The concept has been around for about as long as employee health insurance, perhaps longer.  On-site medical clinics for employees originated as facilities to treat injured workers.  In the 1960s and 1970s they evolved to provide a broader array of services such as drug screenings, pre-employment physicals, the treatment of common illnesses and wellness education. 

The on-site health clinic boom ended with the recession of the early 1980s, primarily because the benefits didn’t seem to add up to the costs.  But now these clinics are back because of rising health costs and flat wage increases.  Questions remain around the return on investment, the role employers should take with employee health, the definition of a medical home, and just how many employees it takes to make an on-site clinic work. 

 In this article we’ll try to answer some of these questions.  But we’ll also try to answer another big question:  Why would a national operator of retail pharmacies and retail clinics such as Walgreens and Take Care Health be interested in on-site clinics on a very large scale?

Retail Clinics and the On-Site Model
 It turns out that the basic economics of an on-site clinic are very similar to those of a retail clinic.  Practitioner labor costs are about the same, as are the costs for supplies and equipment.  But there are some differences.  
 

First, the operator of the clinic typically doesn’t pay rent, nor do they pay for the build out of the clinic space.  But most importantly, there is no financial risk to the clinic operator.  All costs are born by the employer and there is a mark-up fee that basically guarantees a profit.

On top of that, if you are an operator like Take Care Health or MinuteClinic, you have the opportunity to give visibility to your retail footprint for the employees and their dependents.  The employer clinic becomes an extension of your retail clinic footprint and the retail clinic gives visibility to your on-site clinic offering.

So it is no surprise that both MinuteClinic and Take Care Health are operating clinics on employer sites.  But while MinuteClinic is just dabbling in this area, Take Care Health has scaled its on-site business quickly.  Walgreens, Take Care’s parent company, last year acquired CHD Meridian and Whole Health, the two largest operators of on-site clinics.  Furthermore, Walgreens placed the two companies, along with Take Care Health, under a new Health and Wellness Division led by Hal Rosenbluth, Take Care’s founder. 
Through the acquisitions, Take Care not only acquires 370 new clinics but more importantly, 180 new clients with names like Toyota, Sprint/Nextel, Lowes, Pitney Bowes, Florida Power and Light, Freddie Mac, Qualcomm and Fidelity.

 And most recently the company announced major initiative called “Complete Care and Well-Being” that combines all of the Take Care assets under one program for employers.

One natural evolution we might expect with their acquisition would be for Take Care to rebrand these employer clinics to gain the benefits of cross promotion with their retail clinics.  But we surveyed three employers whose clinics are operated either by the former Whole Health or CHD Meridian operations, and all three said Take Care has not raised the subject of putting the Take Care name on the clinics.  The employers included Pitney Bowes, Fidelity and One Beacon Insurance. 

Why Employers Opt for On-Site Clinics
 Cost is the initial driving factor in virtually all cases when on-site clinic initiatives begin.  According to the latest Kaiser Family Foundation survey of employers (http://ehbs.kff.org/), healthcare costs continue to rise well in excess of wage and gross domestic product (GDP) growth.  According to the Congressional Budget Office, total health care spending consumed about 8 percent of GDP in 1975; today it consumes about twice that and the share is expected to reach nearly 20 percent by 2016.  About half of that spending is privately financed, which is why CEOs are putting a great deal of pressure on HR executives to think about long-term solutions.

Approaches to on-site clinics vary significantly.  At one extreme there are a number of companies in the United States whose motives go well beyond cost.  It is often captured in statements like, “We no longer view this as a cost problem; we view it as an opportunity to create a health-conscious culture.”

One example of this approach is Quad Graphics, the largest commercial printer in the United States based in the Milwaukee suburb of Sussex, WI.  The company’s on-site clinic program is unique in two ways.  First, Quad Graphics is outwardly encouraging employees and dependents to replace their outside PCP with the on-site clinic.  Second, the company’s clinic subsidiary, QuadMed, has begun offering its services to other large companies in the area. 

 “The on-site clinics provide virtually all services an employee, dependent or retiree would need,” says Bob Wrench, QuadMed marketing manager.  That includes primary care, OB-GYN, ENT, cardiology and dental.  There are 20 medical providers, including physicians, physician assistants and nurse practitioners. 
 All medical claims are filed through a company-run third-party administrator (TPA), enabling the company to analyze health informatics.  Participation is high:  86% of Quad Graphics’ 8,000 covered lives participate in the wellness/on-site clinic program.  The clinics are set up near the entrance to each facility so dependents and retirees have easy access. 

“The benefit design encourages use of the on-site clinic for primary care,” says Wrench.  “There is a small co-pay, but beyond that there is 100 percent coverage.  Going outside the clinic is the equivalent of going out of network.”
 

The on-site clinic initiative began in 1990.  There are now eight QuadMed on-site clinics, five of which serve Quad Graphics employees.  The other three serve local employers, including Miller Brewing and Briggs and Stratton.
 

At the other end of the spectrum are smaller companies giving on-site clinics a try by outsourcing the operations either to a company dedicated to on-site clinic operations or health systems who have begun offering these services as part of their employer outreach efforts.  According to a Hewitt study of on-site clinics the number of employees needed for an employer to make an on-site clinic successful and cost effective usually hovers between 800 and 1,000 employees for an on-site clinic and 3,000 to 4,000 employees for an on-site pharmacy.  But that number appears to be dropping significantly. 
 

A good example is SAIF Corporation, a workers’ compensation insurance company in Oregon whose main facility in Salem, Oregon, has 670 employees.  Another 225 employers are in branch offices throughout the state.  SAIF is one of the few fully insured companies we have found with an on-site clinic.  That means instead of paying for employee medical costs directly, they pay insurance premiums.  So they have to achieve savings through either stabilized insurance premiums or soft costs, such as reduced time away from work, lower turnover or improved morale.  The company is in its 15th year of having an on-site clinic.

SAIF has contracted its on-site clinic staffing to a local staff-model HMO:  Providence Health & Services.  What is unique here is that Providence is now both the operator of their clinic and the provider of their insurance.  But according to Providence spokesperson Lisa Helderop, SAIF is the only on-site clinic that Providence operates.

Clinic hours are Monday through Thursday, 7:30 a.m. – 5:30 p.m. and Friday 7:30 a.m. – 11 a.m.  Two NPs staff the clinic, although they combine for 1.1 FTE.  Two MAs also staff the clinic; they combine for 1.9 FTE.
 SAIF’s plan incorporates philosophies to encourage both preventive care and use of the clinic, and has moved to a high-deductible HRA.  Generally, they are trying to take all barriers away from preventive care, with heavy emphasis on chronic disease management.

“Our goals are simple yet ambitious,” says Ken Van Osdol, manager of compensation and benefits for SAIF.  “We want to improve the health of our employees and sustain the affordability of their health care.  We are using the clinic as a platform for education to create a culture of health and appropriate utilization.  And we’re trying to make clear that poor health does not necessarily affect just the individual who is unhealthy, but all of us.”

Through the analytical work of a benefits consultant, SAIF reported that overall savings from 1999 – 2005 was $2.15 million.  Included in the savings was absence savings in 2005 of $77K.  From 1993-2005 absence savings amounted to $750,000.

The expense budget for the clinic this year is $397,000.  This includes labor and benefits cost of $287,000.  Providence passes through the labor and benefits costs and adds a percentage markup for personnel management, medical oversight and malpractice insurance.  The facility, equipment and inventory costs $88,000.

There are many other examples of smaller populations with on-site health care.  Some have worked well, others have not.  Take Nova Biomedical, for example, the leading developer of whole blood analyzers.  The company’s headquarters and primary manufacturing facility is in Waltham, Mass. The company is in its second year of an on-site clinic for its 400 employees but has decided to close the clinic in the next few weeks.

The idea of the on-site clinic originated with the company’s health benefits broker.  When looking at Nova Biomedical’s annual premium increase, the broker suggested looking at an on-site clinic combined with a high-deductible plan. 

Those who wanted to use the clinic had to participate in a health risk assessment.  Once they did that, they had access to the clinic anytime.  They also had to visit the clinic at least once a year for a screening.
 The Nova Biomedical on-site clinic was operated by HealthSTAT, a firm dedicated to the operation of on-site clinics on an outsourced basis.  Clinic hours were Monday 8:30 – 10:30 a.m.; Tuesday and Wednesday 8:45 a.m. – 12:30 p.m.; and Friday 2 – 4 p.m.  This approach meant the clinic was open almost every day of the week on a predictable schedule.  The clinic cost $30,000 up-front, including equipment and inventory.  It cost an additional $80,000 per year to operate, not including lab fees.

Although the clinic and high deductible health plans helped to reduce costs initially, it was not sustainable.  “We were not able to prove any diversion in health costs over the long term,” says Christine Budd, benefits manager at Nova Biomedical.  “I think if the economy was stronger and we weren’t cutting costs in other areas, we might have kept it open, but given this economy it just doesn’t make sense.”

Another example of a smaller employer clinic is in the Minneapolis/St. Paul suburb of White Bear Lake, MN.  Wilson Tool is the world’s largest independent manufacturer of tooling systems for punch presses, press brakes and punch and die components for the stamping industry.  It has 450 employees at its headquarters facility.

In September, the company opened an on-site clinic operated by Health Partners, a local health system and health insurance company.  The clinic serves the company’s Minnesota-based employees and their families with a physician, nurse practitioner and wellness coach.  At no charge to employees or family members, the clinic offers the same services of a traditional family practice clinic, including routine exams and screenings, lab tests, urgent care, work-related injury assessment, and wellness counseling. 

Company CEO Brian Robins says the clinic is a two-way street.  “High quality, on-site medical care will not only benefit our employees, it will help us maintain a high level of productivity and manage health care costs by promoting health and wellness and a lower overall level of absenteeism.”

The clinic is open Wednesday from 11 a.m. to 7 p.m.; Thursday from 7:30 a.m. to 4 p.m.; and Friday from 6:30 a.m. to 3 p.m.   The hours provide at least some level of coverage during all three shifts on at least one of the three days.

The more typical examples of an on-site clinic, particularly those operated by the big players like Take Care Employer Solutions, CHS and IMC Healthcare, are those that have a population of around 1,000-3,000 people  on site.  The clinics are open full time five days a week, and are staffed by any combination of a physician, nurse practitioner and medical assistant.   They typically extend hours one or more days a week to catch those going into 2nd shift, and/or open early one day a week to catch third-shift workers leaving
for the day.

For a single nurse practitioner on site full time, typical ongoing costs are around
$100,000.  Start up costs are around  $20,000 not including the $50,000-$100,000 involved in the build out.  These clinic operators also charge a percentage management fee based on the practitioner cost.  And they charge for MD oversight, professional liability and some allocated costs.  They all generate reports on every visit, which for larger employers are sent to an HR consulting firm to be integrated into the employer’s overall health data.

Despite some of the articles that say you can expect to get a return on every dollar spent on an on-site clinic, there are many employers who say the benefits are still hard to measure.

Summary
 On-site clinics could be the next wave of disruptive innovation in primary care, as if primary care medicine needs more disruptive innovation.  Health systems that are seeing MinuteClinic or Take Care Health moving into town must begin looking at how this combination is going to impact their affiliated or employed physician groups.

There are several strategic approaches for health systems, but all must address two fundamental needs:
- Is the final outcome a healthier patient?
- Is the delivery method convenient for the patient (which basically means anytime and anywhere)?
 

Some hospital systems have had success partnering with retail clinic operators.  It certainly is less costly and complicated operationally.  But very few health systems have gotten physicians on board with such partnering schemes.

The other less complicated strategic option is to outsource a retail clinic or on-site clinic offering such that the clinic carries the health system brand but the operator behind the scenes is another entity with deep experience in retail or on site operations.  Medcor is one such operator, having run Target’s retail clinics as well as Target’s on-site clinics for distribution center employees.

And finally there is the option of operating retail clinics and on-site clinics directly.  There is no shortage of retailers who want a solid retail clinic operator with a strong community brand inside their stores.  And there is no shortage of employers looking to lower their health care costs by getting more involved with employee healthcare delivery.

The bottom line is that primary care medicine is changing fast.  Reimbursement is changing fast.  And the one thing we know will be the single most important characteristic of the surviving health systems is the degree to which they can innovate during these changing times.

Examples of On-Site Clinic Operators
Medcor (www.medcor.com)
CHD Meridian (http://www.takecareemployersolutions.com/)
Whole Health (http://www.takecareemployersolutions.com/)
Comprehensive Health Services (http://www.chsmedical.com/)
IMC Healthcare (http://www.imchealth.us/)
HealthSTAT (http://www.healthstatinc.com)
CareHere (http://www.carehere.com/)
CareATC (http://careatctulsa.com/index.php)
QuadMed (http://www.quad-med.com)
Cerner HealthE (https://www.myhealtheexchange.com)

In case you missed it, in the last two years the start of the flu shot season has moved up considerably. And the implications for retail clinics are mostly positive. In fact, this could be the best news retail clinics have seen in a long time.

We are all familiar with the predictions of a booming retail clinic industry. But if you think those predictions have ceased, think again.  Merchant Medicine estimates 2,050 retail clinics by the end of 2014.

Of any company we have followed in the retail healthcare space, Solantic seems to hit all the strategic buttons:  stand-alone urgent care centers in high-traffic shopping centers, clinics in Wal-Mart, joint ventures with area health systems, a clinic in the Orlando airport, franchises for physicians, outstanding consumer marketing and a relentless pursuit of customer satisfaction.

Over the long term, it could be that seasonality is the least of a retail clinic operator’s worries. As we noted last month in an article about the long road to breakeven for retail clinic operators, traditional medical practices are taking a page out of the retail clinic playbook and focusing more than ever on patient convenience and consumer marketing. The result is a trend that we call “ConvUrgentCare™,” the merging of convenient care, urgent care and any type of walk-in medicine that involves non-emergent acute medical care.  Today you can see retail clinic techniques crossing over not only to urgent care and emergency care, but also pediatrics, family medicine and work-site clinics.   And these techniques appear to be working to change the game in walk-in medicine.

He has lived in the world of corporate travel management and now the world of healthcare.  Oddly enough, the corporate travel world seems to know a lot more about Hal Rosenbluth than the healthcare world.  But that may be about to change.