The coal miner who owed his soul to the company store also owed his health to the company doctor. An anachronism from the beginning of the industrial age, the company medical clinic virtually disappeared with the rise of health insurance in the 1960s, and most would say good riddance.
Now the idea has been revived, however, at Goodyear Tire & Rubber Co.'s tire manufacturing plant in Lawton, Okla., where a medical center operated by the company celebrated its first anniversary last month.
It is an example of a powerful campaign by major companies to slow the growth of health-care costs by reducing the reimbursement employes receive from medical insurance plans or by bringing direct competitive pressures on the medical community.
Goodyear's center offers basic family and emergency medical care to the plant employes and their dependents at costs far below those in Lawton's private medical community.
For example, a patient with suspected bronchitis is charged $15 for a visit to the center and receives an X-ray and blood test free of charge. The same visit and tests would have cost $90 at a doctor's office in Lawton, said Dr. C. Victor Williams, who headed the emergency wards of Lawton's two hospitals before contracting with Goodyear to run the center.
The $15 is the standard fee for all visits, half the typical cost in Lawton, said Williams. Under Goodyear's deductible plan, the $15 comes out of the employe's pocket, but there is no charge for laboratory work, X-rays and prescription drugs at the clinic.
Goodyear gets the $15 and, in turn, pays for the laboratory work ($3.10) and the X-rays ($1.80), according to Williams' figures. The company pays Williams and the others on the staff, whose salaries are comparable to those of their counterparts in Lawton.
After a year, the center's operating costs are $5,000 a month less than Goodyear would be paying if it relied on Lawton's medical community, says Williams -- promising Goodyear a rapid recovery of its $100,000 investment to set up the center.
The patients' cost savings and the center's location alongside the plant make employes less hesitant to come in, Williams said. The center's medical personnel have no financial incentive to refer patients to hospitals for treatment -- as private medical practitioners often do. But the center isn't reluctant to make referrals, either, Williams said. "The magic of this is, there's no needless admissions to hospitals, no needless tests."
It originated with Goodyear's frustration with Lawton's medical community. "Perhaps the biggest impetus was our failure to persuade the city's two hospitals to reduce their cost increases," Goodyear Chairman Robert E. Mercer said earlier this year.
Mercer said Goodyear is studying whether the center approach could be used elsewhere. But "even if the Lawton plan is not viable anywhere else, it has sent a clear signal to hospitals and doctors that we have both the will and the capability to take control of our own destiny and do what we must to cut health-care costs," he added.
More and more companies, driven by the pressures of health costs, share Goodyear's determination. A survey by Regina E. Herzlinger and Jeffrey Schwartz, published in the July-August 1985 issue of the Harvard Business Review, noted that health-care costs paid by the Fortune 500 industrial companies and the 250 largest nonindustrial companies equaled nearly one-quarter of after-tax corporate profits from 1981 to 1983. And although health costs increases eased last year, they still are rising much faster than consumer prices.
"Corporate expenses for health care are rising at such a fast rate that, if unchecked, in eight years they will eliminate all profits" for the average industrial and nonindustrial companies in their sample, the authors said. "Health benefits are now the third-largest cost element after raw materials and straight-time pay for most manufacturers, second for most service businesses," said Worth Loomis, president of Dexter Corp., quoted in the Harvard Business Review article. "Any president who isn't giving the control of health benefits significant attention doesn't yet understand the magnitude of the problem," said Loomis.
The Goodyear example shows the benefits of a competitive approach to health-care financing. But there are obvious and substantial problems with a market solution.
In a market-driven health-care system, major companies will be able to bargain hard for discount medical coverage and service -- shifting more of the health-cost burden to smaller companies with less bargaining clout.
Health maintenance organizations (HMOs), which provide comprehensive health-care services to individuals for a fixed fee, have a strong incentive to seek out companies in "clean, healthy" industries while avoiding industries where health problems are rife. Some new HMOs and other providers have begun targeting healthier workers -- "the joggers and yuppies," the Wall Street Journal reported this week. Others are offering to adjust rates based on the age and sex of the workers, indicators of likely health problems.
In the Harvard Business Review article, Herzlinger and Schwartz, a management consultant, suggest that one promising approach would be a switch to an alternative health insurance strategy that pays only for major kinds of treatment required for so-called "catastrophic" medical problems.
A company would begin to pay for an employe's health expenses once the amount rose above some annual limit, say, $1,000 for the average employe, she suggested. To make the system fair, the limit should be related to an employe's income, she added.
Such a shift would mark a profound change in the way Americans think about alcohol, tobacco, diet and life style, forcing us to accept a much greater responsibility for our own health, because we would be paying for a greater share of medical care except for catastrophic illnesses. Those that could handle the challenge would benefit. Those who couldn't would suffer. Presumably, all would benefit from a more cost-efficient health-care system, but the inevitable trade-offs promise to create some jarring new strains for society.