five years already. It's been five years. And have they forgiven you?

17:02They have forgiven us because we actually predicted it in the range where they found it acceptable. Yeah. Yeah. Interesting. Well, let's talk about your career journey. You joined DeVita's reimbursement department in 1998, and you worked your way up to now obviously being the CEO, which is incredible. I mean, this sort of tenure is unheard of today. You also have a unique background. Your father was an entrepreneur and you immigrated to the U.S. from Mexico as a kid. How did your childhood, your family life shape your views on opportunity and leadership? Yeah, well, a couple of things. I can't thank my parents enough.

17:43My dad taught me about work ethic and my mother was the brains of the operation. My dad always said, surround yourself with the smartest people. And he said, I surround myself with the smartest woman. And that was a huge success for him. And along the way, it was not a straight line. When you go to the entrepreneur ride, as you know, there's ups and downs. So there was times where there was absolutely no money. When I went to college, I had to self-fund everything because my dad's business hadn't done well. So what it teaches you is a bit about resiliency. And then the other thing that he really always emphasizes is be an owner.

18:22Don't be an employee. don't check in and out, but rather make sure you make a mark. And that really did resonate through my career. When someone gives you an assignment, just don't do the assignment. Try to see if you can help someone else along the way and then learn from the people around you. So there was a lot of lessons learned in this beautiful journey of the ups and downs. Yeah. And how does he feel about you not being an entrepreneur? You know, at the beginning, he was really worried because he always said, gosh, someone else is in charge of your destiny. What if the company gets bought or sold?

18:57Or what if your boss is not good and you get fired or something like that? But now I think he's like, wow, it turned out OK. It turned out all right. It's funny because my father was also an entrepreneur, but he really pushed me not to be and was so, so distraught when I gave up my 401k at Intel and went to the startup route. He was so concerned because he was like, I took a risk and, you know, it wasn't a great outcome for me and I don't want the same for you. So it's funny how sometimes you want the opposite for your children. And I think it's so funny. And you might skip a generation, right?

19:36Because my son's now getting his MBA and I'm pushing him to be an entrepreneur. So maybe it's a generation. So there was a time early in your career where you got called into your predecessor's office thinking you'd be rewarded for your performance, but instead you were almost fired. Can you tell us about that? Yeah, it shows you how sometimes you can have a big blind spot. I had done some things that added a ton of economic value. So I was like, OK, here I go into the CEO's office. I was a young MBA, you know, so I'm like. Get my bonus. Can't wait to get a promotion and a bonus, et cetera. And the conversation starts off pretty well.

20:20Like, hey, you've done this, this, and this. And then he said, but unfortunately, the way you're doing it is not leaving people feeling so great. And so if you don't fix that, you're going to have to take your talent somewhere else. And I was like, whoa, am I getting fired right now? How were you making people feel? The reality is I was not as sensitive as one could be about life's journey. There's a what you do and how you do it. And I was so worried about what to do because at that time the company was bankrupt. And this is back in 1999. And I was just so worried about paying the bills and making sure that we could actually get out of the hole that I almost put my feelings on pause or something that was not a positive thing.

21:15And people were saying, yeah, you get stuff done, but a huge cost. And so how did you change? How did that moment become an inflection point for you? You know, a lot of reflection as to who are you as a person. The first thing you got to start out by asking is, is he right or is he wrong? And have you been misunderstood? And the answer is, he was absolutely right. And the people were spot on. And so it was a big growing up moment. I remember coming home and feeling a bit bummed out. You know, you get kind of spun up thinking life was going well. And then all of a sudden, gosh, you weren't being the kind of person you wanted to be.

21:58But then you get on your way and say, OK, I want to show my authentic self. And my authentic self doesn't have to pretend to care. I do care. I got caught up in the urgency of the moment. And so it was a good learning lesson. And then, of course, today, what it's made me do is be a champion for the culture. And, you know, our Harvard MBAs and Ross MBAs and all these other ones that it's not just about getting it done, but how you get it done. Yeah. And how is that? So from the top, you now have thousands of employees. You know, healthcare is a very draining industry to work in. What are like some key tricks that you have for keeping people motivated and happy and performing well at the job?

22:50Yeah, you know, it is taxing in one way. It is so rewarding in another way. Our job is to remind people of the purpose. So we just had our leadership meeting and it was purpose in action. and it's this whole reminder of it's not just coming up with a strategy and this or the other, but you actually, it's about how you act, how you get it done. And so our reminder to our caregivers when they're feeling a little fatigued with where they're given much is how do you fill up your cup? We have a lot of personal and professional development plans to help you sort of get back into what drives you with purpose and remind ourselves that we could do other things in life, but what would be more giving, what would be more powerful than helping a human being next to you?

23:39And that tends to get you to just sort of reflect, pause, recharge, and come back at it. Yeah. Yeah. I love that. So in the 30 years that you've been working in healthcare, not to age you, but in the 30 years - I guess my white hair can't lie, right? I think you look great. Where do you think that healthcare has actually gotten better? and what do you think is actually worse now? You know, one of the most annoying things for me is how everybody's so dissatisfied with healthcare, but if you really stare at it, there's been an amazing amount of progress. If you look at breast cancer, for example, and the survival rate, off the charts improvement.

24:19You have HIV, it used to be a death sentence. Now you take a pill and you're good for six months. My dad had his hip replaced in his 70s. He walked out of the hospital. Yeah. I mean, so you just kind of go around the spectrum. Cardiovascular surgeries become non-invasive, which is wild. Yeah, there's so much. And when did you ever think you could take a pill or get an injection? You'd lose weight. Most of the side effects would be healthy for crying out loud. Yeah. I mean, we've made amazing, amazing progress. And I get the dissatisfaction. I think, you know, if you grab the other side of the coin, where am I the most frustrated is the data interoperability.

25:01We just go into this world where data is so powerful and we could do so much with it. And the fact that we fragmented that data is really, really frustrating to me. Yeah, agreed. Do you think that there's a way we can continue to see the sort of progress that we've had and continue to move forward while also bringing health care costs down? I think the answer is yes. One of the things that I really pontificate with my healthcare geek, so I won't call you a geek, but I'll call you an expert. Happy to be a healthcare geek. I would love to hear your opinion on this. Healthcare, we can all agree it's incredibly complicated, right?

25:47It's got all these players from policymakers to payers to providers, pharma, et cetera. But the real problem that I think is, who's our decision maker? So the more complexity you bring to something, I think, the more governance you need. You need someone that can actually listen to all this stuff. And at the end, whether right, wrong, or different, at least come up with a decision. And in healthcare, one of the biggest challenges I see is we can identify the complexity, but we haven't identified anyone to be accountable for the trade-offs. And so what is your point of view on that? I've read your book, and I think I have a little hint, but what would you answer to that?

26:37I think that one of the reasons we don't have that one kind of responsible person is because the payer of our health care until you're, what, 65 changes every two to four years. Except in your case, you've had the same payer for a very long time. But most people stay at their jobs for two to four years. And so we don't have that longer time horizon to invest in things that a patient might want and might be better for their long-term health. But if that value doesn't accrue until you're on someone else's dime, someone else's health plan, there's no incentive there. If we had a functioning, I don't know, single payer or at least coordinated payer where there was an incentive to care about our long-term health outcomes, people might not end up in dialysis.

27:26Maybe they would be able to take the steps earlier on to live a healthy life. Well, I think I would agree theoretically with what you pose. But the reason why I kind of question it is if you look at other countries where the government is a single payer and we operate in many of these countries, their health care system is actually worse in many regards or at least challenged in different places. And we have dialysis patients. So if you were theoretically going to say that the incentives were aligned, they wouldn't have any of these because they would do preventative care. Yeah. But we see of no country to have addressed this issue up to now.

28:09Are the prevalence rates higher in the U.S. of kidney failure than in countries with single payer? In different demographics, it depends how you look at it. It's higher in Hispanic and black communities, but there are other countries that have a higher prevalence. Yeah. So what do we do? That's a big question. I like to actually close all my conversations out with this question, but if you could wave a magic wand and change something about our healthcare system instantly, what would it be? I've got many, but I'll start out with, we got to bring joy back to the clinicians. We just have to do that.

28:45Number two is, I think the moment you're born, you got to be given a health record and you should just keep it for life and it should be easy to see your allergies, et cetera. And then number three is we got to have someone put Humpty Dumpty back together. We say there's so many specialties between the mind, the body, and the soul, if you will. We got to put them all together at some point and hold somebody accountable for looking at us as human beings and not just a subspecialty. Yeah, I love that. All right, Javier, great chatting with you today. Thank you.

29:48edited, and mixed by Kyle Moore. Visit our website, heartofhealthcarepodcast.com for show notes and details.