New Financial Model for Worksite Health Clinics

New Financial Model for Worksite Health Clinics

Its not a secret that self insured employers are flocking to worksite clinic solutions.

These solutions offer the potential of significant health care cost containment while at the same time delivering improved employee productivity and enhanced employee recruitment and retention.

As these worksite clinics have become more sophisticated at delivering cost savings to employers, the total realized ROI has grown as well. The enhanced cost savings has primarily been achieved by integrating the best in class health care cost containment services into the on site clinic offering. These services include population health management, targeted wellness programs, patient advocacy, price and quality transparency tools, and narrow referral networks of value based providers.

 

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These “next generation” of worksite clinics have essentially become an engagement tool for employees and employers.

The on site medical staff builds a trusting relationship with the members, and then leverages this relationship to drive significantly higher utilization for the best in class cost saving services as compared to employers offering these services through their carrier or as a stand alone solution.

You would think that with such sizable, predictable savings being generated by worksite clinic vendors, they would be willing to put more skin in the game by offering employers a financial model, whereby, the clinic vendor assumes most of the financial risk and the employer assumes very little. However, to date this has not been the case. Instead, these vendors have begun offering employers a set of performance guarantees around quality of care, patient satisfaction, and soft ROI predictions that are tied to the management fees. This is certainly a step in the right direction, however, by only placing the management fees at risk, these vendors are  exposing themselves to, on average, 10%-15% of the total fees charged to employers while the employer is on the hook for 85%-90% of the fees.

 

New Financial Model

Our team at InHouse Physicians is proposing a new financial model for self insured employers interested in a worksite clinic.  We call this model “Limited Risk”. We believe this model will accelerate the adoption of worksite clinics and limit the risk for employers. This is how it works.

The “Limited Risk” model looks like the current models in that InHouse Physicians would still charge an implementation fee to cover items such as staff recruiting and training, electronic medical record system, medical equipment and supplies, and furniture for the clinic. And the employer would also be responsible for modifying existing office space for use as a medical clinic. But this is where the similarities end.

In the limited risk model, InHouse Physicians would submit medical claims to the health insurance company for all billable clinical services rendered in the on site clinic including patient office visits, medical procedures, and labs.

For the first 6 months of the clinic opening, the employer would be responsible for a monthly guaranteed payment equal to the traditional fees of an on site clinic.  Any collected monthly charges from health insurance carrier or patient (after deducting administrative costs for billing and collections) would be deducted from the monthly guarantee amount. This differential would then be the amount owed by the employer to InHouse Physicians on any given month.

Then after the first 6 months, the employer would no longer be responsible for a guaranteed payment  as a safety net and InHouse Physicians would be fully at risk receiving most, if not all, of its clinic revenue directly from money collected through filing medical claims and collecting payments from both the health insurance company and patients. The employer could set co pays for the clinic to be less than co pays with community physicians to provide a financial incentive to visit the on site clinic for care.

The only fee the employer may see is a modest charge for non billable clinical services such as population health management and narrow network contracting with value based providers.  And these are optional services.

 

Benefits of New Model

This new model allows employers to move forward with a worksite clinic solution without all of the financial risk associated with the traditional model. With the traditional model, a benefits director who sold the worksite clinic solution to their CFO now has to worry about not only employee utilization at clinic, but short term clinic cost savings and ROI data tied to reductions in medical claims.

Just imagine how that same benefits director would feel if a clinic vendor was able to offer the on site clinic with the limited risk model described above. Essentially, the employer would only be on the hook for paying the vendor a monthly fee for the first 6 months of operation.

 

  • 1In addition to limited risk for the employer, this model has additional benefits. One of the most valuable additional benefits is that now all clinical activity in the clinic is captured by the carrier through claims data, thus allowing more accurate and robust reporting back to the employer by the carrier.
  • 2Secondly, with on site medical staff as in network providers for the employer’s health insurance carrier, the on site clinic  can be integrated into all of the programs that carrier is offering to the employer including such offerings as population health management. Clinic providers will receive updates from the carrier on their patients enrolled in these programs and the on site clinic can seamlessly refer patients to these programs driving engagement and value to the employer.
  • 3Thirdly, this model addresses any IRS issues associated with an HSA plan and an onsite clinic as described in IRS Notice 2008-59. In this notice the IRS has ruled that if an on-site clinic provides “significant care in the nature of medical services” free of charge, or at a cost that is below fair market value, employees with access to the on-site clinic will not be eligible individuals for purposes of HSA contributions. By having the on site clinic file medical claims and charge patients copays any issues around this IRS notice are avoided. As mentioned above, the employer can still modestly reduce copays for the onsite clinic visits and avoid the HSA issue above by considering the on site clinic as part of a custom network.

 

How Common Are Onsite Clinics?

Mercer National Survey of Employer-Sponsored Health Plans 2009

Source: Mercer National Survey of Employer-Sponsored Health Plans 2009

 

New Model Employer Requirements

So right about now many of the readers may be thinking “this is too good to be true”. And you are partially correct. There are a couple of characteristics of employers that make this revolutionary worksite clinic model viable.

First, the clinic location must be at an employer site with at least 1500 employees. This number could be less if remote employees and dependents were eligible to use the clinic either in person or via telemedicine. This is required to provide a critical mass of members who are eligible for the clinic, thus minimizing the risk of low clinic utilization and associated low revenue stream for on site clinic vendor.

Second, the employer must be willing to launch the clinic with a lean medical staff team and allow flexibility and growth in team as patient demand grows. This again protects the on site clinic vendor by minimizing any unnecessary staffing expenses in the clinic’s infancy.

Third, the employer must partner with the clinic vendor to build a comprehensive employee marketing strategy and tactical plan. This plan must be effective in driving employee engagement through a number of modalities.

 

Summary

This “Limited Risk” financial model for worksite clinics fundamentally changes the way worksite clinic vendors charge employers for this service. In the new model the vendor now bears most of the risk while the employer’s financial risk is very limited. In addition, it offers several other key benefits for the employer beyond reduced financial risk.

InHouse Physician’s “Limited Risk” model does come with some restrictions making it primarily available to worksites with at least 1500 employees. This of course limits this model’s penetration into the mid size employer market place. However, as InHouse Physicians become experienced with this model, I believe we will make it available for smaller employer sites that already have an engaged workforce and existing set of effective wellness programs.

This revolutionary new financial model for worksite clinics will remove the primary obstacle associated with worksite clinic adoption – namely financial risk. As such, many larger midsize and mega employers who have not adopted  worksite clinics, may  begin seriously entertaining the idea.

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Author Info

Jonathan Spero

Dr. Spero is the CEO of InHouse Physicians and a thought leader in the area of cost containment solutions for self-insured employers. Dr. Spero graduated medical school from the University of California, Davis. He completed his residency in Internal Medicine from Scripps Mercy Hospital in San Diego and has practiced both internal and emergency medicine. Dr. Spero is an expert speaker on employee health care cost containment strategies, energy and performance, as well as medical risk management for corporate meetings and events. Dr. Spero resides in Chicago, Illinois.

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