Carly Fiorina On the Paradox of Cost vs. Quality--In Healthcare, and Everything Else

Carly Fiorina, the former CEO of Hewlett-Packard, now running for the US Senate seat held by Barbara Boxer, was in Washington DC today, talking about, among other topics, healthcare.

Fiorina is a Republican who played a prominent role in John McCain's presidential campaign last year, and her answers, heard at a small gathering, mostly reflected Republican healthcare orthodoxy: patient empowerment, choice, and competition, including in insurance. And interestingly, she also put in a plug for community clinics, the expansion of which was a significant, if generally unheralded, achievement of the Bush 43 presidency.

But what makes Fiorina stand out is her obvious orientation toward problem-solving, based on her three decades in corporate America, during which she rose to lead a Fortune 50 company. Asked to sort through the issue of whether government is too big or too small, she left no doubt about her own conservative inclination toward limited government, drawing a further distinction: between government that is effective and government that is ineffective.

And it was on this question, of effectiveness, that her organizational experience became apparent: “If you focus on quality," she said, "you drive costs down. But if you focus on costs, you get unintended consequences.” That might seem a bit counter-intuitive to some, but not to SMS readers; as argued here many times, powering through on technology is the key not only to improving the quality of technology--making it work better--but also to making it cheaper. Think computers, or cell phones, or just about anything else: Innovation times productivity equals lower costs. You make it cheaper by making it better.

But let Fiorina tell her own story. Asked to elaborate on her answer, she recalled that when she took over at HP, “There were 87 separate divisions, each with its own president, or CFO, each its own little empire...a very expensive cost structure...hard for customers to navigate."

It would have been simple, Fiorina said, to give each division its own “10 percent haircut"--just a rote budget paring. But the better way, she continued, was to ask a new and potent question: “How do we improve the quality of service for the customer?” That is, rather than directly confronting the budgets of those 87 divisions--each one turf-conscious, each eager to defend its own little silo--Fiorina sought a more indirect approach; she changed the equation by which the entire company operated.

Was Fiorina successful? As her website puts it:

Carly served as the Chairman and Chief Executive Officer of Hewlett-Packard Company (HP) from 1999 to 2005, leading the reinvention of the legendary company, successfully steering it through the dot-com bust and the worst technology recession in 25 years. During her tenure, HP's revenues doubled, from $44 billion to $88 billion, with improved profitability in every product category. Today, HP is the largest technology company in the world.

She proved her leadership in tough times. Her pursuit of the controversial merger with Compaq Computer is now acknowledged to be the most successful merger in high-tech history and positioned HP to become the first $100 billion information technology company, creating market leadership positions for the company in every one of its product lines.

And while not everyone is a fan of her performance at HP, she demonstrably has a lot more valuable real-world experience than Boxer, who is perhaps the leading left-wing ideologue in the Senate, and a staunch supporter of paleoliberal policies.

Listening to Fiorina's answer about costs vs. quality, we were reminded of the famous quote from Albert Einstein: "No problem can be solved on its own level." That is, when confronted with a seemingly insoluble conundrum, new intellectual inputs are needed to get out of mental stasis, even stalemate.

So how to apply such wisdom to healthcare? The answer, she said, was "integrated care," as well as the aforementioned empowerment, choice, and competition.

Here at SMS, of course, we would have wished that Fiorina had put more of an emphasis on cures--because cures are the real purpose of healthcare and medicine.

But Fiorina herself was recently treated for breast cancer, and while her doctors, she said, have given her a clean bill of health, she still has the short hair to prove that she has recently gone through chemotherapy. So she knows about Serious Medicine--and what it can do. And no doubt she has plenty more ideas on how to make medicine and healthcare work better.

Indeed, we are sure that she will have more fresh ideas to bring to the healthcare debate in the months and years to come, which is more than Barbara Boxer can say.