Cost containment, medical management, voluntary wellness programs, higher deductibles, increased participant contributions, marketing your health coverage each year to find the “best” carrier rate, are all employer strategies that have been tried over the past ten years with the sole purpose of controlling the rapidly increasing cost of health insurance. However, according to the Kaiser/HRET Study, during the same period, health insurance premiums have increased four times as fast as general inflation and 3.5 times as fast as worker’s earnings. Perhaps it’s time to consider a different strategy?
In 2010-11, health insurance rates increased by almost 6.9%, the highest amount in the past 6 years. Based upon current rates of medical inflation, insurance rates are doubling every 5-7 years. Adding the anticipated negative financial impact of the Affordable Care Act, which does nothing significant to reduce medical costs, combined with the stress to our current medical delivery system of adding 30-40 million previously uninsured people into the system, the future does not look very optimistic for controlling future healthcare/insurance costs. Add to that a provider compensation system that rewards frequency of services rather than quality of outcomes, and we have a formula for disaster that is clearly unsustainable. Perhaps its time to consider a different strategy?
The concept of the company doctor is not new and actually can be found as far back as the 1860’s with the developing national railway system and mining companies. These companies established medical clinics to handle mostly occupational injuries with the primary goal to keep employees working. Many larger employers created medical clinics and this approach prospered until the early 1920’s. Due to the development of Workers Compensation and cost cutting associated with the depression, these in-house clinics gradually disappeared until the 1950’s, when a concern about workplace safety led to growth in occupational clinics at mines, factories and logging companies. In 2007, keen interest in primarily non-occupational on site clinics began to develop amongst employers, across various industries.
Worksite clinics (Onsite), as they are more commonly known today, are gaining popularity amongst larger employers. According to a 2009 Mercer study, approximately 34% of all employers with 500-999 employees, 36% of employers with more than 1000 employees and 42% of employers with more than 5000 employees have developed worksite clinics. The largest number of these clinics have been created by healthcare employers, industrial employers and governmental entities. However, the most significant interest of late has been by smaller employers, banding together to share a clinic. We will discuss clinic sharing a bit later in this article.
Worksite clinics generally are characterized by one of two models:
Onsite Clinic– Building a primary healthcare clinic on an employer’s premises, either staffed by the employer, outsourced to an independent third party or contracted through an existing healthcare system. By far, the most common approach today is to contract with a third party to establish, staff, manage and operate the clinic
Direct Contract– allowing employee’s special access to an existing healthcare provider system’s clinic.
Irrespective of the model chosen, the worksite clinics generally provide the following types of occupational and non-occupational services to employees and, usually, dependents:
- Primary Care
- Wellness and prevention
- Disease management
- Lab work
- Radiology (some models)
- Prescription drugs
- Health Counseling/ Health Risk Appraisals
According to consulting firm Mercer, the value proposition of worksite clinics include:
- Providing participants with improved access to care with added convenience.
- Reducing overall plan costs.
- Reducing lost time and incidental absenteeism thereby improving productivity.
- Improving health outcomes.
- Promoting wellness and the importance of preventive screenings.
- Providing a higher quality of care than is routinely found in the community.
- Increasing employee retention, recruitment and morale.
- Redirecting care from expensive, sub-optimal and time consuming settings.
- Serving as the primary focus of care delivery for workers and dependents.
Generally, the clinic can handle lab work cheaper than the traditional system. They are able to buy most generic medications at bulk rates. Physicians will spend more time with the patient, providing advice on how to manage personal healthcare, avoiding future high cost encounters. Most clinic programs book only 3-4 patients per hour, allowing for a more meaningful exchange of information with the provider and for real time wellness counseling. In addition, the reduction in time away from work, incidental absenteeism and general employee productivity is improved because of the convenience of the on site process and the state of the art scheduling technology. Many of the clinics have real time reservation systems that text the patient when they should leave work for their appointment. Things as simple as a wellness exam, which may normally take as much as 3-4 hours away from work, can be accomplished within 30-45 minutes at the clinic. There is evidence that the efficiency of the system often attracts visits from participants who had not previously seen a primary care provider for years. Virtually every clinic operator will relate a story about an individual who had not seen a provider for years, whose life was saved because they caught and prevented a serious medical condition.
According to Mercer, about 13% of the Worksite Clinic activity has been amongst smaller employers who have joined together to share a clinic and it is the smaller segment, which is experiencing the most rapid growth. Generally, clinic managers state that the optimum number of participants for a full time clinic is between 800 and 1000. (A full time clinic being defined as providing primary healthcare services, lab and x-ray, wellness counseling, chronic disease management and dispensing certain generic medications through an in-clinic pharmacy.) However, this employee population could be split over a number of unrelated employers utilizing the same clinic resources. Many smaller clinics initially start providing services only two or three days per week, but as volume grows, add days to their schedule. Some office parks are even offering worksite clinics to members of the office park in order to enhance the park’s value proposition.
As you might expect, depending upon the model chosen, start up costs can be substantial, but are usually offset by the savings generated in the first year. Most clinics are established within the organization so extensive capital expenditures are not required. Most of the worksite vendors indicate that build out expense is around $100-$125 per square foot and the amount of square footage depends upon the size of the employer, but will usually be a minimum of 1200 square feet. Key is creating an environment which is secure, HIPAA Private, so that dependents are comfortable and can use the clinic without disrupting the normal work environment. In addition to the build out, medical supplies/equipment for a 1200 square foot clinic with a pharmacy, will cost an additional $70-$100K, based upon the number of exam rooms and the Rx formulary. Additional operating costs are related to the number of staff. A primary care physician, physicians assistant, RN and clerical assistant’s cost will vary by vendor, but will generally be in the neighborhood of $250-$300 per hour if outsourced to a third part vendor.
The return on investment for a worksite clinic can be substantial, but is challenging to calculate. Most worksite vendors state that the return on investment is 2.5-3.0 to 1 and comes from a reduction in group health plan costs, reduction in occupational health costs, including workers compensation, human resource testing, recruitment, retention and lost productivity due to incidental illness and “presenteeism”. Obviously, if the health plan is self funded, the savings are easier to calculate and flow directly to the employer. However, even if fully insured, purchasing a very high deductible plan without primary care and a limited Rx benefit will yield a significant reduction in insured premiums, but the savings is “shared” with the carrier. Perhaps its time to consider a different strategy?
Finally, it is impossible to write an article regarding an innovative healthcare delivery mechanism without discussing it within the context of PPACA, Healthcare Reform, notwithstanding the forthcoming Supreme Court decision. There is nothing in PPACA today, which would adversely impact worksite clinics, at least through 2014. To the contrary, we can expect that through 2014 healthcare costs will continue to increase, as they have since its inception, and there is nothing within PPACA that leads us to believe that this trend will abate. Perhaps its time to consider a different strategy?