Why Employers Should Practice Medicine

Every businessperson will tell you that the key to reducing costs in any industry vertical is by reducing the amount of friction in the transaction. Friction is created every time an additional party is brought to the transaction because that party will likely have its own profit incentive, thereby increasing the cost of the product through the supply chain. Think about the amount of friction in every healthcare purchase; drug and device manufacturers, doctors, hospitals, nurses, administrators, insurers, government (local and federal), PBMs and dare I even say…misaligned brokers and consultants.

One way employers have effectively removed friction has been by self-funding. That has come at the expense of government (which has lost a lot of tax revenue) and insurers (who have lost premium revenue), and by extension seen massive reductions in retention charges.

Increasingly, employers are looking at the next frontier – the care delivery itself. And there is no better way to reduce that friction than to open an onsite health clinic, fully staffed by a Nurse Practitioner or Physician Assistant.

The obvious benefit of investing in an onsite clinic is immediately reducing $70–$250 office visit charges down to $20–$30 (when amortizing fixes costs over total services provided). But the synergies extend far beyond that. Various studies suggest employees who are regularly engaged in their healthcare through unfettered low-cost access to an onsite center cost 30–40% less than unmanaged participants wildly roaming through the maze that is the modern healthcare system. And of course, the goodwill it engenders with employees is harder to quantify, but extremely valuable.

Onsite centers aren’t cheap – aside from the 500–1,000 square footage and buildout costs, operating the facility itself can approach $500k a year. But provided there is a sufficient concentration of employees in one location, experience has shown that the ROI will absolutely validate the effort. In fact, even employers with smaller populations can get in the care delivery game by offering shared facilities with other local employers; perhaps even those in the same industry vertical.

Strategic employers are learning the secret to reducing medical costs requires getting even closer to the transaction of services.

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