Health-Care Reform, Corporate-Style

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Patient vs. Company Care

The question is, will health management companies hired to help control costs act in the patients' best interests? "We are trying to avoid the company-doctor image," says Dr. Jeb Johnson, Take Care Health's medical director at the San Antonio plant. "If [employees] perceive that we place some company's interest over their well-being, they won't come."

That doesn't entirely reassure critics. Some worry that the general-practice doctor might miss something a specialist would catch. And there are potential privacy issues, says Dr. Bruce Auerbach, president of the Massachusetts Medical Society. When employers have a tight relationship with the health-care provider, there's a risk they might access health information that could prejudice them against a particular employee. But Auerbach also believes clinics work well when the right guidelines are in place.

As for the quality of care, employers who have built medical centers say there is no need for concern. The cost savings, they say, come mainly from eliminating inefficiencies, including premium care that doesn't improve the patient's health. P.H. Glatfelter (GLT), a York (Pa.)-based paper manufacturer, says the company reduced costs by $2.1 million last year using a Take Care Health-run clinic to serve 1,700 workers at a plant in Chillicothe, Ohio. A large portion of the savings, says Greg Paradiso, Glatfelter's director of compensation and benefits, come from cutting unnecessary specialist referrals. At his plant, only 4% of patients are sent to a specialist, while 25% of patients in the surrounding community are referred out. By avoiding 2,100 such visits, with an average fee of $250, the company shaved $525,000 from its total health-care bill.

Need, Not Want

Managers of the medical centers also maintain they are more diligent in screening for long-term health conditions than traditional company-supported health plans. That's because there's an incentive to help workers avoid diabetes, hypertension, and heart conditions—problems that are expensive to treat and are responsible for high rates of absenteeism. Dr. Johnson, the Take Care Health medical director at the Toyota facility, says he is seeing improvements in such measures as blood pressure and cholesterol levels.

Companies running clinics also tend to save money on medicines. At Glatfelter, the use of prescription drugs by employees fell by 5% after the clinic was opened, saving the company about $130,000. "I think this is a silver bullet," Paradiso says. "I want our doctors prescribing what patients need, not what they want." Many of the union workers have enrolled, says Billy Smith, president of United Steelworkers Local 988, which represents some of Glatfelter's workers. "We've always had good luck with it," Smith says. "I haven't heard any complaints."

Scale Necessary for Return

If on-site clinics are beloved by boss and worker alike, why aren't all companies building them? For starters, there has to be scale. Clinic managers say there should be at least 1,000 employees in a single location to make the economics work, and the majority of workers must sign up. "Employers looking for a one-year return are barking up the wrong tree," says Stuart Clark, executive vice-president of operations for Comprehensive Health Services, one of Walgreen's largest competitors, with more than $100 million a year in revenue. "This is a two- to three-year return."

The company-clinic movement faces an important test in November. Walt Disney Parks & Resorts plans to open a $6 million facility at Disney World in Orlando, which will serve more than 40,000 employees and their dependents. Tracy Swanson, vice-president of workforce planning, benefits, and compensation for Disney's (DIS) parks, says the program is partly a response to the state's shortage of physicians, which she attributes to Florida's high malpractice costs. Says Swanson: "We can't afford to wait for the government to solve this."

Welch is BusinessWeek's Detroit bureau chief.