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Charlie Baker '86

Charlie Baker '86

The road to recovery: Charlie Baker ’86 gets an ailing health company back into shape

By Amy Trang

Like most business executives, Charlie Baker wakes up and puts on his suit and tie before heading to the office, which in his case is Harvard Pilgrim, a Boston-based health benefits company. But there’s an invisible second uniform that Baker jokes about, one that includes a pleated skirt, pom-poms and a megaphone.

Baker considers himself the head cheerleader for Harvard Pilgrim, a top-ranked nonprofit that serves members in Massachusetts, Maine and New Hampshire. Initially, though, Baker was rooting for what seemed like a losing team when he assumed the roles of president and chief executive at the company in 1999.

The Kellogg School graduate is credited with turning around Harvard Pilgrim, a health plan that went into state receivership in January 2000 after reporting a $225 million loss the prior year. Troubled by accounting errors and inefficient computer billing systems, Harvard Pilgrim made major regional media headlines and was deemed insolvent by critics.

Faced with the task of fixing Harvard Pilgrim’s problems, Baker first implemented a straightforward diagnostic process: document everything that was broken. But to get people to admit to what was wrong wasn’t easy.

“I’ve had to change the culture of a place so that it became an environment where it was OK to be upfront and direct about problems and that there wasn’t a ‘shoot the messenger mentality’ in the company,” Baker says.

Harvard Pilgrim steadily began its recovery from the losses, with Baker and team embarking on a 150-day campaign to bring the company to optimal performance.
The organization recovered within the year, released from state receivership six months later and had losses totaling only $10 million at the end of 2000. The company invested in online technology to make communication seamless between the health plan, health providers and plan members. Harvard Pilgrim also implemented processes to keep members involved in their healthcare management, such as calling members to explain what a deductible is.

“If you deliver an error-free experience for all the various entities that you work with, the likelihood that your providers and members will have a positive experience goes up,” Baker says. “Our view is we should get everything right the first time, every time.”

Nearly a decade later, the company has climbed the ranks to be rated No. 1 commercial health plan by U.S. News & World Report and the National Committee for Quality Assurance for the last four years. It’s also been ranked No. 1 in member satisfaction by J.D. Power’s National Health Insurance Plan Satisfaction Study.

David Leslie saw firsthand how Baker’s leadership style prompted change. Leslie, who was special counsel for the state’s insurance commissioner and attorney general during the receivership, says Harvard Pilgrim was closely watched by the public because of its immense regional influence, with the plan serving parts of the New England area since 1969.

During the receivership, Baker held regular town hall meetings with employees, outlining the company’s plan and answering every employee’s question. Baker’s open leadership style encouraged the company’s senior management to stay during the turnaround, when that team could have easily left for other jobs, Leslie says.

“Charlie has a very interesting personality in that he attracts strong-willed people to work with him and allows them independence and opportunities to be creative,” Leslie says. “The senior management had a high level of loyalty to the company and to Charlie and was able to manage successfully during this difficult time.”

Baker also wrote an e-mail to all employees every Friday with an update on the company’s progress. Employees, in turn, were sending the e-mails to healthcare providers and customers, to keep them informed.

“You can’t lie; you have to be brutally honest about what’s going on but you have to be able to demonstrate to people that you think that we’ll get out of this,” Baker says. “The minute that they start thinking that you don’t think that — ball game over.”

Baker says that his leadership of inclusion is rooted in his Kellogg education.

“The most important thing I learned at Kellogg is that it’s all about the team,” Baker says. “It was drilled into your brain from the way that your classes were set up or grades were handed out. No one fails or succeeds on their own; you succeed or fail as part of a team. The sooner you figure that out, the more likely you are to be successful.”

Baker’s name has been touted in political blogs and news articles as a promising Massachusetts gubernatorial candidate in 2010. Baker spent eight years in Massachusetts state government, serving as Secretary of Administration and Finance and Secretary of Health and Human Services prior to Harvard Pilgrim. He won several awards for his work in state service, including the National Governor’s Association Distinguished Service Award.

Baker says that although he wouldn’t mind serving again in the public state sector, his decision will depend on his family’s needs, since he notes that public officials sacrifice much of their private lives while in office.

With Harvard Pilgrim’s historical transformation behind them, the company’s focus now is preventative healthcare. Baker says the concern voiced by some is that the next generation might not outlive his generation, which is a discomforting thought.

“The biggest challenge for us is to figure out how to engage consumers around good health,” Baker says. “We want customers to get smarter about it. We need to be active and aggressive in a nice way in promoting health to our members.”

Looking back, Baker says there were moments at the beginning of Harvard Pilgrim’s trouble when he would comment to his wife, Lauren Baker ’86, about the mess he got himself into. Lauren would simply respond with what Baker once had told her about his career goal: “All I really want is to be relevant and make a difference.”

And with Harvard Pilgrim reporting a $45.6 million net income in 2007, and its efforts to benefit its more than 1 million members, Baker might have done just that.

Posted December 2008
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