With health care costs on the rise, companies are finding savings by creating their own medical clinics for employees.
By Jennifer Alsever, contributor
A health clinic at HP
FORTUNE -- Corporate America is going clinical. Some prominent companies have given up hope that Washington will do anything to curb health care costs and instead are taking matters into their own hands.
This fall, Intel will open its own medical clinics on campuses in Hillsboro, Ore., and in Rio Rancho, N. M., hiring its own doctors and staff to care for the 9,043 employees who work there. The goal? Lower insurance costs, improved employee health and higher productivity. "I don't think anyone thinks that anything is going to happen with health reform and a lot of employers are rethinking their overall strategy," says Marne Bell, a senior consultant at Towers Watson, a New York HR consulting firm that has found a dramatic increase in interest in clinics this year.
For years, workplace clinics consisted of handing out Band-Aids and treating workplace injuries. But as health care costs climb -- employers pay 36% more today than they did five years ago -- companies are betting on long-term cost savings with their own clinics staffed with physicians, nurses, even chiropractors, physical therapists and pharmacists.
Earlier this year, Michelin North America built a medical clinic on its campus in Greenville, S.C., Hewlett-Packard (HPQ) opened one in Palo Alto, Calif., and drug maker Sanofi-Aventis (SNY) opened a clinic and pharmacy in Bridgewater, N.J. Intel (INTC) has already opened two other clinics in Arizona and another in Hillsboro, Ore.
Intel executives say they want to make access to doctors easier for employees. With no drive time to appointments, no long waits and no rushed visits with physicians, workers are more likely to actually get to the doctor. And hopefully that can prevent more serious -- and costly -- diseases like diabetes and heart disease.
"It's the right thing to do," says Tami Graham, Intel's director of global benefits design. "People have come in because it was convenient, and they're finding life-threatening issues they wouldn't have known about, and they're taking action."
The clinics are no small investment. Each clinic cost Intel about $1 million to build and another $1.5 million to operate. The chipmaker managed to break even on those operating costs at its first two clinics in Arizona. "For every dollar you spend, you save $2 to $3 but it may take two to three years," says Bell at Towers Watson.
Nearly a quarter of the 588 large companies surveyed by Towers Watson this year already have on-site medical clinics for both factory and office workers, and next year, another 12% of those corporations will open new clinics for employees. (Towers Watson doesn't have comparative data, but a decade ago, most companies used on campus clinics for workplace injuries. Only now are clinics shifting to be more focused, primary care doctor's offices, says Bell.)
The powerhouse behind much of that construction is Walgreens (WAG). The drug store chain has a division called Take Care Health Systems that runs 360 on-site clinics, managing their staff and operations. That business makes up a small percentage of the company's $67.4 billion in annual revenues, but Take Care Health is seeing more companies move to offer primary care services at their health centers, says Peter Hotz, Walgreen's group vice president. "Our pipeline is up 60%," Hotz says.
A similar uptick is playing out at Kansas City-based Cerner. The company makes software to manage medical records but expanded into the business of building and managing health care clinics after rising health care costs prompted Cerner (CERN) to build its own in-house clinic in 2006.
"Once a year we would have one bad meeting about our health plans, and you would watch the price climb and deal with it as an employer," says Jeff Townsend, a Cerner vice president. Executives projected that providing health care for its then 6,500 employees would cost the company $100 million over 10 years.
In 2006, Cerner built its own 13,500-square-foot clinic staffed with four full-time doctors and a team of nurses, chiropractors and pharmacists. Two years later, Cerner became such a believer in the concept that it jumped into the business of designing, building and running those clinics for other companies. Cerner now operates 30 medical clinics for corporate clients, including AT&T (T), Frito-Lay and Cisco (CSCO).
At Cerner, employees make their appointments online, walk down the hall to the clinic, check in electronically and wait no more than a few minutes to see the doctor. Exam room décor includes couches and high-tech touches like smart blood pressure cuffs that transmit data to a screen mounted on the exam room wall -- touting some of Cerner's technologies. There's no co-pay, and a pharmacy is a few steps away.
For Cerner, the added convenience translates into about $1.2 million in productivity savings among its 5,700 Kansas City workers. Annual insurance claims, too, climbed just 3% at Cerner last year, which is about half the national average.
While many companies struggle to get employees into wellness programs, participation in Cerner's programs hit 96% last year. Biometric tests taken over the past three years also show 70% of employees have either improved or stayed steady when it comes to health risk factors as BMI, glucose and cholesterol levels. "We think employers are this country's best shot at innovating a new healthcare system," says Townsend.