Employers as Doctors

Applying the Economic Way of Thinking to Health Policy

Two recent articles by Milt Freudenheim in the NYT are worth reading.  The first describes companies that are providing onsite primary care to their employees.  Included are Toyota, Sprint and Pepsi Bottling.  Toyota's San Antonio plant, for example, has a blood-test lab, an x-ray center and its own pharmacy.

The second article describes the practice of employee provision of free services (deductible, no co-payment).  Eastman Chemical, for example, provides its employees with free mammograms, free vaccines for children and free drugs and supplies for diabetics.  Marriott is waiving co-payments for generic drugs related to heart disease, diabetes and asthma.  As one executive said, the aim is "to drive value and to target where care is most needed". 

These practices are not new.  They were faddish a few years back, then faded, and have returned again.

If none of this strikes you as odd, that's because you have become so inured to the strange world of health care that you are unable to distinguish between normal and abnormal.  In normal markets, companies specialize in what they do best.  Auto makers produce cars.  Soft drink companies provide colas.

So why are employers venturing into the practice of medicine – a field in which they have limited experience and no comparative advantage?  The answer: employers are trying to solve the very problems they themselves have created.  Third-party payers have completely destroyed the ability of doctors to provide innovative, creative, entrepreneurial solutions to health care problems.

Take diabetes, for example.  Doctors are trapped in a system where they are paid piecemeal for isolated services.  They cannot re-bundle and re-price their services to treat diabetes as such. (There also is no payment for one of the most important services: teaching patients how to manage their own health care.)

Granted, this mainly is the result of the way the government pays for care, but all the private payers pay the same way the government does.

There is an alternative to having your employer as your doctor, although it is so radically different from the current system that it is never discussed: free the doctors.


On free employer primary care:


On free employer drugs:


On how third-party payment creates the underlying problems:


Comments (5)

Trackback URL | Comments RSS Feed

  1. Chuck Reynolds says:

    A useful way to look at what companies are doing with on-site clinics is to view it as an immediate solution to a health care supply chain issue. For the exact reason that reimbursement systems are muddled with perverse incentives that drive wasteful and ineffective care behaviors, employers are shortening the supply chain for primary care services. They are skipping insurance intermediaries to pay docs, nurses, pharmacists and health educators to deliver the right services to the right patients at the right time. And, their employees receive services within walking distance and be back on the job within minutes, not hours.

    Rather than be critical of such a strategy, it is better to hold it up as a model for how health care should work, and to consider how it can be replicated more broadly in the marketplace.

  2. Sue McFellan says:

    There is payment for “one of the most important services”: skilled home health care. It is uniquely suited to teching patients how to manage their own health care and has been quietly doing so for about 100 years.

    When will the vaunted acute care system recognize the critical contribution of post acute care and start to take responsibility for the outcome patients care about: the restoration of the ability to perform basic tasks of daily living for themselves?

  3. Bob Kramer says:


    I could not agree more. These initiatives are destroying the practice of
    medicine for reasons I cannot fathom. Do they think they will save money
    and bring down the cost of healthcare? Not likely. This will now add to
    the disconnect between the time honored doctor/patient relationship,
    further cut into the earnings of primary care providers, and further
    denigrate to role of the “family” physician.

  4. Uwe Reinhardt says:


    When you say that “Granted, this mainly is the result of the way the
    government pays for care, but all the private payers pay the same way the government does” you show that you must have been still a baby when Medicare was passed.

    In 1965, Medicare had to adapt its payment practices to the way private health insurers paid doctors: usual, customary and “reasonable” (UCR) fee for service. It was an explicit part of the deal.

    No one would have stopped private health insurers from inventing more innovative ways of paying doctors, then or now. They left the innovations (DRGs, RBRVS) to Medicare. If they had found a better way, Medicare would have copied it.


  5. Jack says:


    great blog post