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Making healthcare less expensive may be as simple as opening up your own clinic. Several large corporations across America have realized this. Now three Florida cities have done the same.

The idea wasn’t just a sarcastic comment to Jim Carnicella, human resources director at the City of Ocoee, which on April 16 became the third Florida city to go ahead and literally buy its own health clinic to serve its 340 employees and their families.

Paying doctors and nurses directly should in fact come out about a third — maybe even more — less expensive than paying for the city’s health plan, which reached $2.4 million last year.

“For what we were spending before, we’re now able to recruit a real live certified medical doctor who makes $150 an hour and a nurse with 25 years of experience,” Carnicella said.

When it’s all said and done, he calculates the city will have saved $700,000 in the first year alone. And that’s just with 25 percent utilization.

The City of Ocoee Employee/Family Health Center was converted from an 1,800-square-foot, three-bedroom home next to City Hall. The clinic serves roughly 700 people — city employees and their families — 20 hours a week, staffed by a doctor and a nurse practitioner.

Patients will receive free office visits, medications — even for diabetes and other chronic illnesses — as well as some lab and x-ray work, all at no charge.
At the same time, the complete BlueCross BlueShield plan that employees had before, remains intact. On that plan, the city is self-insured. For charges over $50,000, the city has reinsurance, so-called stop-loss insurance.

The idea seems so simple, Carnicella said, like the unassuming discovery of electricity. And it speaks volumes to the stress that American businesses, government and school districts are under in trying to provide benefits to their employees. In essence, corporations and now cities are challenging the biggest forces in American healthcare: insurance companies and healthcare facilities.
“What I’ve learned over the years is that the way insurers build premium is they add 8 to 20 percent in administration and overhead,” Carnicella said. “One doctor visit under Blue Cross self-insurance costs around $300. The employee co-pay is $15. Now with the clinic, the city pays $185. We pay that inflated charge through the health plan because the doctor has to make money. The health plan has to make money. Every time someone uses the clinic we will save 50 to 60 percent.”

The City of Ocoee began last year looking at how it could drastically reduce the city’s perpetual cycle of increasing healthcare costs. After all, the city saw rates increase 20 percent last year as Ocoee city coffers were drained by $2.4 million on employee benefits. Faced with the likelihood of yet greater price hikes, the city took the advice of Carnicella, who had previous experience with self-funded insurance.

If self-funding saves money, Carnicella told the city council, then operating the city’s own clinic would save even more money. So the city followed his advice, choosing to self-fund and opened the clinic shortly after.

Living proof exists to the south in Port St. Lucie, which opened an on-site clinic in July 2007. With the clinic up and running, the city looks to save $1 million in the first year. And its employees will keep $75,000 that would have been spent on out-of-pocket costs, said Ray Tomlinson, president of Crowne Consulting Group, which works with all three cities and other employers with their on-site clinics.

Palm Bay opened a similar clinic in March. And at least one school district is considering the idea, Tomlinson said. The actual clinic administrator in Ocoee and Palm Bay is CareHere, a Tennessee company. The clinic in Port St. Lucie is administered by WeCare TLC out of Lake Mary.

Here’s how it works: The city pays an average price per employee per month, which will likely average between $50 and $55. If costs rise, the city pays more and if they decline, the city pays less. City administrators may ultimately put limits on the amount of drugs that are available for free depending on costs. Ocoee also pays a consulting firm and a clinic administrator, CareHere, which in turn carries the medical liability risk.

On-site employee health clinics could change the healthcare delivery system as we know it, Tomlinson said. “Part of the problem of the great American business system is that the greed for profit sets in,” he said. “We think we have to make a profit on every little service.”

The clinic in St. Lucie attracts between 40 and 60 percent of all medical office visits that city employees make. “Between 48 and 54 percent of healthcare costs come from office visits and prescriptions,” Tomlinson said. “Over half that can be reduced.”

So far, physician groups have yet to weigh-in substantially. The specter is raised, however, as companies like Walgreens notice the business possibilities. In March, the drug store chain bought Whole Health Management and I-trax Inc. in Pennsylvania. Both companies operate on-site health clinics for large companies.
Tomlinson says it’s no wonder that Walgreens spied a prime opportunity. The idea is rock solid, he said. That’s why he has a hard time concealing his excitement when he talks to employers.

“They say it’s a benefit for employees, but ultimately, how much is it going to cost,” he said. “I can say with all candor, it’s really going to cost you nothing, because you already have those dollars funded in your health care.”



May 2008

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