Health-Care Reform, Corporate-Style

When a company unveils a new plan to rein in health-care costs, workers usually groan. Yet Toyota Motor (TM) is getting rave reviews for the on-site medical center it built at its truck factory in San Antonio. Ask line worker Louis Aguillon. He went to the clinic in May with nagging back pain, and paid just $5 for the visit. "I saw the doctor for 20 minutes," Aguillon beams. "You're not just a number there."

Toyota isn't running a charity. The medical center, which cost $9 million to build in 2007, could save the company many millions over the next decade. Managed by Take Care Health Systems whose business is running medical clinics, the program has helped Toyota slash big-ticket medical items including referrals to highly paid specialists, emergency room visits, and the use of costly brand-name drugs. Plus, there are big productivity gains because workers don't have to leave the plant and drive to a doctor's office for routine medical matters.

The company doctor is back. It's a tradition with roots in the 1800s, but the practice fell from grace in the 1930s and 1940s, when critics complained that the doctors were mainly serving the employers' interests. Many states passed laws requiring such medical centers to be owned by physicians. Even now there are calls for monitoring the clinics, to ensure they emphasize patient care over savings.

Nevertheless, in a climate of deepening health-care woes, company-based medical centers are winning dozens of fresh converts. These include the North American units of Toyota and Nissan (NSANY), Harrah's Entertainment, and Walt Disney Parks & Resorts. Pharmacy chain Walgreen (WAG), which also operates nearly 200 small clinics for customers at its retail stores, sees so much growth in on-site medical centers that in May it snapped up Take Care Health. A recent study by benefits-consulting firm Watson Wyatt Worldwide (WW) found that 32% of all employers with more than 1,000 workers either have an on-site medical center or plan to build one by 2009. "We're talking about a microcosm of health-care reform," says Hal Rosenbluth, president of Walgreen's health and wellness division. "Companies can take control and understand their health-care costs."

On-Site Savings

In setting up a clinic, an employer typically comes up with a blueprint of the services it aims to provide to its workers. Then it hires an outside firm to manage the project, offering employees a major break on co-pays and other incentives if they use the center. At Toyota, the co-pay is $5, vs. $15 if workers visit an outside doctor. Some companies also reward the use of in-house services by making deposits in the worker's health savings account.

At the San Antonio plant, Toyota workers find little reason to venture outside. The on-site medical team can take X-rays, treat broken bones, and handle various emergencies. The doctors perform many of these procedures for as little as half of the physician fees charged by a specialist or a local hospital. And when medicines are required, an on-site pharmacy steers patients to generic drugs that have proven just as effective as the branded products. That seems to suit Toyota employees: some 60% of the San Antonio staff uses the clinic.

Managers of on-site centers such as Toyota's make a variety of bold claims. Rosenbluth says every dollar invested in setting up a clinic will return $3 to $5, even though on-site doctors spend an average of 20 minutes with each patient—more than double the national average for primary-care physicians. Some of the biggest savings are on referrals to specialists and visits to emergency rooms, where the financial burden falls mainly on the worker's employer. Peter Hotz, president of Take Care Employer Solutions, the on-site medical division of Walgreen, says the clinic-management companies Walgreen acquired refer 40% fewer patients to specialists, compared to the primary-care physicians who treated the workers previously. And emergency room visits are down 72% at companies where Take Care is managing medical facilities.

Behind Rising Health-Care Costs