Cash-strapped employers turn to clinics
NEW YORK —Soaring healthcare costs and a renewed focus on employee productivity has prompted many U.S. employers to take a closer look at the benefits of corporate health centers, and many are turning to third-party vendors for help.
“The day of the on-site medical center model has finally arrived. Large employers no longer are confident that large health plans are going to control costs for them,” said Stuart Clark, executive vice president of Comprehensive Health Services, a company specializing in on-site healthcare solutions that currently operates more than 80 worksite clinics. “Employers are saying, ‘When it comes to health care, we are going to begin addressing this here.’ They are directly addressing healthcare spending by providing on-site medical centers.”
Since 2002, CHS—which is the largest independent worksite healthcare company—has experienced an annual compound growth rate of more than 20 percent, with 2008 shining through the highest growth year. For 2008, CHS has opened about a dozen new clinics, which equates to a 30 percent to 40 percent increase in demand compared with previous years, Clark estimated.
CHS’ growth may be impressive, but the company is not alone. In fact, many on-site clinic operators are experiencing an uptick in demand as such employers as Toyota, BMW, Pepsi Bottling Co. and Lowe’s increasingly implement on-site health centers. And going forward the growth potential for the industry is phenomenal.
Given that the ideal client is an employer with 1,000 or more employees at a site, industry sources suggested that the market could bear as many as 5,000 worksite clinics.
“We are certainly less than 10 percent of the market right now, and if we are the biggest, that means there is a heck of a lot of market still left to go in terms of the traditional worksite model,” said Peter Hotz, president of Take Care Employer Solutions, which is the division of Walgreens’ Take Care Health Systems that operates more than 300 worksite clinics.
Also representing an opportunity are those smaller employers who opt to team up to form coalitions to establish and share a facility.
As further evidence, a recent study by global consulting firm Watson Wyatt found that nearly one-third (29 percent) of companies have or plan to have an on-site health center by 2009, up from 27 percent in 2006. A separate Watson Wyatt study of 84 companies with on-site healthcare centers found that reducing medical costs was the chief reason 70 percent of companies have opened a center since 2000.
What is the cost savings? It is expected that companies will see a return on investment in about two to three years of operation. According to an August 2008 report by human resources consulting and outsourcing services provider Hewitt Associates, dubbed “Trends in HR and Employee Benefits: Employers Implement On-Site Health Clinics to Manage Costs,” some studies suggest that worksite clinics lead to $2 in savings for every $1 invested, and some may even reach $3 to $6 in savings for every $1 invested. Citing data provided by On-Site Health Care, the Hewitt Associates report also stated, “For prescription drugs, employers may see 11.9 percent in brand savings and 56.3 percent in generic savings.”
For employees and their dependents, the services may be offered free of charge or for a cheaper copay to encourage use.
While the concept of an on-site health center may not be entirely new, what is notable is that early adopters, those with health centers before 2000, typically opened centers to address occupational health. Today, companies are opening acute-care clinics to reduce soaring medical costs and are operating such clinics as part of their overall health and productivity strategy.
It also is important to note that, along with curbing healthcare costs, worksite clinics have been shown to reduce absenteeism, improve productivity, promote preventative health and wellness and can be used by employers as an attractive recruitment and retention tool.
On-site health clinics differ depending on the employer’s level of investment and employee population size, but there are some common characteristics. Many times the clinics are located on the same campus where most employees work, or at a nearby location, and may be comprised of multiple exam rooms, blood-draw rooms, laboratories, X-Ray machines and pharmacies. Nurse practitioners, physician assistants and/or physicians often staff worksite clinics.
To facilitate the implementation of such clinics, employers increasingly are contracting with third-party vendors including: CHS, Take Care Employer Solutions and QuadMed, which operates several internal clinics and externally two clinics for Briggs & Stratton Health Center and one for Miller Brewing Co.; and even John Hopkins, which, in addition to operating a handful of internal clinics, operates about 50 worksite clinics for other employers.
Truly validating the strength and growth potential of the industry was Walgreens’ recent acquisition of workplace-based healthcare providers I-trax/ CHD Meridian Healthcare and Whole Health Management. The acquisitions instantly catapulted Take Care into the largest operator of worksite clinics.
“I think the fact that we acquired both companies show just what a commitment to the business Walgreens made. To take the two leading companies in the space was just a huge commitment,” said Hotz, who previously served as chief operating officer for CHD Meridian. “Major employers aren’t waiting for reform. They just can’t wait any longer so they are saying what can we do as a major employer to better manage healthcare, provide more access and to manage our costs?”
Hotz said Walgreens is preparing to roll out initiatives linking the retail-based Take Care clinics and the pharmacy to broaden the scope of services and provide a more universal solution to an employer. Whenever possible, it will brand the worksite clinics as Take Care.
Meanwhile, Tom Ryan, CVS Caremark chairman, president and chief executive officer, has told analysts on at least one occasion that the 2006 acquisition of MinuteClinic will, among other things, help it “realize the additional revenues and profits that we’ll get in both CVS stores, as well as MinuteClinics in corporate settings.” Among MinuteClinic’s corporate settings is the clinic located right in the Woonsocket, R.I., headquarter office for CVS associates.
Wegmans begins trial of self-checkout lanes in New York store
ROCHESTER, N.Y. Wegmans is testing four self-checkout lanes for the first time near company headquarters at its Penfield, N.Y. store based on consumer demand, according to published reports.
We were never in a rush to introduce self-checkout,” Jo Natale, Wegmans spokeswoman, told the Rochester Democrat & Chronicle. “We had never seen one we liked or offered features for customer convenience.”
Wegmans stores close all photography centers
ROCHESTER, N.Y. Supermarket chain Wegmans is closing down its photo operations, reports this week said. After more 20 years serving its communities with photo services, the company will no longer offer full-service in-store photo development.
The closures affect 12 stores in Wegmans’ Rochester market. This will affect 18 full-time employees and 52 people who work in photo part-time in Rochester, the company said, as well as 63 full-time photo employees and 173 part-timers companywide. Wegmans has said it will try to make adjustments to keep some of those employees in the company.
So far in the past year, Wegmans has closed 9 of its photo departments. The company has said that the closures are largely due to the growing popularity and accessibility of digital photography.