WHEN: Today, Monday, March 30, 2020
WHERE: CNBC's "Squawk on the Street"
The following is the unofficial transcript of a CNBC interview with Cigna CEO David Cordani and with CNBC's Bertha Coombs on CNBC's "Squawk on the Street" (M-F 9AM – 11AM) today, Monday, March 30th. The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2020/03/30/cigna-ceo-david-cordani-on-managing-the-global-coronavirus-pandemic.html.
All references must be sourced to CNBC.
BERTHA COOMBS: Thank you very much, David. Cigna was the first insurer to move to say it was going to cover all of the costs on COVID testing. Now it's joined with Humana to say it's also going to be covering first dollar costs for all of the treatments for coronavirus patients, not just hospitalizations, but also future medications, future vaccines, and they'll do that both in-network and out of network. David Cordani joins me now to talk about that decision. David, how did you come to this decision and what were some of the considerations that you took in?
DAVID CORDANI: Good morning, Bertha. As you know, we're a global health service company, in a time of crisis, which is what we confront right now, we're telling ourselves to step forward and help our customers help our patients and provide them peace of mind. Appreciate your reference to the testing. We also leaned in with expanded tele-med resources, 90-day delivery of medication, in our announcement this morning we ALSO acknowledge THAT we're redeploying hundreds of doctors and nurses to support outside third party tele-med choices. So, we're challenging ourselves to step in to help customers, and in this case, as we step back and see individuals fighting the health challenge, we wanted to take the financial burden off their docket. So, it's a simple decision. Complex, but when you boil it down, it is putting the customer and patient front and center and trying to provide them peace of mind, which is what we did with our action.
BERTHA COOMBS: It's a complex decision. S&P Global analysts estimated in a severe pandemic that the medical costs for insurers could be near $100 billion. So, as you take on this responsibility and some of your peers likely will follow, how are you going to be able to handle that?
DAVID CORDANI: Well, again, we acknowledge we're in unprecedented times. So, let's step back and understand what we're saying here. An individual has an out of pocket financial responsibility tied to insurance, whether it's commercial insurance, individual exchange insurance, Medicare Advantage, Medicaid. We're saying we're taking that individual responsibility on ourselves. Backing that is a large additional responsibility in regard to the government with Medicare or Medicaid or the corporate employer which remains. So, we're taking the portion for a COVID patient's treatment and we're taking that financial obligation on. As a large diversified financial service company and health service company we believe we are well-positioned to do so. And we are going to track this over the next several months as we serve our customers and patients. But stepping back, fundamentally, we think it's the right thing to do because individuals are in hospital situations dealing with treatment, we wanted to take this burden off their lap and off their family's lap and provide them the peace of mind they deserve.
JIM CRAMER: David, it's Jim. Thank you so much for what you're doing.
DAVID CORDANI: Jim, good to hear your voice.
JIM CRAMER: Always good to hear you. Thanks for coming on "Mad Money" a bunch of times, too. I'm trying to figure out the priorities, and maybe it's multi-prong what would help you the most? A five-minute Abbott test that would tell you what you're – what some of the lives that you back are seeing? Or something about more personal protective equipment, because it does seem you go through it quickly, and that's hurt the process in hospitals? I know it's difficult to balance these, but I do feel like testing, testing, testing would really help Cigna.
DAVID CORDANI: Yeah, Jim, maybe I'll boil it down into three. And I appreciate your question. We've been working every other day, there's a group of CEO leaders who come together crossing hospital, lab, home health care, skilled nursing facility, pharmacy services, our sector, etcetera to ask those very questions. You hit on two of the three. One is PPE. We need to have the ability to get the PPE or the personal protection equipment to the right place at the right time. And the way in which the country is rising up to that is quite inspiring, though there are hot spots and additional acceleration necessary in the production and distribution. Second then is testing. The accelerated testing. There's a hierarchy. In-patient first, medical professionals and first responders, second, individuals who are high-risk third and then others fourth, from that standpoint. And then third is what we've all become accustomed to talking about now, social distancing. Reducing the risk of onset. Taking on the responsibility to reduce the risk of onset, all Americans have that responsibility. We've learned now washing our hands for 20 seconds is really important. And we've learned social distancing is very important. So, if you take those three items, while the medical system is working feverishly both to triage those who are ill as well as to evolve therapies and ultimately vaccines, that's what we need. Those three items plus the medical system doing its work.
JIM CRAMER: Would a -- would the number three item, social distancing, would that benefit from a national lockdown or national travel ban?
DAVID CORDANI: That's not my call. I think you see the country is going through different phases of it. First and foremost, I'm proud to see what corporate America did. Corporate America stepped in and aggressively moved to supporting individuals to work at home, for example. We have probably in excess of 90% of all of our colleagues in a work at home situation from that standpoint. Because of the nature of our business, some people need to be in the work setting. We've limited that. Social distancing from that standpoint. We provide additional pay for those who have to be at work, whether it's tied to care delivery, pharmacy service delivery, et cetera. We also offered an additional 10 days of emergency PTO because we know individuals are trying to balance work, life, caregiver, sandwich generation, et cetera. So, number one, corporations are stepping in quite aggressively. And then secondly, the government has to deal with in from a local to national and national to local basis. We're not a one size fits all country, and I think we're seeing, in this case, it's not a one size fits all solution. But the intensity is ramping up. I think that more political leaders are finding that more aggressive posture, social distancing is probably in society's best interest over the near-term.
DAVID FABER: David, David Faber. What is your sense right now in terms of the financial health of our nation's hospitals? I would assume they'll benefit from the fact that you are going to be covering all the costs related to some of their patients or the patients who have your insurance. But what are you hearing and how will this industry look once this virus passes?
DAVID CORDANI: Yeah. There's strains to every business, there is no doubt about it. I was listening to Jim's comments just before I came on. So, the strain is acute. As you deal with the hospital and the care delivery part of the equation, obviously we're seeing in the country those elective procedures or those deferrable procedures are being asked to be deferred by hospital leaders, by policy leaders and otherwise. So, that's an extraction of revenue from that standpoint. Conversely, there's an onset of certain services consumed. You're correct, the action we took, we're doing our part by saying the hospitals. Don't worry about that part of the reimbursement, don't worry about that part of the collection process, don't worry about bad debt attached to that, we want to support you from that standpoint. And then, David, as you saw the stimulus bill, there's dollars being allocated towards health care delivery services from that standpoint. So, I think we are going to see in most cases the strongest of the strong will be there. The strong players will provide support for their brother and sister locations around the country. And some of the hospitals that may be in a little weaker financial state might find themselves in a state of disarray more rapidly. Elected officials need to be prepared to step in quickly to provide the financial backing that they need.
CARL QUINTANILLA: David, it's Carl. I thought your answer on testing priorities was interesting because do you think the debate is going to come down to when we get high-speed testing at scale and antibody testing at scale. Do you test high-risk individuals first because of their vulnerability like you said? Or do we test low-risk individuals first because they're the ones who are most able to get back to work?
DAVID CORDANI: I think when the testing capacity expands, we are going to see in our country testing consumed at a higher rate across the board. My comment, Carl, was relative to the present time. So, let's take an example of why I referenced what I did. Working with hospital partners, we're able to see that, the priority is to get non-COVID patients out of the hospital if possible, into long-term care, skilled nursing facilities or home. So, our industry works with hospitals to accelerate those transitions, but we needed to make sure that individuals were COVID negative. So, therefore the prioritization of in-hospital individuals' consumption. To your point, as the rate and scope of testing expands, and it is, companies like Quest, LabCorp and others are ramping at quantum pace. And to your notion, there's additional testing in terms of speed or type of tests that expand. I think we'll see societally more consumption of the testing to help identify individuals at risk or people who may be asymptomatic and carriers from that standpoint. That's the next chapter to come. My comment was more relative to the present-state we are dealing with right now.
BERTHA COOMBS: David, one of the things that you have talked a lot about over the last couple of years is whole health and mental health help. You have expanded telehealth access to mental health. Are you seeing people access this, in this time when people may not be sick but they are certainly feeling the stress?
DAVID CORDANI: Bertha, I appreciate the question. The simple answer is yes. You recall that we fielded the largest study of its kind some time ago relative to loneliness and we were able to determine that in the United States we have an elevated level of loneliness. The social distancing runs the risk of perpetuating that yet further. So, the ability to have mental health or whole person health services brought to bear and more easily accessible, including tele is mission critical from that standpoint. Secondly, having mental health or whole person health services that are merged in with chronic care management, acute care management is mission critical. Because we see the two cohabitating. For example, if an individual has a chronic disease, about half of all Americans do, they're seven times more likely to be clinically depressed. If that clinical depression goes untreated, there's a multiplier effect on their health issue and health challenges from that standpoint. We're trying to acknowledge that, understand that and step in and to your point, telehealth is an example of expanding the access and services for the benefit of individuals.
DAVID FABER: David, what about Cigna itself? To say this is an uncertain time is an understatement. Given that, a lot of the CEOs I speak to certainly are trying to figure out ways to pull back, to cut expenses. Are you doing that as well? If so, where?
DAVID CORDANI: We agree it's an unprecedented time. Stepping into 2020, we're carrying some meaningful momentum as a corporation. First growth momentum, outstanding client and customer retention around the world, expansion of relationship and new business adds to the corporation from that standpoint. But to the macro statement you make, there's no way a corporation could step back in the current environment and say given everything I know today, what I thought I was going to execute in 2020 I'm going to be able to execute it exactly the same. So, it presses the be dynamism of a corporation aggressively. We're not arbitrarily pulling back on expenses. In fact, I made the reference where we're spending more for colleagues who need to be in the work setting, in the provision of care or the supply of pharmacy resources from that standpoint. But we are and we will dynamically reprioritize where and how we're investing. For example, we have a very large R&D discretionary investment pool in our corporation that we add to every year, we have a venture fund within our company that we execute each and every year. Those investments would have a higher hurdle rate right now to be deployed, simply because of the unstable environment that stands in front of us. So, in a macro level, of course, we're revisiting, but there is not an across the board cut because our 170 million customer relationships around the world obviously still need to be served and we're growing in those relationships, we need to be in position to serve them.
JIM CRAMER: David, Jim. One of the things I'm trying to understand, and you're an international company. Why are things less dire in Germany, very dire in Italy and catastrophic in Spain?
DAVID CORDANI: Jim, I don't think I'm the right person to give a pinpointed answer. If we look back at a few points of similarity, let's take South Korea and Italy as an example. Two ends of the spectrum. What South Korea proves is a couple things. One, South Korea has a population that is older, on average. Italy is even older. So, data point one, we know COVID-19 affects the older population more acutely. Point two, it seems to affect older males more acutely than older females. Italy's population not only skews older but skews older male. Three, it attacks smokers a bit more aggressively. And while South Korea has a somewhat elevated smoking percentage, Italy has even a higher smoking percentage. So, you take that as a population measure. Second piece, it's clear, South Korea was extremely aggressive and constructive relative to what we know today as social distancing and testing. If you look at Italy, they were less aggressive relative to social distancing, even after the country put forth certain mandates and less comprehensive relative to test. So, I take two cohorts. One, the data of the people, age, age and sex mix, smoking, there's higher risk across the board in this case Italy. And then secondly, how aggressive one was with social distancing and how aggressive one was with testing to inform that social distancing and inform the triaging. Those seem to be playing out as we look at the comparison to Spain versus Germany that pattern is playing out pretty consistently.
CARL QUINTANILLA: David, thank you for your time. So much, A lot of good information. A lot to absorb. David Cordani of Cigna--
DAVID CORDANI: Great to be with you.
CARL QUINTANILLA: -- and our Bertha Coombs. Bertha, thank you very much for bringing that to us.
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