Employer Sponsored Health Clinic? Why Not? You Are Paying For It Anyway

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Many large self funded employers have, in the past,  considered establishing their own Employer Sponsored Health Clinic (ESHC) but have determined it did not fit their business model for a number of reasons.  However, with the advent of Obamacare and the pressures being applied to the health care delivery system, it might be time to revisit and reconsider.

Any comprehensive evaluation must include a number of factors and assumptions that go beyond simply the provision of primary care. An ESHC is designed to allow the employer to internalize many more related services and as such, must account for each of the following:  Current and future costs of primary care, the savings realized for the internalization and management of 1) triage and post-surgical worker’s compensation cases, 2)  back to work releases, 3) immediate on-site urgent care  4) management of employee lifestyles, 5) dispensing commonly prescribed pharmaceuticals, 6) annual immunizations, 7) reduced stop-loss premium and factors and 8) web based medical services.   Additionally, internalized laboratory and radiology services will provide further cost reductions.

Future access to medical care will be restricted at best.  As greater number of Americans and others are directed towards a dwindling number of physicians and allied caregivers, wait times will become excessive and detrimental to the overall health and well being of your workforce.  An on-site ESHC will avoid these matters also.

Cost of Entry

The cost of entry is generally the greatest hurdle that the self funded organization will need to overcome once all concerned parties have concurred that an ESHC facility would be in the best long term interest of the company.  Practical expertise can be acquired and paid for as the program progresses.  However, the investment necessary to commence operations could be daunting, with facility costs being the greatest portion.  However there are a number of ways to mitigate those requirements.

The suggested method to reduce the cost of entry is to utilize what you already own. Many large employers have dormant office space that could be remodeled into a first class medical facility.  The cost of remodeling a 7500 sq.ft. office might be $500,000.  However, a medical facility of that size could easily accommodate 30,000 office visits annually. Amortized over 60 months, with a monthly payment of $10,000, that equates to $2.67 PEPM for those 3750 employees.   An additional $150,000 (or $.81 PEPM) would be needed to completely outfit the facility.  All costs, including an allowance for overages would be less than $4.00 PEPM for 5 years.

In order to reduce these aforementioned startup costs,  the utilization of existing staff personnel on the remodel project could be considered.  Governing authorities such as cities, counties and States have qualified construction personnel that are quite capable to do much of the rebuild.   To divert their duties from facility maintenance to a 90 day project would be a great assistance in mitigating costs.

Project developers should also consider the modular approach to the build out.  Once acquisition of adequate space (based on projected employee migration) is located and secured, it might be recommended to remodel only enough space as to serve the needs of those utilizing the facility in the very near term without investing in walls and floors that will go unused or under-utilized for any period of time.  Proper planning will see the site expand as employees migrate from their current primary care provider to the ESHC.

Where possible, purchase refurbished equipment.  Renewed laboratory and radiology equipment will provide years of performance at a fraction of the cost.  Consider a contracting & relocation effort with a physician that has contemplated leaving or closing his/her practice in order to secure their medical services and equipment, both, at one time.  If nothing else, offer to purchase the existing equipment (if in serviceable condition) once they have stepped away from their practice.

While computer workstations systems are relatively inexpensive and easy to network, the software required for billing and electronic medical records are not. Leasing medical software eases upfront cash requirements with annual payments for licenses and maintenance.

Employee Migration to the ESHC

As stated, the entire program must pencil out to fully understand the benefits and impact on the employer’s health care costs. However, high employee utilization will not be immediate.  Employees will be introduced to the facility through their interactions due to urgent care needs, annual immunizations, worker’s compensation cases, pre-employment physicals, etc.  However, the employer is strongly urged to modify plan co-pays and deductable limits in such a way that the ESHC is highly favored by the employee.  Historically, a number of programs have seen migration percentages as high as 60% within a few years. Complete migration is not to be expected.

The State of Montana opened its first health clinic in Helena, MT in 2012.  The attached report indicates that the program savings have been substantial, being greater than $1.5million for their 11,000 employees, dependents and retirees.   The state is in the process of opening others in 3  locations. School systems in south Texas have seen the same type of savings, some as great as 20% of their healthcare expenditures.   The same results are being reported nationally and there is no reason to think that this will change.

Access to Care

It is reported that many senior physicians will be choosing early retirement as Obamacare is implemented over the next 3 years, just as legions are accessing this government system.  In 2010, it was estimated that we were short 50,000 physicians and Obamacare will exacerbate this looming access problem.   It is easy to understand that many responsible for the provision of medical care see access as a greater issue than the cost of care.    For the employer, it only makes sense to directly provide health care to their employees, and as such, avoid long wait times for care and thus maintain a healthy workforce.

Summary

Not since World War 2, when Henry Kaiser implemented his plan that provided health care to his shipyard workers and their families, has a more clearly prescient and opportune moment existed for employers to establish their own ESHC.  Those that act now will be able to learn from recent program rollouts, will more easily contract with physicians and allied providers, control costs, and forestall excessive wait times for adequate healthcare for their employees. We suggest that employers conduct a thorough evaluation before any other actions are taken and to that end we offer our consultative and actuarial services.

Cecil C McCumber Jr.  President

Medical Care Consultants – www.mcchealthcenters.com

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