Work-site health goes mainstream

First he spent years leading a company that contributed to the nation’s high cholesterol problem, and now he’s launched his own company to help employers help their employees manage it.

Activate Healthcare LLC, founded in 2009 by former Steak ‘n Shake CEO Peter Dunn, is one of several young Indiana companies that provide on-site health-and-wellness clinics to a growing number of employers. The company just reported raising almost $1 million in equity financing.

High growth in the number of companies that provide these work-site health services over the past decade has ushered in a class of young companies like Activate that do the legwork of running on-site clinics.

According to a white paper from research firm Fuld & Co., the number of new on-site clinic vendors that entered the market between 2001 and 2009 was greater than the total number from the previous 40 years. And many of the vendors that the firm interviewed reported growth rates of at least 20 percent a year in demand for new clinics.

Indiana is home to several of these vendors — most formed within the last decade and many showing signs of growth. There’s OurHealth, co-founded by former Indiana Medicaid Director Jeff Wells and real estate entrepreneur Ben Evans, which signed on its first client in 2010. Workplace Health Services launched in 2008 as a subsidiary of Indiana University Health Occupational Services in an effort to increase the network’s focus on workplace health. That same year, Community Health Network launched Infinity Employer Health Solutions to bring health coaching and on-site medical care to Indiana businesses.

Before these vendors came Novia CareClinics, now operating more than 30 clinics just eight years after being formed, and RepuCare, which was founded in the 90s but expanded its on-site occupational health services to include primary care in 2004.

Expanding clientele

Fuld & Co. estimated in 2009 that the number of on-site medical clinics in the U.S. would grow 15 percent to 20 percent annually, reaching 7,000 employers by 2015.

In the near term, companies invest in part-time or full-time wellness and primary care services to reduce absence and lost time for medical appointments and illnesses. Over the long haul, companies hope wellness and disease-management programs will encourage adherence to medical regimens.

In Indiana, the clientele of vendors has expanded, especially in the area of public schools and local governments. Activate, for example, runs clinics for North Lawrence Community Schools and Monroe County government in southern Indiana, and last year, Fort Wayne Community Schools signed a $1.1 million annual contract to open two clinics managed by Novia CareClinics.

Bridget Scott of First Person Benefit Advisors said clients of these vendors are usually self insured and have most, if not all, of their employees in one location. Scott said that even more than an increase in the companies signing contracts to open clinics, she’s noticed an uptick in the number of businesses just working with these companies to explore the idea. Scott is the executive director of marketing and product development for the employee benefits consulting and management firm.

And the data crunching part of the process may be an important source of business for these companies. They not only provide the health facilities, programs and tools, but also the analysis tools for assessing which, if any, of these services would be most effective.

“We work with clients to develop a carefully thought out, data-driven strategy based on their needs, their claims history and their demographics, and design a unique solution,” said Lee Dukes, president of Principal Wellness Co., an Indianapolis wellness assessment and solution provider.

A long-term relationship

The decision to move forward with a clinic is a high-risk, high-reward scenario, as Scott estimates the initial investment for an average-sized clinic to be at least $100,000. Many of the companies who undergo the analysis don’t end up with clinics on their site, possibly because of the significant investment required.

“Our clinic is three exam rooms, a lab room, a waiting area, some office space for staff and the pharmacy — it’s about 1,600 to 2,000 square feet,” said Kyle Hamilton, president and general manager of the Offertory Solutions Division at Our Sunday Visitor, a Catholic publishing company in Huntington that opened its clinic to 320 employees and their dependents in November 2011. “If we invest $100,000 in this, the last thing you want to do is pull back.”

Companies like Novia CareClinics and OurHealth make their money not from high startup costs but by collecting per-employee, per-month fees, while the employers additionally pay the actual costs for clinic staff, any drugs dispensed, lab tests and supplies. Hamilton said that his company, which contracts with WeCare TLC in Longwood, Florida, pays a monthly fee for each employee who is eligible to use the clinic — basically, every employee on the company’s health plan — not per employee who actually uses it. Although the company hopes for and encourages high utilization, it reiterates to its employees that use of the clinic’s services is purely optional.

In addition to making a large initial investment, employers have to wait a while to see quantitatively how the clinic is changing — or not changing — employee health and the company’s expenses, which means continued business for the vendor. And according to Fuld & Co., more than half of the firms the company interviewed in 2009 had not yet even implemented systems that would allow them to properly measure savings.

“Realistically, it will take 18 months for us to see changes in costs, but it’s really difficult to know,” Hamilton said. “If our costs still go up 10 percent a year, we don’t know if that would have been 25 percent if we hadn’t done this. You won’t ever have 20/20 vision to go back and say what would happen if we hadn’t done the clinic.”

Dukes estimated the lag time as even longer, at two to three years from when employees’ behavior changes would be reflected in claims costs. “There are a lot of moving variables that affect claims cost, so it is hard if you try to attribute an impact on claims change to any specific area,” he added.

Value proposition

The surge in workplace clinics has the potential to boost business in other health sectors, too. For example, many employers provide disease-management services and pay for their clinics to stock the most frequently prescribed medications for distribution at no cost to the employee. That means that if a diabetic patient is screened at the clinic, he can have his prescriptions refilled monthly at no extra cost to him. Improved compliance is good for the employee, the employer and — here’s the big one — the drug manufacturer.

As with anything in healthcare — especially in the wake of major reform — the future of these clinics and the companies that run them is uncertain. None of the vendors mentioned in this story responded to requests for interviews about the growth of their businesses, but it appears that an overall shift in the function and reputation of work-site health programs has taken place that may help keep them afloat.

“We saw a bit of contraction through 2010 and 2011 in the wellness industry because of the economy, but in the last eight to 10 months there’s been renewal in both interest and implementation,” Dukes said. “As health exchanges are introduced, I think it’s going to drive wellness to a much more local point. Employers will be left to their own resources.”