David J. McIntyre Jr.: Protecting Customers, Managing Growth at TriWest

David J. McIntyre Jr., is president and CEO of TriWest Healthcare Alliance. McIntyre was the chief architect of the strategic vision behind TriWest Healthcare Alliance and has led the company since its inception. The privately held company, which is based in Phoenix, Arizona, is owned by 15 Blue Cross Blue Shield plans and two university hospital systems and is the 10th largest federal government contractor. Its primary line of business is serving the health care needs of 2.7 million members of our nation’s military family through a Department of Defense Managed Care Support (MCS) contract covering the 21-state TRICARE West Region.

He has more than 20 years of experience in national health care policy development, business development, and leadership. He served for nearly nine years in the offices of the U.S. Senate, where he was responsible for health-policy issues for Senator Slade Gorton (R-WA), Senator John McCain (R-AZ), the Senate Indian Affairs Committee, and contributed to the work of the Senate Armed Services Committee. As a vice president of Blue Cross and Blue Shield of Arizona, Arizona’s largest health care organization, McIntyre assisted with the management of the corporation’s strategic planning process and had direct responsibility for legislative matters, media relations, and several strategic projects including the development of TriWest and its initial MCS proposal in the mid-1990s.

McIntyre has a bachelor’s degree in political science from Seattle Pacific University, a master’s degree in administrative sciences (with an emphasis in management and health policy/administration) from Johns Hopkins University and he participated in the Executive Education Program for Senior Government Managers at Harvard University. In 2000, he was named one of 12 “Up and Comers” in health care by Modern Healthcare magazine, in 2004 was named as one of “12 to Watch” by Arizona Business magazine, and in 2004 was selected as CEO of the Year by the Arizona Chamber of Commerce and the Arizona Business Journal.

◊ ◊ ◊ ◊ ◊

Ethix: You made headlines in the national news a couple of years ago for the way you handled an information theft incident.

David McIntyre: On December 14, 2002, thieves broke into one of our offices and stole hard drives containing the personal data on over 500,000 customers—members of the military, retired military, and their family members. Everyone from privates to four-star generals and admirals, including the Chairman of the Joint Chiefs of Staff—that’s a pretty daunting list. We obviously were concerned about protecting our customers from the criminals using that information for identity theft. There were also people who were concerned about whether the information was stolen for potential blackmail material against the government.

We asked ourselves, “If our name was in that database, what would we want to have done?” The experts said that the only thing you could do is to contact your customers within seven to ten days so they can take steps to protect themselves. So that’s what we did. It took a couple of days to build a communications campaign, and then we went fully public. Although we didn’t exactly want the notoriety, we went to the news media to ask their help in getting the message out across the country. All the networks, The New York Times, The Wall Street Journal, and others carried it as a lead story. Our goal was to try and reach people, regardless of where they were located in preparation for the holidays.

We asked ourselves, “If our name was in that database, what would we want to have done?”

What other options did you consider?

None. For us there was no other option. We built a massive call center to handle all the phone calls, and we asked our people to work around the clock and through the holiday period. We also went to the law enforcement community and offered a $100,000 reward for information leading to the apprehension of the thieves. We announced it with a press conference with the State Attorney General, the FBI, the Secret Service, the Postal Service—I mean it was like running for office. To this day, unfortunately, the case has never been solved.

What was the cost to you?

Several million dollars—including the call center, building a special Web site, sending out literally millions of letters over time. It was a huge investment of both human and financial resources.

How about public opinion? Were you perceived as an innocent victim trying your best to make it right, or were you perceived as a sloppy handler of data?

That’s a great question. We were in the middle of a bid for our next contract with the Department of Defense. It was a winner-take-all thing for us because we were bidding on one contract, and if we didn’t win the contract we would lose our entire line of business. We were just getting ready to submit our procurement response when the theft occurred.

The first reaction was that we were irresponsible. How could this happen? So we tried to help people understand how it happened. We didn’t leave the door open. We didn’t accidentally email out a list to someone. We were robbed. And they really knew what they were doing because it took several steps to get to where they needed to go to steal the hard drives. We said, “We’re willing to be investigated. Come in. See what happened. And help us.”

I took some of the early phone calls personally to help shape messages in response to inquiries. I called those customers whose credit card information was in the database. It was the holidays and I wanted to make sure they could cancel their credit cards to protect themselves and still have money to buy gifts for their loved ones. That was the first wave, probably a week or two in duration. Then people started to say, “This is an incredible response.”

Was there anybody internally who was pushing, “Let’s delay it until after we’ve filed for the procurement”?

There may have been individuals who were more conservative and weren’t sure we should go public, but even they changed their opinions. For those of us at the senior level of the company, the pathway was very clear from the start. I contacted the board and said, “This is what happened, these are the risks to our customers. Given what’s going on with many of them getting ready to deploy, I don’t want it on my conscience, or the organization’s conscience, if they get back from battle and find their credit was wrecked. The right thing to do for our customer is to go public and to do it aggressively.” The board agreed and never wavered.

They said, “We don’t care what the ROI is, we don’t care what it’s going to cost. You need to be guided by what you think the right answers are and act on them.” Frankly, if we didn’t win the bid because of this, so be it. Our first obligation is to protect the customer, not the company, because we were the trustees of their personal information. That was the higher responsibility than protecting our business or reputation.

Did any customers actually get violated with the data that was stolen?


When Johnson & Johnson had the Tylenol tampering crisis, they spent millions to recall it all; but in a relatively short period of time, the record suggests that they made a lot of money on that decision because it was such an enhancement to their reputation. With that model in mind, have you seen a backdoor positive spin on this thing? Did it help you win bids that you might not have otherwise won?

Well we won the bid, and doubled the size of our company in the past year. We got many accolades around how we handled this, from public and private entities, including Congress, business groups around the country, the media, and the like. We weren’t doing it for accolades, but it appears that doing the right thing actually strengthened our reputation.

It is ironic because others in the procurement process were amazed that we survived. But they probably looked at this through the framework of how they would have handled it, and didn’t really understand what we had done and how we had done it. In the eyes of our senior customers at the Department of Defense, they saw us as transparent and fully engaged in trying to do what was right to honor our customers even in the midst of a crisis.

One of the other things we learned out of this exposure to identity theft is that the laws to protect consumers had become antiquated. How the credit bureaus treat customers is antiquated, what you had to do in terms of protecting yourself from a credit perspective was antiquated, the court requirements and the rules that allow them to do sentencing were antiquated. So I went to the board and said, “I think we have an obligation, based on my background from Capitol Hill, and what happened to us, to use this as leverage to get all those things fixed.” And, as a result of that work, last year the President signed into law amendments to The Fair Credit Reporting Act. It provides a broad suite of enhanced protections for consumers, including an annual credit report for free.

The last piece we’re working on now is seeing requirements imposed on organizations for what must be done in the case of such thefts, and seeing to it that there is a change in the penalties for such crimes that people who perpetrate them are no longer simply slapped on the wrist. It takes people six to seven years to kind of clean up their credit record when these things happen; I’d say that’s a pretty serious crime.

This whole experience has helped our employees understand our ethical framework—how we think they should do their work every day. Transparently. Putting the customer first, rather than the corporation. Trying to make sure that they’re responsive to what the customer’s needs are, and the like.

Didn’t a competitor try to get you barred from that procurement?

Yes! We were in the procurement process for a two billion dollar a year contract, a pretty sizeable deal. And as we’ve learned recently, some companies take a lot of shortcuts to win contracts. We were going head-to-head against a company that attempted to get a Congressional committee to hold a closed-door session and attach a rider to legislations to put us out of business. And we went to Congress and said we are willing to stand and get pummeled if that’s what you want to do, but don’t do this behind closed doors because we will shine the light on the unfairness. The irony was, by the time we got done laying out to the members of Congress what had happened to us and how we had handled it, they used us and the Tylenol case in the same breath and basically said in this public hearing, “They are an example of how you ought to handle such events. We hope that others follow their lead in what needs to be done.”

Trends in Health Care

Maybe you could say something about the trends in health care. It seems to me that with technology enabling automated billing, etc., health care is becoming more of a business. I’m wondering how the patient fits in the health care system these days.

There have always been aspects of health care that have been a business. My father just sold his practice. As a physician, he had to be concerned about meeting expenses or he would have to shut the doors.

We weren’t doing it for accolades, but it appears that doing the right thing actually strengthened our reputation.

I believe there are areas where technology can be incredibly useful. If you look at the clinical side of health care, we’ve seen technology and new drugs result in dramatic extension of life. My mother passed away a year or so ago. She had MS for twenty-five years. It wasn’t MS that killed her. She was able to manage her MS through a very elaborate drug cocktail. Forty years ago that wasn’t available and her life would have been cut short. What’s the value of that? And how much do we want to pay for that individually and as a society? You look at the changes in surgical procedures and the quality of life that’s come from that—the fact that you can get joints replaced now, reasonably easily. It’s really remarkable. Eye surgery has gone from five days of recovery to a couple hours. So in the practice of medicine, there have been incredible advances on the technology side. The issue from an ethical perspective is how far do we go? Is there a point at which the expense isn’t really justified? Do we do joint replacements or heart bypasses on 90-year-old people? Those are ethical and economic issues that the country and the delivery system and the population have to grapple with. They are also decisions that families have to grapple with.

That’s the interesting policy question behind that ethical dilemma: who actually gets to make that call? If I have the money to replace the joints of my 90-year-old father, and want to, should I be able to?

Right. In a public-private system, if you’re on the private side and you’re willing to pay for it out of your own pocket, I believe that in this society you will always be able to do that. But it may not be a good idea to replace someone’s joints at 90 years of age, regardless of how much you can pay. Those are issues that families have to work through, let alone policy-makers and providers and insurance companies. So in the medical technology area I think there are great ethical issues to be focused on and worked through.

In the business side of it, when you’re talking about health care coverage itself, the challenge is, for both providers of health care, as well as insurers—those who actually pay the bill on behalf of the patient—where is the right breaking point, what’s the right mix? We as an organization have approached that challenge in the following way: we attempt to make our decisions from a clinical perspective, not a business perspective. We’ve set up groups of peer review physicians to review the decisions that are made in areas where there might be some question about whether something is medically indicated or not—transplants, experimental services, and the like.

We are regularly taking vignettes of the “right things to do” and putting those in front of our employees.

Do you have the possibility of using technology as a cost-savings, both on the administrative side and on the actual health delivery side?

Absolutely. We share the savings with the taxpayer on the health care side. And when you’re doing something that touches the actual delivery of health care or the decisions and you’re using technology to do that, you’re having a benefit both in health care and in administration.

Managing Organizational Growth

You very substantially increased your geographic region in the last year or two. Did you “colonize” your new region by simply sending out your own employees or did you pick up some existing structure? If the latter, what sorts of things did you do to try to transmit what’s obviously a very strong corporate culture into the new region?

We started thinking about the fact that we may have to grow in order to survive because the government was going to say to us, “If you want to stay in the business you’ve got to bid for a bigger area and grow your company in that bigger area, because we are going to consolidate regions.” I call that “hypergrowth” because if we were successful we were going to go from 1.1 million customers to 2.7 million, in months. And go from 26 sites of operation to almost 90, increasing from 16 states of operation to 21 states of operation, in months. And go from 20-some thousand providers to 80 thousand providers, again in months. And we would cover 70-some percent of the land mass of the U.S. We looked at that as hypergrowth. So we asked, “Who does that well?” We didn’t look to health care, because we thought if we looked to the industry we’re in, people were going say, “I don’t want to let out the secret.” So we looked at Nordstrom. We looked at IN-N-OUT Burger. We looked at others who did hypergrowth well.

And we came to a couple of conclusions. One was that you had to plan aggressively and you had to think through, from an organizational perspective, what core competencies you wanted to project into that new area. What were the things that made you successful from a customer experience perspective? And then how do you identify your best people, and what’s the right strategy to place them somewhere so that they feel as though this was a positive change?

We said to our employees, “We’re going to offer any employee in the company who would like it, regardless of where you work, even if you work at the corporate office, the opportunity to move somewhere else. Have you always wanted to live in Hawaii? Do you want to retire three years from now in Alaska?” So we had this campaign built into our Intranet. We had a map that showed how people were moving from this place to that place. We made it fun. We paid their moving expenses in full and a 25 percent one-time bonus. Then we talked to the former contractor in the region—about their people in those areas who weren’t inclined to move—and we tried to hire the best individuals out of that team who fit with our cultural profile.

How could you tell?

Through the questions you ask and some employee profiling tools now, like Predictive Index, which give you pretty good emotional and innate personality characteristics of an individual. We attempted to apply that tool as a filter in our interviewing process. We’re refining that, but we studied this issue hard, because our view was those companies that had failed to grow well could not do this. The month of June was essentially the time frame, because we began operations in part of our new region on June 1, and then on July 1st, the rest of it. So we had a 30-day window for that kind of growth.

The other thing that we do is spend a lot of time talking about our mission. We recognize the sacrifices of our customers and we spend time helping employees understand why we do what we do and why it’s an honor and a privilege to serve those in the military, those who are retired from the military, and their families. It’s important that we honor their sacrifices by doing the right thing, whether it’s the company’s response to the theft, how a customer service representative handles a claims issue, or how a case manager deals with a customer who is sick. We are regularly taking vignettes of the “right things to do” and putting those in front of our employees. We spend a lot of time in the field. We are all over the place as a leadership team, from a geographic perspective. We’re regularly out there dealing with our people. We want to make sure they have the tools they need, we want to make sure that they understand how we think the customer ought to be treated. It really comes down to a pretty simple rule set: how do you want to be treated? If you’re in their position and your spouse is in Iraq, and you have three kids at home and you’re 27, and you’re trying to do everything—you’re shoveling the snow, you’re taking the kids to school, you’re paying the bills, you’re trying to manage the household, essentially as a single spouse for awhile—how would you want to be treated?

We’ve found that if you do the right thing, and you serve your customer right, and you’re focused on how to become effective and efficient, the rest takes care of itself. It’s this question: do you focus on the profit or do you focus on delivering to your customer? If you do the latter well, the rest of it works out.

Electronic Medical Records

Let me ask one more technology-related question. What is the health care industry doing to get into the digital records era? It seems this industry is more resistant than most.

I think it comes down to a couple of things. One is that companies have been unwilling to sit down and share information. The second is: where’s the economic incentive for people to put the systems in place? Who pays for it? That is, in my opinion, an issue that the public sector has to play in. And I believe that’s why the President of the United States has said that the adoption of a nationwide electronic footprint that’s going to allow for the storage of medical information and the transference of that information between various elements of the health care delivery system and patients is an important national priority.

It’s this question: do you focus on the profit or do you focus on delivering to your customer?

That doesn’t mean one big massive government computer system. What it means is an architecture that’s agreed-upon between organizations and between companies, and a rule set that’s ubiquitous. And if you look at the banking system, we all use ATMs now. The banking system fundamentally changed when the ATM came into existence and was adopted. The banks sat down with each other and came to an agreement about a rules set. And then they rolled it out within their own bank first. So they got the infrastructure set and settled out the challenges, and then they started to link it together. And now you essentially have everyone being able to go to an ATM, put in your card and your code and get money, regardless of where you are. You may have to pay a small fee because you’re using someone else’s backbone versus the backbone of your own bank. That’s an example of where an industry that was highly competitive came together and agreed upon a set of specs, and agreed that it was good for them, and it was good for their customers, and that they weren’t going to suffer loss, long term.

So when will this happen in the medical field?

David Brailer is the person the President has asked to lead the national effort to get businesses and health care providers and big medical systems from the government together, to agree on a rules set, and to agree on an overall architecture for how this gets done.

He put out a Request for Information (RFI) early in 2005. That RFI asked for a response from industry on the key questions sets and the types of things the government should look for in putting out a Request for Proposal to acquire components to a structure. There weren’t 15 responses to that RFI by the 15 major companies in the country, there was one. They all got together and decided that it was in the best interest of the American public, and even in their interest as competitors, to lay down a common and integrated response—to provide a rules set that makes it easy for the government to say, “This is the way we need to go.”

Now they are starting to have round table discussions around this. They will go head-to-head competitively, there’s no question about that, but the President’s goal is to get to a place where the rule set has been defined, the architecture begins to be built, and in the public environment there’s infrastructure in place to allow data to be transmitted back and forth. I believe from a policy perspective that’s where the Administration is attempting to go.

And that’s where technology is important, back to the start of the conversation. You can spend it on administration or you can spend it on services. And our responsibility in our organization is to constantly be thinking about how we automate those things that reasonably can be automated. How do we take out of the human hand those things that don’t need to be in the human hand? When you do that, you’re taking human touch that’s not required out of the system and you’re enhancing the responsiveness of the system to the customer. And you’re taking dollars that otherwise would be spent on administration and moving them to health care.

Jeff Van Duzer is the Dean of the School of Business and Economics at Seattle Pacific University.