Full Transcript of CFO StudioLIVE Interview With Sandra Clarke, CFO, Blue Shield of C.A.
Andrew Zezas:
CFO StudioLive presented by CFO Studio offers livestream real time interviews with highly accomplished CFOs from prominent New York Stock Exchange, NASDAQ and large privately held companies and notable tax exempt organizations conducting business in North America. CFO Studio’s guest audience can post questions and hear CFOs live responses. Visit cfostudio.com to learn more and reserve your seat at future CFO StudioLive interviews. Today’s CFO StudioLive interview will be available along with our others on podcast at cfostudio.com/podcast. Good morning, good afternoon, depending upon where you’re coming from. I’m Andrew Zezas, publisher and host, CEO of CFO Studio, and it’s wonderful to have you with us today. I’d like to remind you before we get started that we have some other exciting CFO StudioLive interviews coming, in addition to today’s exciting interview, of course, and over the next few weeks, we will be scheduling interviews with the CFOs of ConAgra, Gogo Air, IFF, NBCUniversal, and many others.
We’ve had a wonderful run thus far with some great CFOs from some wonderful companies, and you can watch all those podcasts again at cfostudio.com/podcasts. I’d like to introduce you to today’s CFO StudioLive interviewee, Sandra Clarke. Sandra Clarke is senior vice president and chief financial officer at Blue Shield of California, a taxpaying nonprofit health plan with over $20 billion in annual revenue serving more than 4 million members in the State’s commercial, individual and government markets. Sandra oversees the company’s financial strategy, actuarial functions and financial operations, in addition to leading enterprise process transformation, focusing on transforming the member experience while reducing administrative expense. Sandra is also responsible for corporate development where she plays a senior role in devising and enacting Blue Shield’s strategies to support growth and realize the company’s mission to transform healthcare.
Now, a little background on Blue Shield of California. Blue Shield of California strives to create a healthcare system that is worthy of its family and friends and sustainably affordable. Blue Shield of California as a taxpaying nonprofit independent member of the blue cross Blue Shield association with over 4 million members, nearly 7,000 employees, and more than $20 billion in annual revenue. Blue Shield of California and its affiliates provide health, dental, vision, Medicaid, and Medicare healthcare service plans in California. It was founded in 1939 in San Francisco, and now is headquartered in Oakland, California. Company is also focused on supporting California communities. The health plan has contributed more than $500 million to Blue Shield of California foundation since 2002. It gives me great pleasure to introduce you to a longtime friend, a friend of CFO Studio, the CFO of Blue Shield of California, Sandra Clarke. Sandra, it’s so nice to have you with us today on CFO Studio. How are you?
Sandra Clarke:
I’m doing well. Thanks, Andy. Nice to be here. I’m honored to be in this company, looking to have some fun.
Andrew Zezas:
Well, I hope you’re safe from the wildfires that have been going on in California, and I hope the weather is good for you out there?
Sandra Clarke:
It’s a beautiful day today. I’m very fortunate that, while the smoke has bothered us a few days, it’s not near us today. So yes, thanks we’re safe.
Andrew Zezas:
Great, great. Sandra, there’s an awful lot of interesting things going on in the world these days. I know you know the Chinese … Yeah, to say the least, interesting. The Chinese say, may you live in interesting times. There’s an Asian way of life, a Chinese way of life called weiji. Weiji is known, to people who really don’t understand it, as having a definition of chaos. But in actuality, weiji is known for what can come from chaos, and the belief is that if you live a life of weiji, you’re living in a life where opportunity comes from chaos. I think you’ll agree with me that there’s an awful lot of chaos going on in the world and opportunities are coming out of it.
Sandra Clarke:
That’s right. My boss says likes the Rahm Emanuel saying, “Never let a good crisis go to waste,” meaning, see what you can learn from it and what you can make happen as a result. So, very similar. I completely agree with you, but sometimes I wish we could have just maybe few less things happening all at the same time.
Andrew Zezas:
Yeah, I would agree. It’s a lot all at once, isn’t it? Well, given the recent health and business crisis or recent, I should say, recent current ongoing, how’s Blue Shield of California faired overall?
Sandra Clarke:
Well, I’m sure if you’ve read any of the news around the for-profits health plans that have provided their earnings for the first couple of quarters, you can see that health plans overall have been in a pretty secure position for the first half of the year, and Blue Shield was no different in that respect. We saw a massive drop off in the use of healthcare services, and that’s essentially our cost of goods. So, we had a significant decline in that for several months. California moved into shelter in place at very early in March and we started to see the decline then, and it continued pretty much all the way through May. We were paying out a significantly reduced volume of claims for members in that amount of time. And it was a much bigger change versus what the cost of COVID turned out to be, at least in California at that point in time. We finished the first half of the year in a pretty solid place.
Andrew Zezas:
That’s wonderful news. Now, you and I know each other from a former life, and I think I have a good sense as to your focus and a little bit of your expertise, of course, but you’ve always struck me as a people person and someone who recognizes the value of human capital and human resources and what people do for an organization. I’d be curious to know, in this mess, in this crisis, what particular steps has Blue Shield of California taken during the crisis for the purpose of supporting its employees.
Sandra Clarke:
It’s been interesting. We sit near Silicon Valley in the heart of tech space, and so everything that we do often get held versus what is Facebook doing, what is LinkedIn doing, in comparison. But we made the decision actually before the state did that we were going to send everybody home, and we had a small portion of our employees that were full time teleworkers before this, and we moved about 6,700 people all to work from home in a matter of about three days. We had a brand new CIO who came to us. She’s got an Intel background as well as other really interesting experiences, and she had just started about two weeks before that, “Welcome to Blue Shield.” She did a phenomenal job, and we got everybody home. We have provided additional leave time for people to deal with COVID related challenges, whether it’s to care for a family member or to deal with having to now be an at home teacher, as an example.
We are also now looking at what kind of equipment are people going to need to stay and work from home for a longer period. We gave people a week at 4th of July. We said it’s going to be a mandatory shutdown and everybody is going to take the week off. At the time that we did it, we thought perhaps this will be a good thing from a cost perspective. What it turned out to be was a really positive experience for people who were pretty overloaded from the pace for a couple of months. The other thing that we’ve done is we’re trying to be very consistent and structured about making sure people have the time that they need with … if they have children and they’re trying to balance that at-home teaching with getting their job done, so the flexibility that they need from an hours perspective.
My team has said, for example, in a couple of groups where they have a lot of younger school age children, we’re not going to start meetings until later in the day, so people have a little more flexibility to deal with technical issues that might occur. A number of things that are both tangible and intangible, because employees are also dealing with the mental stress of shelter-in-place and the restriction around services and the concerns about family, things that everybody is. On top of it, they’re trying to support other people who are in that same situation.
Andrew Zezas:
Wow. It sounds like you guys are certainly being mindful of your employees, and I would imagine that the reaction you’re getting from employees is very positive?
Sandra Clarke:
It is. As a matter of fact, in all of this, we do an annual employee survey. It’s our version of … many companies have some kind of an employee engagement survey that they do every year. We do one through an organization called Great Place to Work. Our head of HR and CEO has been very thoughtful over the last, probably six or seven years, certainly before I arrived, around we need to make this a great employee experience. You have to feel like this was a great place to do meaningful work, because what we’re trying to do in terms of changing healthcare is not easy. So, you have to feel good about being part of Blue Shield in order to be all in on what that change requires. I think we were all surprised at just how positively employees reacted to what we had done, and we had great scores on the survey, and we are a certified Great Place to Work as a result, which we’re very pleased with because it’s not about being able to say, “Oh, we had a survey.”
It’s that employees are genuinely feeling that Blue Shield is trying to do the right things for its healthcare providers, for its members and for its employees, because you have to have that three-legged stool.
Andrew Zezas:
I would imagine that you’re getting the same positive response, not only from your employees, but also from healthcare providers, as well as your customers and clients.
Sandra Clarke:
Yeah. I think our providers, the feedback that I’ve received is that they recognize that we certainly have tried to voluntarily do more than many of our counterparts. We announced a program back in April to help provide advanced funding for providers who were dependent on a fee for service environment. What that means is that, depending on the type of health plan coverage you have, the doctor only gets paid if you go in and see them. In a normal environment, that provides a pretty consistent stream of income for a provider. But then all of a sudden, that door is closed and providers don’t have that anymore. For a number of them, it was a big hit, and not just to them, but to their office staff. So, here you are in the middle of a healthcare pandemic, and people are having to lay off doctors, staff, and nurses, because they don’t have any income coming in.
We extended financial assistance that way. We’ve also been working to try and restructure contracts. There’s been a move in the industry towards this notion that value-based payments where you get paid, not just for the patient coming in to see the doctor, but the patient satisfaction and the quality of the care are a better cost structure for the overall industry. That comes with a more assured base of income to the provider. So, we’ve been trying to work with our providers on shifting more to that type of contract, which also gives them a more assured baseline income too, so a number of different things. I’m using providers to include hospitals as well as independent physicians. Hospitals were hurting too. They had to clear out everything, but the only parts of the hospital that might’ve been busy were the emergency room in the ICU. That’s not sustainable for anybody.
Andrew Zezas:
Yeah. Wow. What tremendous efforts you guys have put forth. Now, you mentioned you sent your employees home over a three day period. Prior to the pandemic … I’m sorry, I should say three day period, pretty tight timeframe, massive undertaking to move that many employees to a home-based work environment in such short time. But prior to the pandemic, did Blue Shield of California have a significant portion of its workforce at home?
Sandra Clarke:
Not on a full-time basis. We’ve always had a telework option where people could work from home one day, a few days a week, and that all of a sudden had to change to a full time environment, so it was different. And we had a huge block of people who spent five days a week in the office, particularly call center people, claims processing. Even large parts of my staff were in the office 90 plus percent of the time. So, they didn’t have the equipment at home to be able to access the systems that they needed to on a continual basis. The other thing that was interesting is how much more bandwidth that takes in the company systems to deal with the phone calls, the VPN lines, that sort of thing. That said, our IT team did a phenomenal job of really amping that up in a short period of time. I’d say it took a week or so to shake out, but I did a virtual close within a couple of … for the quarter, no less, and closed out the year end 2019 audit all after we had moved to work from home.
We really went through it pretty smoothly. I was sweating a few bullets, but we got through it pretty smoothly. I was very glad for the system support that we had, but the ERP system that we were using played a big role in it, and above all, it was the people. They were just bound and determined that we were going to make this work, and I think that’s really why it did.
Andrew Zezas:
Wow. You mentioned how you’ve your employees have reacted very positively. So, it’s apparent that they recognize what leadership in the company as a whole is doing for them. From a motivational perspective, I’m sure the company is taking particular steps, but I’d also be curious to know how, how the company, how Blue Shield of California is focusing, not only on motivation, but on maintaining its culture. When you’re a people-driven organization, culture is everything. Then perhaps you can also expand that to the steps that the organization is taking to ensure operating efficiencies and to drive profitability.
Sandra Clarke:
The operating efficiency has been interesting because productivity, as I’ve read happened with most companies, just went through the roof in the early days. People aren’t commuting anymore. Oh, let’s start meetings at seven o’clock. How about not. I am not a morning person, but days got longer, but people were cranking through a lot. I think I’m starting to see that we’ve hit the edges of that. I don’t see additional operating efficiency happening within our current environment. It’s just you’ve mapped people out. We are continuing to work on that process transformation that you mentioned that falls under my team, and that is to continue to automate and add more digital options for a lot of interactions with our members and our providers. I’m sure if you’ve ever gone for a test, you’ve had to have a prior authorization from your health plan.
How can we make that more seamless for people so you don’t have to wait two weeks and it has to have a lot of human intervention, as an example? We continue to work on that project because long-term that’s how you drive additional efficiency. The corporate culture part has been interesting. I think the company overall, people come here because they absolutely buy into this notion that we want to change healthcare. You said it at the beginning, and when I first heard it when I came and met with people from Blue Shield, I thought, wow, they all talk this way. But we do, because we all believe that so deeply, which is we want high quality healthcare. When you say you want it to be worthy of family and friends, you’re really trying to drive for high bar, and we want it to be sustainably affordable.
There’s no shortage of conversation in the culture these days about the pace at which the cost of healthcare is increasing, and people just can’t afford it. Having that as a foundation for everybody, I think, helps. And nowhere do you get to practice that more than in a situation like this? In addition to that, we were doing weekly, and now I think they’re biweekly meetings with managers and above, across the organization to give them updates, what’s going on with COVID, what are we doing around it, What else is going on with the company? Just to continue to have that degree of connection. Then there were a lot of tools and suggestions that our HR team introduced so that we could, within our individual functions, also work on that. They did a phenomenal job of beefing up our ability to use the video conferencing equipment and be able to have more of virtual lunches, and just things like that in order to stay connected.
My big concern was that if you saw corporate culture start to deteriorate, not only could it be a de-motivator for productivity, and that people might leave, but that can create risks in your control environment. You’re in a much more dispersed situation. I think it can be more challenging to keep that level of attention around controls. Not that anyone wants to do the wrong thing, but when you’re sitting next to other people day after day, you will hold one another accountable in a slightly different way than when you’re doing it like this. How do you make sure that everyone continues to feel that degree of ownership and responsibility? That’s the culture and it’s the feeling about, yes, we’re on a mission to change health care, and we’re going to continue to do it in a way that stays compliant and ethical.
Andrew Zezas:
Wow. That’s powerful. That’s powerful.
Sandra Clarke:
We believe … yeah.
Andrew Zezas:
You don’t seem too tired. That’s an awfully heavy lift you’re doing. And it sounds like a wonderful, wonderful place to work.
Sandra Clarke:
It is.
Andrew Zezas:
Let me ask you about your industry, about the healthcare industry in particular. It goes without saying that this is the most unusual time, and I’d love to be asking you, what it looks like for your industry in the recovery, but we don’t really know when that’s going to be recovery from the health crisis, recovering from the business crisis. I guess I’ll pose it in the context of today and beyond. What specific challenges do you see the healthcare industry facing?
Sandra Clarke:
Well, I think the first one is, what does recovery look like? Because one of the challenges that I think everyone in the healthcare industry is trying to sort out is the … I wouldn’t even call it a second wave, but we’re continuing to ride this COVID wave. As it ebbs and flows, what does that look like for people’s ability to access healthcare services? We saw this huge avoidance and deferral of elective, and I’ll use that term very loosely, optional procedures or elective procedures for a number of months. Meaning, people said, “I can live with the pain in my knee. I don’t have to go get the knee replacement right now. I’ll wait until it’s safer to be in a hospital.” Well, at some point, depending on what those things were that you deferred, you’re going to have to get them done. Has the situation gotten worse because you waited? Therefore, what does that look like?
There is just a maximum capacity that the system has when people start to return to their dentist, to their doctors, to their hospitals. What does that look like? So, it’s cost, it’s volume, it’s the severity. So, predicting what that will look like so you can make good actuarial projections and therefore good business decisions is, I would say, one of the biggest challenges. Then, we’re all trying to figure out, I said, don’t let a good crisis go to waste, what are the things that we’re learning from this that we want to continue to implement? Telehealth. We’ve been trying to get a bigger adoption of telehealth for a while now, and all of a sudden, telehealth has exploded. Well, that hopefully stay sticky in certain areas, but it’s not appropriate for everything.
I have an employee with a relative who found out, once this relative was able to go to the doctor, that he received a diagnosis of cancer, and it’s advanced because in a telehealth visit, it’s really difficult for the doctor to suss out just how significantly progressed the disease might be. Where does telehealth makes sense and where doesn’t it? I think that’s another thing. There are lots of digital technologies of self-service technology that make a lot of sense in healthcare. There are not a lot of reasons why certain parts of healthcare shouldn’t be as easy for consumers as any other experiences for them. Then there are things that you need to be a little more thoughtful about. “No, you really didn’t need to go in and get that checked out in person.” So, what can you do there? And with the low in services in certain areas, how can you advance some of those things? Because the system isn’t quite as overwhelmed in that particular area.
So, making some of those trade offs. But really, I think the biggest challenge is not so much around the technology. That’s more of a good challenge or the exciting part. It’s what does recovery look like from a use of healthcare?
Andrew Zezas:
Let’s stay with that concept of recovery. As we speak, there are changes that have happened over the last six months. What changes, either in employee behavior or even organizational changes, do you think will remain in place as, let’s say, as the economy and the health crisis recovers and the world finds balance?
Sandra Clarke:
I think one of the biggest ones, and it’s not unique to health-care is going to be the notion of people wanting more flexibility about where they work. In the first couple of months, I heard lots of, “Yeah, this is great. I’m going to work from home 100% of the time now. Who needs to go into the office?” After a month or so, I’m saying, “Me, I adore my husband. My family is great. At the same time, I miss being in the office, at least to some degree.” You can’t have the same type of dialogue. You can’t read the body language as well. You can’t whiteboard things in the same way that you can when you’re together. You can’t do a drive by somebody’s office because everyone’s so highly scheduled on meetings. So, there’s some benefits, and we’re starting to hear a little bit more of that.
I think people will come back into the office to a certain degree, but they’re going to want a lot more flexibility than the old way of doing things. I think that’s going to be a really big change regardless of the industry. The other one that I’m going to interested to see how it plays out is, we had all been marching toward this concept of open offices. We wanted much more open space, tiny little workspaces, because you’re all going to collaborate. That doesn’t look so good in the face of COVID, right? You need a little bit more space in between one another. Maybe you’re not all going to want to huddle over there. Maybe you shouldn’t for a little while. I think that those types of work habit changes are likely to stick at least for the next year or two.
Once there’s really hard immunity, and there’s really a solid uptake on vaccines, perhaps it will swing a little bit more back, but I think that’s going to be pretty interesting for the next couple of years. The other thing that I think is going to change about work habits is that we were all forced to figure out different ways to interact when we were used to being face to face, not just in an office, but I’m talking about a business travel. The whole idea of you had to go and be face-to-face in order to do an M&A deal, that you had to be face-to-face in front of a customer to do a presentation, that the only way to do real networking is in person. I believe we’re finding that there’s still a lot of situations where that is true, and there are an equal number where, no, you really probably don’t need to be face-to-face, and you can do these things in a more virtual manner.
I think it’s going to shift people’s perception of when they need to do business travel, and given their concerns around health and safety, I think that … Well, look at what’s happening with the airline industry right now. People are going to be more cautious about when they travel, at least in the short term.
Andrew Zezas:
I would concur with all of that. In fact, given my background coming from the corporate real estate world, we’re very heavily involved in conversations with companies about re-imagining, how they’ll their employees will return to the office and to the warehouse. I’ve had the pleasure of having some interesting conversations with some of your peers. In fact, one is the CFO of a well-known food brand company that manufactures various food brands that we all grew up with. They’re based in the Midwest. One of the comments that the CFO made to me early on in the pandemic was that they realized that because of the nature of their employees, they hired a lot of former immigrants, a lot of working class folks who worked in their factories, and he spoke about a couple of different ethnic groups that tended to have large families living in smaller homes.
He said that knowing who their employees were, they recognize that their employees were actually safer in the plants than they were at home because of the procedures that were put in place in the plants, and the fact that they recognize that these particular groups weren’t necessarily following safe practices at home. So, they took on an even bigger responsibility of keeping their employees safe. The other extreme that we hear about is city facilities. The first question is, how do you get employees up to the 32nd floor in a city facility when elevators are designed to hold 10, 12, 15 people, and no one wants to be in an elevator with 15 people going to the 32nd floor. It can take nine hours if you’re only sending two people up in an elevator at a time to fill a building. That doesn’t work. If you do figure that out, when they get to their space, you’re absolutely right. The days of benching, which is one of the office environments that companies were moving toward, where people were sitting almost shoulder to shoulder, that’s gone.
Employees want larger spaces, they want cubicles, they want plexiglass, sneeze guards. They want their work surfaces to be sanitized multiple times during the day, especially if they’re sharing facilities. They don’t want to sit in a facility until they’re sure it’s been sanitized, and we’re not talking about just having wastebaskets emptied. We’re talking about sanitization. They want HVAC systems that scrub the air. They no longer want to sit in closed door conference rooms and breathe everyone else’s air, maybe infect others. Then, even before you get to that point, the question is, how do you get them to the city when people are fearful of traveling in dense pack, buses, trains, and subways? We started hearing almost immediately from companies who were asking themselves these very same questions and saying, we need to move employees out to the suburbs.
One of the reasons being, employees feel more comfortable traveling in their own car with no one else and not dealing with mass transit and parking in an open air parking lot, and walking up three flights of stairs versus taking an elevator to the 32nd floor. I would concur, I think work styles and work preferences are going to change. They’ve already changed and they will continue to change. However, with large companies, I think it’s impossible to send everyone home permanently, and that’s not what we’re hearing from most companies.
Sandra Clarke:
I agree.
Andrew Zezas:
You would agree with that?
Sandra Clarke:
Yeah.
Andrew Zezas:
Yeah.
Sandra Clarke:
Yeah, I would. I would, yeah. I think it’s going to change the frequency you’ll be in the office. But yeah, I think you’re going to end up back in the office for some period of time. Sorry, go ahead.
Andrew Zezas:
And that will change. That design will change, the way people flow in and out will change. But smaller companies are asking themselves, can they work from home completely 100% of the time? And some of them will. But it has a lot to do with what the functions are as well. You mentioned technology a couple of times. It’s been my opinion, Sandra, I would imagine you’d agree that, aside from the heroes that we know exist, the healthcare workers, the doctors, the nurses, the people who supply them, I think that list goes a lot further into delivery people and warehouse people, and the guy who still makes sandwiches at the deli, and police and fire, and the list really is so long with people who helped us all get through this and continue to do this, to do that. But I think in the business world, the unsung heroes are really the IT people, the IT executives.
Right? Think about it. Without them, we wouldn’t be having this conversation, and every conversation is now digital. It’s email, text, phone, or video. That couldn’t happen unless the infrastructure and the technology was there, so kudos to the technologists. Which leads me to my question, are there technologies that you see in the future that will be a specific benefit to the healthcare industry and the people it serves?
Sandra Clarke:
Yes. By the way, big shout out to the firefighters, especially in California right now, they’re completely exhausted trying to deal with COVID and multiple fires. I just wholeheartedly agree with what you said about the list of essential workers. On the technology side, in addition to telehealth, the ability to do video visits, we are working really hard on as much technology as possible to put fax machines completely out of business forever. Healthcare is still an area that uses fax machines to transmit information, as crazy as that sounds. We are working on technologies that … I should back up. The whole idea about digital and electronic communications is one that we fully support and we’re moving as much there as we can. The interesting thing about healthcare is that you are required regulatorily to produce a certain amount of your materials in paper and mail them. It is a federal requirement.
Andrew Zezas:
Wow.
Sandra Clarke:
Yeah. You can’t get completely away from paper. There are certain things that you must send to notify people on a physical sheet. I think that we will not 100% of the way to electronic communication within healthcare, at least not in the next few years. The strides that are being made around telehealth and improving that, we are working on how to make more claims processing real time, so that, as you are leaving the doctor’s office or the hospital, you know exactly how much the hospital knows, and you … [inaudible 00:35:57] how much it’s going to get paid by the health plan and how much it’s supposed to get paid by you, and more importantly, you know. You’re not waiting for a bill six weeks later to find out what your share of the CT scan was, which think about it, in what other industry does that happen?
We believe that that’s a technology that’s past time to introduce, way more complicated than I could have appreciated, but really, really important. There are things just around the doctor’s visit that we believe can be improved. So, we’re piloting various tools that allow the doctor to go back to having a conversation with you, and there is electronic voice transcription going on simultaneously so that the doctor doesn’t have his back turned to you for the bulk of the visit, furiously typing into a medical record, single back to having a real conversation. And then the doctor can review that information and it gets uploaded into your record. Again, making this all much more near time and creating a much more personal experience. So, we believe those technologies, and a whole list more, are really vital. You mentioned about the cities and people feeling safer in the suburbs.
There are a lot of people, and we saw that with the agricultural workers here in California. They should have a choice about where they live or how they live, and it creates additional issues with slowing the spread of something like COVID-19. That really points to the notion that’s called off in social determinants of health, which basically just means that there are things in your environment that have a very, very significant impact on whether you’re healthy, how you’re healthy, how quickly you recover if you’re sick. There are things that are combination of low and high tech that you can do around that to help improve people’s health so that they are having positive interactions, but hopefully, fewer interactions with the healthcare system. I mentioned prior authorizations earlier and making those much quicker and more automated, as opposed to the doctor’s office having to call the health plan, find the right person, explain the situation and get the approval.
Even something like, when you have to decide on a treatment plan and give your authorization for … maybe it’s an oncology treatment, maybe if it’s something else. I hope you’ve never been in this situation, but you probably know a family member who is told by a doctor, it’s usually an elderly family member too, “Well, no, you just have to go do this.” And they get that piece of paper that’s supposed to be their, here are all your options and now sign off on it, and they really don’t understand it. There are ways that you can use artificial intelligence to do this in a more interactive way and make it much more specific to the patient’s situation and make sure they truly understand it before they go forward. Like I said, it’s a laundry list, but those are some of the big ones that we are working on now, and we expect that some of what people have experienced during this pandemic will accelerate their adoption.
Andrew Zezas:
Wow. Oh, wow. My goodness. So much going on in your industry. How do you keep track of it all? But it also seems to be a very, very … being respectful of the human impact of this crisis. I know nothing that you and I are saying is meant to diminish any of that. From a business perspective, which is really the basis of this conversation, what you’re experiencing just seems incredibly exciting. I think years down the road we’ll look back and say, this was a time of change and this was a time of evolution, and out of the chaos and the pain and the difficulty that a lot of people are experiencing, some very positive things will have occurred. We hope. Right?
Sandra Clarke:
Yeah.
Andrew Zezas:
With change, I’d be curious to know, what do you think are going to be some of the more dramatic changes? We’ve talked about technology, we’ve talked about changes in work style. What do you think will be the more dramatic changes that’ll come out of this pandemic?
Sandra Clarke:
I think some of the technologies will make significant change in how you interact with your physician. I also think that this is going to push a number of consumers to be much more assertive about what they want to see in their healthcare. I was conducting an interview a couple of days ago with … it must have been last Friday with a young woman, who was talking to Blue Shield coming from outside the healthcare industry. I said, “Well, as a consumer, what do you think of healthcare?” She said, “The lingo is confusing, it’s complex. You definitely don’t have a relationship with the health plan. You have your relationship with your doctor, and that’s if you’re lucky and you actually have a doctor that you get to see all the time,” and a number of other words to that effect. I don’t think, for what healthcare costs, people are going to continue to put up with that.
They’re seeing what they’re paying and what they’re getting, and now with the economic situation, the way it is, I think consumers are going to continue to be assertive that they expect this whole area of how they’re treated and what they pay for it, to have some pretty fundamental shifts as we move forward. Yeah, you’re right, Andy. If you ever thought that working in a nonprofit would be sleepy or boring, I can absolutely guarantee you that is not the case, especially in this industry. I have plenty to do.
Andrew Zezas:
At least not in this not-for-profit.
Sandra Clarke:
That’s right. That’s right. At least not in this one. Yeah.
Andrew Zezas:
Sandra, you’ve always struck me as a big picture thinker. Share with me your thoughts about the effects of the crisis on the US and the global economies.
Sandra Clarke:
Can I leave it at that? Well, it’s sure not V-shaped. I think it’s going to be a very uneven recovery. CNN has a map that I saw this morning where they’re showing how recovered different parts of the country are, and they’re saying overall, the country is about 78% of the business levels that it was in March. I bet if you go talk to somebody in different parts of the travel industry or you go talk to the small deli owner who depended on the business crowd at lunchtime to survive, they’re going to give you a much different picture.
Andrew Zezas:
Yeah, I would agree.
Sandra Clarke:
I think it’s going to be very, very, very uneven. I think that small businesses are definitely at risk, particularly those that can’t naturally go to a virtual environment. What I hope it doesn’t do is shake out such that there’s no competition left in certain areas because only the strong can survive and so you end up with these oligarchies. Oligopolies, excuse me. It’s clear there are parts of the world, like China, that have really started to recover and they’re back to “normal.” I think it’s also going to be different region by region in terms of how it goes. The stock market here just doesn’t seem to bear any resemblance to reality. It defies the laws of gravity on a regular basis. At some point, I don’t quite understand how that continues. Now, I’ve got stocks of my own, my 401k, etc, so it’s great, on the one hand. But on the other hand, you have to have something behind it. I think it’s the true production recovery cannot happen at a reasonable pace.
At some point, those two things are going to have to get reconnected, and that could be a risk as well. I would have told you in March that I was concerned about liquidity overall in the US, but that seems to have cleared out. I really think it’s just more around who can adapt and which industries were the most dependent on activities that are not readily adaptable. Does that answer?
Andrew Zezas:
Well, you mentioned the CNN map and the purported average recovery. I think I agree with you that there are industries that would differ. In fact, averages are a dangerous yardstick because they’re not very specific. I can point to industries, like you mentioned, travel, events planning and others that are still at a relative dead stop versus having … I had a conversation with a CFO of a liquor distribution company based in East Coast. Yeah, exactly. He shared with me, in the months of March and April being $10 million in sales above their year over year projections, in each of those months. Now, I don’t know what the reference point was, but $10 million, that’s not, hey, as they say. It’s all over the board.
But I would agree. I think it’s a peculiar recovery, and I too am concerned about how the stock market is basically disconnected from everything else that’s going on in the economy. But grateful that for now the stock market’s doing well. I hate to use the term recovery only, because it’s … some people say recovery, some people say bounce back. I’m looking for balance. I’m hoping that the world and the economy comes back into balance because we’re not going to return. I’m convinced, I would imagine you’d agree with me, that we’re not going to return. We’re going to evolve into something.
Sandra Clarke:
Yeah. That’s a good way to put it. Yeah.
Andrew Zezas:
It’ll be something else. When we achieve that balance, do you anticipate that the US economy will soon return to a position of evenness, steadiness? Do you think it’ll be a sustained recovery? Do you think it will be a shaky recovery? What’s your expectations?
Sandra Clarke:
I think it’s going to be shaky for at least another year. I wouldn’t expect steady growth until people feel more comfortable that any investment that they make, whether it’s a personal expense type of investment or an investment that a business makes, that they will be able to actually realize the benefits from it. I’ll give you an example. In California, in the County where I live, back in June, they allowed hair salons to reopen. But in order to do that, they had to make massive changes to their ventilation system like you were describing. They had to invest in a lot of personal protective equipment and plastic shields to separate booths, and they had to cut down on the number of people. That was a significant investment for those businesses to make after not having any income for several months. A number of them made it, and people started coming back in, and within two weeks, our county shut them down again, because they didn’t like the direction that the numbers were going.
I’ll save my comments and thoughts on that. But the point being is, when they are allowed to reopen, if the county or the state put additional restrictions around them, if I were that small business owner, I might be saying, “And why would I go through this again when you might just turn around and tell me I can’t do business?” That’s a really small example, but I think many, many industries, we were looking at what it was going to cost us to make the safety modifications in one of the buildings that we own, which has only two floors, not the 24 in Oakland where I sit. Because you’re right, two people in an elevator doesn’t work. But in this particular building, we were going to make those changes, but as we started to look at the timeline for putting them in, all of a sudden, case rates started to rise again in that county, so then you go to put things on hold.
I think that inconsistency and people’s ability and willingness to invest, and then of course the same thing on the personal side, are you going to go invest in a new home, a new washing machine, whatever it is when you’re not sure about the economy? I think that’s going to make the economic growth unsteady and uneven, probably for at least another year until we start to get clearer direction on things. I don’t think that’s unique to the US either. I think that’s probably global. I’ll tell you, the other thing that I expect to play into that is supply chain. People really are going to be taking, based on what I’ve read and just from common sense, a hard look at the choices that they’ve made around supply chains.
So, in prior businesses where I’ve worked with a supply chain referred to goods and products, excuse me, versus healthcare services, we had, in many cases, said, you know what? We’re going to one supplier with maybe one backup because we can get the best pricing that way, and we’re going to use labor arbitrage. So, we’re going to put it in the country where we can get the cheapest rates. Well, now, you look at it and say, well, if I’ve got both of my suppliers in that country and that country has a major health event, or anything else, fires, political instability, is that really a good idea?
Because if you can’t get a product, think about your grocery store shelves for a while. For that matter, a lot of that was that everyone had gone to just in time inventory. I think there are a lot of things that people are going to be rethinking there that are going to have an impact on how the economy evolves as well. But I agree with you with evolution is the right word, not recovery.
Andrew Zezas:
Yeah, yeah, yeah, yeah. Well, Sandra, we’ve got a few more moments. I’m going to try to squeeze in a couple more questions with you. This has been a wonderful interview. I’d like to switch to something you mentioned before, you briefly referenced M&A. I was speaking with one of your peers at a global … one of your CFO peers. He happens to be at a global telecommunications company, and he was very excited to share with me that in April, they completed, I think it was a four and a half billion dollar acquisition that started 45 days sooner, and no one ever met face to face, no one ever shook hands, no one ever touched a piece of paper from start to finish, and he didn’t believe it could happen. From his perspective, he thinks a whole new world has opened up. What do you think happens to M&A going forward? Do you think it changes permanently as a result of what we’re dealing with now?
Sandra Clarke:
I think it depends on the industry and the nature of the businesses. If it’s an acquisition, I think a lot of this will likely continue. As you said, I have corporate development, which includes M&A under my team. And we are supporting a couple of our subsidiaries who are in the midst of doing some acquisition analysis. I think that you can achieve a lot virtually. I think that if you are doing … So, anything where it’s much more about the business transaction, does this have synergy, is the price right, are the incentives right? That I think will continue, to a large degree, virtually. I think if it’s what I would consider a true merger, and I know not a lot of those happen anymore, except maybe in the nonprofit world, I expect that there will still be a degree of in-person interaction, even if it’s six feet or more apart.
I think that, when you are in a … The way I’m defining the two differently is, in acquisitions, a lot of the people that are in positions that would have to work together in the future, one group ends up leaving in a short period of time. They stay long enough to make sure the integration happens, then they go. In a merger, when I worked for Daiichi Sankyo, that was a true merger. They merged Daiichi and Sankyo, and they combined to the management teams. That was more than 10 years ago, and those people still work together. So, you’re signing up essentially to be married to these people for some period of time. I would expect you’re not going to go to just online dating. I think there’s going to be some degree of in person to validate that. Okay, I’ll be a bit flip. Online dating doesn’t tell you if somebody has got garlic breath all the time. There are some things you just have to do in person.
I think that that’s true in a business environment as well. It won’t go back to where you have to get on a plane every single time and go flying around the world, but I think there are going to be some occasions you’re going to want to get together in person.
Andrew Zezas:
Yup. I love your garlic breath analogy. I think that’s great. So, we have time for one more question, and I’d like to actually step out of the current discussion and just ask you a question about your views of the evolution of the CFO role. I know you’ll agree with me. We’ve sat in many of the same discussions over the years whereby your peers and you have discussed how the CFO role has evolved into what it is today from what it used to be. But I’m sure you’ll agree also that it continues to evolve. Now what we’re seeing, finally, we’re seeing more and more women take on, not just CFO roles, but CEO roles as well in major corporations. But specifically, with the role of CFO, one of the changes that’s occurred very dramatically in the last few years is that professional accounting designations, while it used to be that you wouldn’t even be considered for, say a New York Stock Exchange Position without a designation, now they’re no longer being required.
In fact, many folks who take on the CFO role don’t even have finance backgrounds, but they’re business people. We’ve come a long way, as they say. We’ve come a long way, baby. Where are we going? What do you think the next evolution is of the CFO title?
Sandra Clarke:
Well, I’ve certainly heard CFOs referred to as the chief fixer officer, because a lot of things come in and … because it all rolls into the finances, at some point you end up trying to sort out and find solutions for things. What I love about the CFO role, and I think we will continue to see is that it’s not a one size fits all, that there are a lot of different flavors, depending on the type of company. I have M&A and real estate and transformation. Somebody else might have IT, or a lot of CFOs have analytics, but maybe the CFO is the chief administrative officer and there are other things in that role. I think that more and more of the CFOs are being seen as people who understand the business, and to my mind, the fact that, that wasn’t always the case, I can’t even comprehend. How in the world can you have the numbers make sense if you don’t understand the underlying business?
I think that’s more and more true. I would hate to see the pendulum swing so far like it did in the days of Enron, where the people that were in charge on the finance side did not have, at least some kind of financial background. Full disclosure, I do not have a CPA. I have a masters in accounting. I have an undergrad in finance. I do not think the lack of a CPA makes me any less ethical or concerned about control. I spent time in internal audit. I believe that if you were going to have responsibility for the financial well-being of the company, you need some grounding in what do controls, mean what do finances mean, understand more than just how stock prices move and how to talk to Wall Street. Not that those aren’t important, but I think that there are some fundamentals that we should all agree on and should be a basis. Then beyond that, the cool thing is it’s going to continue to take on the color of the company for which it works.
Andrew Zezas:
I like your comment about the CFO role is not one size fits all. I think I would agree with that. It is a custom position that gets filled by people with varying skills, and those skills are changing rapidly and have been changing for the last few decades. Sandra, you’ve been wonderful. You’ve shared a lot of good insights. You’ve been open, you’ve been transparent. I always enjoy our conversations. I’m so thankful that you gave us an opportunity at CFO Studio to shed a light on you and to share your thoughts with us and to bring to the public, in one other component of the public, all the great works that Blue Shield of California has been doing. I’m sure it’s a wonderful place to work, it sure sounds like it. That has a lot to do with what’s happening in your office and throughout the organization. It sounds like your clients and your partners and your customers are equally excited to be affiliated. Thank you so much for giving us an opportunity to conduct this interview today.
Sandra Clarke:
Thank you, Andy. I always enjoy spending some time with you, and I really had a fun time with this. So, I appreciate the opportunity.
Andrew Zezas:
Thank you so much. To our guests, I’d like to thank you very much for signing in with us today. If you’d like to reach Sandra Clarke, you can contact our office and we’ll be very happy to make a connection for you. If you have any questions about today’s interview, please contact me either at LinkedIn or by email at andrew.zezas@cfostudio.com. Today’s interview will be available at cfostudio.com/podcast in a couple of days, so we invite you to listen to it again and again and again, and to come see us and participate with us at some of our other interviews. Sandra, hoping you and your family remain healthy. I hope we’ll see you on the East Coast again sometime soon. Again, thank you very, very much to you and to our guests. God bless.
Sandra Clarke:
Thank you very much, Andy. Bye-bye.