THE MANAGEMENT INTERVIEW Ian McPherson – A passion for healthcare

He may head an organisation that offers healthcare safety net but Southern Cross CEO Ian McPherson’s own path from clinician to manager involved deliberate decision to abandon both social and professional safety nets. That was in the early 1980s; he was married with four children and working as GP in Thames where small local hospital also gave him the chance to do some obstetrics and administer anaesthetics.
“But I was working in fairly protected environment with lot of professional support – plus I was reasonably prominent person in small community and supported by that community.”
It was, he says, all very comfortable.
“The question in the back of my mind was whether I could do my craft and profession without those supports. That’s why I contacted the Red Cross.”
Which is how he found himself looking after Vietnamese boat people in Malaysia.
“There was no safety net – nobody knew you from bar of soap – it was case of either sink or swim on how good you are as professional and as person.”
Sinking didn’t come into it. After three-month stint with Asian refugees, he was offered work in Pakistan dealing with the human fallout from the Soviet invasion of Afghanistan. It was there that McPherson got his first taste of management when Red Cross asked if he’d stay on as medical coordinator.
“I got message to [my wife] Rosemary and asked if she wanted to bring herself and the kids up to Peshawar and she said ‘yes’. We’d talked about doing the family thing with no safety net and decided that we’d give it go. I didn’t really realise how difficult living in deepest northwest frontier Pakistan could be – for my wife and kids in particular – but it was fascinating job.
“I was the first non-Swiss person to take on that coordination role which was much more about management and administration than clinical practice.”
They stayed for 18 months and were heading home when McPherson was asked if he’d fill similar role on the Thai/Cambodian border.
“That looked like very different experience and Rosemary was keen so off we went. I ended up doing three or so years of managing, Swiss-style, which both got me interested in management but also in dealing with communities of people rather than just individuals.
“Medicine, in western countries in particular, is about dealing with individual problems but if you’re into saving lives – without being dramatic about it – you can save whole lot more when you’re dealing with large populations rather than dishing out drugs to individuals.”
An example: McPherson and his family took three to four days out over Christmas largely uncelebrated in their patch of Thailand. During that time, the Red Cross and UN led by an American medical colleague shifted community of around 70,000 from inside Cambodia to the safety of Thailand, setting them up with hospitals, medicine and food.
“That’s like shifting Hamilton to Cambridge with war going on – it’s sort of life-changing stuff.”
All of which helped cement his interest in community healthcare and brought about shift in career focus back in New Zealand where he was appointed chief executive of the Thames Hospital Board, then inaugural CEO of the combined Bay of Plenty Health Board.
After working as an adviser on health reforms with the Prime Minister’s Department and Ministry of Health in the early 1990s, McPherson moved into the private sector, becoming executive director of Aetna International in New Zealand. That involved spending lot of time in Asia and led to another challenge – establishing joint venture between hospital group Parkway and German insurer Allianz for whom he later became regional general manager, Asia Pacific.
This last detail is from his CV – McPherson himself gallops through this wide-ranging career track with an apology for the “long ramble” that brought him to role he is quite evidently passionate about. His mum may not entirely have forgiven him for giving up clinical practice – but McPherson believes he can do lot more good by ensuring New Zealand’s scarce health dollars are managed well.
Now 55, with six children and two grandchildren, he says if there’s one thing his varied career has driven home, it’s the reality that healthcare has to be seen in the context of cost.
“It’s okay as doctor to worry about healthcare costs – it’s your ethical duty to worry about it, I think, particularly in the context of the wider community. Given the cost of healthcare, making compromises is acceptable because the money is limited wherever you are.”
In New Zealand the figures are daunting. We already spend close to nine percent of our GDP on healthcare and costs are ramping up rapidly as expanding medical knowledge generates more (and more expensive) medical options and the demand on services (driven in part by an aging population and greater healthcare expectations) keeps increasing.
Healthcare costs are already outpacing GDP growth and if the gap between the two keeps widening at current rates, by 2050 healthcare could be gobbling up more than half our GDP. The issue of affordability is “huge”, says McPherson.
“We have to make sure the services we provide are efficient and value for money.”
Which is why he reckons his job is one of the most challenging, important and most potentially rewarding roles in New Zealand healthcare. Southern Cross is, he notes, unique both in its diversity and its structure as not-for-profit organisation.
“It’s different to any other health organisation here and in Australia in that we have range of services in the health sector that complement each other. We provide health insurance, travel insurance and healthcare programmes. We have New Zealand’s largest chain of private hospitals (13) and savings scheme we’ve just started. While these do different things in the health sector, they’re all pieces of system. I think it’s important we have this multi-faceted service – and the important distinguishing feature is that we’re not-for-profit.”
That means surpluses are ploughed straight back into services to members.
“I guess the main difference compared with profit-based companies is in returning value to the customer rather than to the shareholder. In not-for-profit environment, our duty is totally focused on the customer – who also happens to be stakeholder.”
So, for instance, the insurance side of the business tolerates much higher loss ratio than private insurers. For for-profit insurance company good profitable product might come in at 45 percent loss ratio – ie, for every $100 of premium paid, $45 goes out in claims.
“Ours comes in at about 85 percent and if we can keep it around that level, that’s good product and good service. We’re in competitive business, we have to cover our costs of doing business – we pay good staff well, make small margin to cover risk, contribute to our reserves to be sustainable long term – so we can’t do 100 percent but between 75-90 percent is about right.”
That said, he in no way takes ‘holier-than-thou’ attitude to profit-motivated healthcare providers.
“There’s place for both – I don’t have problems with organisations that are profit-based. I do think there needs to be contestable environment where success in business is achieved … market in which the best quality, best price, best value for money, best service provision wins the day. We must win our business because we’re good at what we do not because we operate in funny market.”
Nor is it enough to be “passive” insurer – you have to add value, says McPherson. Hence the organisation’s strong involvement in corporate healthcare and expansion into savings-based schemes like Activa which is more targeted to the under 35s.
“Younger people don’t tend to see health insurance as relevant to them but putting money into an account you can see and get interest on, or access credit if you need – that’s more relevant than taking out insurance when they’re not sick. And being relevant to young people is very important.”
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