An Old Order is Dying, and Its Backers are Grieving
Under Pressure
“We’ll go down in history as the first society that wouldn’t save itself because it wasn’t cost effective” — Kurt Vonnegut
Psychology and politics are the main problems to getting big things done.
The political part takes many forms. One of them is deception. A manager, for example, might lie about the cost of a project in The Pitch in order to get something funded, then come back for more money when it’s too late to stop the flywheel. The new program becomes 'kinetically trapped' in the narrative sold to the executive leadership team.
The psychological part is the human tendency to be overly optimistic. Or overly reliant on technical potential, where progress is defined in technological terms, and where the new operating model is positioned ahead of the new thinking model on roadmap, a fuzzy vision used to conjure shareholder value. Which tends not to work out: CEO churn last quarter surged 70 percent.
“A wave of seasoned leaders are stepping down in 2025 compared to the same period last year, which indicates many of these CEOs are taking the opportunity to leave. At the same time, companies are ready for new ideas in the face of a rapidly changing landscape — politically, socio-economically and technologically,” says Challenger, Gray & Christmas in its latest report.
The rain of news has been unrelenting.
Novo Nordisk this morning said Maziar Mike Doustdar would take over as president and CEO following the surprise ousting of Lars Fruergaard Jørgensen. It also said it was slashing its full-year guidance, citing weaker growth expectations for Wegovy — shares fell as much as 26 percent before paring losses slightly, now trading down 20 percent. Two weeks ago, Kenvue said Chief Executive Thibaut Mongon departed and has engaged McKinsey in a strategic review.
An old order is dying, and its backers are grieving.
Few of these mourners — UnitedHealth Group, ExpressScripts, Centene, Elevance Health, Molina Healthcare, among the most recent in healthcare — seem truly ready to accept the order’s passing. But they should. Praying for its resurrection is not just naive; it's counterproductive. And their responses misdiagnose the order’s deepest illness and thus prescribe the wrong remedy.(Dig Deeper: Escaping McKinseyLand is Hard, Even for Mckinsey)
UnitedHealth said its earnings will plunge this year to a level below even Wall Street’s lowered expectations, highlighting rising costs and operational shortfalls across several parts of its business..
“When we prepared our 2025 Medicare Advantage offerings back in the first half of 2024, we significantly underestimated the accelerating medical cost trend and did not modify benefits or plan offerings sufficiently to offset the pressures we are now experiencing,” CEO Tim Noel said during the call this morning.
Noel said physician and outpatient care collectively represented 70% of the pressure on medical costs so far this year. But inpatient care also accelerated through the second quarter, and the company expects it will account for a “relatively large portion of the pressure” over the full year, he added.
The world is adrift.
As long as you ride the rails of 'expert knowledge' of the past, the more you reward legacy narratives and obsolete operating theories, the further away you become from navigating the transition space to compete in a different context.
"As I see it,” Peter Coy wrote in Goodbye, for Now the final edition of his newsletter for The New York Times earlier this year, "the ultimate purpose of economics is to improve people’s well-being, or at least remove the obstacles that get in the way of their own pursuit of it."
Which actually sounds similar to the ambitions of UnitedHealthcare.
Chief Executive Stephen Hemsley, who retook the job in May after UHC withdrew guidance, said UnitedHealth expects to return to earnings growth next year and has “embarked on a rigorous path back to being a high-performing company fully serving the health needs of individuals and society broadly.”
He also said some parts of his business need ‘fundamental reorientation’.
A Fundamental Reorientation
Everyone is trying to squeeze more life from the storylines of the past, swimming against the tides, wondering why we make no progress, why our leaders (and their results) continue to disappoint, entire brands, businesses and markets are now controlled by the dynamics of destruction, stuck circling the drain, arguing about “heritage” instead of facing reality: complex systems disintegrate, often quickly.
The only way to "fix" the American Way of Healthcare is assume you know nothing at the start, other than everything works and everything is broken and everyone has personal knowledge of the experience that needs correcting. We have all been to a doctor's office or visited a pharmacy, we have all dealt with government and commercial insurance plans. We are a nation of 300 million experts in healthcare. (Dig Deeper: Healthcare, the Next Tom Brady and the Real Wealth of Nations)
Better to step off into a corner for a different review of reality, and then put in place a deliberate process of creative destruction. It’s simpler, and faster, to chop the Knot and start with a clean slate. From the review of Men, Money and Medicine in the New York Review of Books:
"The American crisis over health has finally taken a place alongside the urban crisis, the ecological crisis, and the “youth crisis” as the subject for solemn Presidential announcements, TV documentaries, and special features of magazines. But to the average consumer of pills, hospital care, and doctors’ services, the crisis in health care is nothing new, except that the stakes -- health, beauty, and life itself -- get higher with each advance in medical technology, from miracle vaccines to organ transplants.
The odds against the sick are high, and getting higher all the time.
Money aside, the consumer’s major problem is finding his way about an increasingly impersonal, fragmented, irrationally arranged set of health services. Fundamental improvements in healthcare can be achieved only through a head on confrontation with our political and economic system.”
That was published in 1970.
Not much has changed since then.
We have become comfortably numb with the conversation. Put another way, the conversation is hardly a conversation at all. It is a ‘nonversation’ that goes nowhere. The “model” does not develop or build on new interactions. It is not dynamic. And so structural stalemate becomes the defining feature of things. An entire economic system -- and the people who have been successful in it -- is paid well to pamper or pursue the myth that “cost” is the crux of The Problem in healthcare.
It isn't.
In healthcare, it's not just one market that drives innovation and determines “value” but an infinite flow of them.
If you accept that premise as your jumping-off point, then what follows is a new path to growth: advantage goes to those with the skills to harness a carnival of markets and manage them as a single economic unit, as a system of markets, cohering and collaborating on the 'production of health' as a new industry narrative, a big strategic rotation in the basis of economic competition.
Let the Fundamental Reorientation begin.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry narratives.