Is an On-Site Clinic Right for Your Firm?

By Brian Schilling

The next time an employee of Glatfelter paper company in Chillicothe, Ohio, needs to go to the doctor for a 30-minute visit to make sure she's responding well to a new medication, she can expect to be away from the office for about 38 minutes, including travel time. Glatfelter employees are among the 10 percent or so of American workers with access to an on-site health center. The full-service primary care health center is across the street from Glatfelter's production operations and its 1,400 employees. Convenience, however, is only one of several compelling reasons employees have to use it.

"I believe our employees get better care at the center than they can get out in the community," says Gregory Paradiso, Glatfelter's director of compensation, benefits, and health. Paradiso's confidence in the center is based on several factors. "First and most important," he says, "our doctors are salaried, so there's no incentive to overtreat patients or order tests that aren't necessary."

The clinic is managed independently by a vendor, Take Care Health, but Paradiso stays involved in setting priorities. The clinic gets a clear directive from Paradiso: provide high-quality care. To that end, the clinic makes sure that care isn't rushed. Physicians at the center are never scheduled to see more than three patients per hour. Even so, same-day appointments are always available.

Another key advantage of the center, according to Paradiso, is that because there are only two doctors on staff, employees will see a physician who knows them and can help them use available company resources. Those resources include two wellness coaches who also operate out of the center and the Glatfelter pharmacy, located next door.

Not every firm or every facility can support an on-site clinic. Expense and space are just two of the factors making on-site clinics a relatively rare perk in most U.S. workplaces. But, according to Paradiso and other experts, the barriers aren't as high as most people think and the return on investment can be substantial.

Size Matters
There are no widely accepted guidelines about what size facility can support an on-site clinic. Some vendors suggest that firms with as few as 300 employees at a single location may generate the patient volume necessary to make a center practical, but Paradiso suggests that 700 to 1,000 is a more realistic number and, even then, only if spouses and dependents are also eligible to use the facility.

The appropriate critical mass, though, depends on the type of clinic envisioned. The Glatfelter Family Medical Center is a full-service primary care facility offering everything from check-ups to radiology, lab work, mammograms, and a suite of wellness programs. It is staffed by two doctors, two pharmacists, one nurse practitioner, and 11 other full- or part-time staff and has an operating budget of about $5 million, which includes the cost of care and prescription drugs provided there.

Paradiso notes several ways to reduce start-up costs. "If you can't justify the cost of 'bricks and mortar,' leasing a custom-designed, pre-fab modular building is one way to significantly cut your necessary capital investment," he said. Another approach worth exploring, according to Paradiso, is collaborating with other area employers on a shared clinic. "If you're in a market where you're not getting real value for your health care dollars, you're probably not the only one."

Getting People to Use the Clinic
On-site health clinics are not a "build it and they will come" proposition, according to Paradiso. Significant marketing is needed to encourage employees to use the facility; building a successful clinic won't happen overnight.

To encourage Glatfelter employees to use the company facility, copays cost half as much in the clinic as they do in the broader community for the same services. In addition, employees that opt to select one of the staff doctors as their primary care physician (PCP) get an average $100 per-month discount on premiums. As a result, about 90 percent of employees at the Ohio location use the center and the majority have selected one of the center's two doctors as their PCP.

It took time and effort, however, to establish. "Giving employees financial incentives to use the facility is one thing, but building trust over time among our workers was equally, if not more, important," said Paradiso. "We took great pains to make sure there was an arm's length relationship between Glatfelter and the medical center. They don't report to us and we don't actively manage them. It's not the company doctor over there, it's just a good doctor that company employees and their families have access to." Little things matter, too. To help protect workers' privacy, the company designed the clinic so the entrance was not facing company buildings.

Spouses and dependents use the clinic, as well. "The more people that use it, the more effective it is and the more we save," said Paradiso, referring to an internal analysis showing that care delivered at the clinic is more effective and provided at a lower cost than the same care delivered in the community. "Every unit of care that takes place at the center is a win for the employer and a win for the employee. In fact, it's a win-win-win because it's a win for the doctor too. They get to practice medicine the way they were taught and don't have to worry about anything else."

How Much Does a Clinic Cost?
Start-up costs for a clinic range widely. For a lightly staffed in-house facility with limited hours, $30,000 or so might suffice, while a stand-alone facility with extended hours, such as Glatfelter's, might cost $1 million or more for the building, medical equipment, information technology, and other expenses. Annual operating costs are significant as well. The Glatfelter facility, which is larger than many, has an operating budget upwards of $5 million per year, which breaks down to $3.5 million for pharmacy costs, $1.5 million for medical costs, and an undisclosed amount for overhead and management fees. More typical operating costs might be in the range of $100,000 to $700,000.¹

Measuring Return on Investment
Though peer-reviewed studies on the subject are sparse, various in-house analyses show that on-site medical clinics are a good investment. A Pitney Bowes analysis from 2006 found that the cost per episode of care was $276 at an in-house clinic, compared with $645 for treating a similar patient in the community.² Paradiso explained that the savings result from replacing less effective, more expensive services in the community with in-house equivalents. "When the external market becomes inefficient, you ask, 'Can we in-source this better?' It's the classic 'build-or-buy' question that supply-chain and engineering professionals ask all the time. In my view, there can be a huge potential savings to in-sourcing some services, especially primary care."

Paradiso is not alone in thinking so. Another analysis of 15 employers' in-house clinics found an average return of $2.55 for every dollar spent to support an in-house clinic. Savings estimates do vary widely, depending on how they're calculated. When increased productivity and other factors are included, several employers found returns in excess of three-to-one. One even approached five-to-one. Only one employer could not substantiate a net savings and positive return on investment.³

An analysis of the Glatfelter Family Medical Center last year found a roughly two-to-one savings. "To purchase the equivalent medical services that the clinic provides for $2 million would cost us $4 million if purchased from doctors in the community," said Paradiso. "But that's just the hard (i.e., quantifiable) savings." Paradiso goes on to note that there are also significant savings in terms of increased productivity, better health, and greater employee retention—"soft" savings that are harder to quantify. But none of those soft savings need be relied upon to justify the investment in a clinic.

In discussions with other employers, Paradiso says that he often refers to establishing an in-house medical center as a "silver bullet" for dealing with rising health care costs, albeit one that might not be plausible for every employer. He attended the first national conference dedicated to in-house clinics in 2008 and recalled being optimistic that more and more employers would establish clinics. "Then the recession hit and capital expenditures of any kind were off the table," he said. "We're coming out of that now and I expect we'll see the trend revive because the cost of health care has not and will not be going down."