The need to contain rising health care costs and maximize employee productivity is prompting some big corporations to create on-site medical centers and factor the square footage into their corporate real estate strategies.
Cisco Systems, which develops digital networking services, recently opened a $38 million health center at its headquarters in San Jose, Calif. Run by an independent medical group, the center is staffed with physicians available to the 17,000 employees at Cisco's headquarters and their dependents. Housed in converted office space, the facility occupies 24,000 sq. ft. of a 112,000 sq. ft. LifeConnections Center that also provides fitness and childcare operations.
“It's a strategic way for corporations to save on health care costs,” says Gordon Soderlund, senior vice president at DASCO Cos., a developer of hospital facilities based in Palm Beach Gardens, Fla.
Global giant GE Co., based in Fairfield, Conn., also provides employee health care services, says Soderlund. “Having worked at GE, I'm familiar with the strategy. The driver was trying to reduce corporate health care costs for employees.”
In some cases, hospitals are partnering with corporations to open wellness centers of 50,000 sq. ft. to 100,000 sq. ft. at a cost of up to $250 per sq. ft., says Soderlund. His most recent project was a $16 million, 80,000 sq. ft. health center.
Santa Clara, Calif.-based computer chip maker Intel Corp. and Stamford, Conn.-based Pitney Bowes, which makes postal scales and mailing software, also provide medical facilities. Pitney Bowes Chairman Murray Martin met with President Obama in May, in a business leaders' strategy session on how firms can reduce healthcare costs.
A lack of financing has stifled construction of medical facilities, says Danny Prosky, executive vice president of healthcare real estate for Grubb and Ellis Realty Investors, a subsidiary of brokerage Grubb & Ellis, based in Santa Ana, Calif., but in five years pent-up demand could spur a building boom.
A company needs at least 10,000 employees to justify the cost, says William Ward, vice president of real estate and facilities at Ochsner Health System, a New Orleans-based nonprofit that operates seven hospitals and 35 health centers in Louisiana. “It's a numbers game. If you have enough employees, it can benefit your organization.”
Companies typically lease space to a provider, says Ward. “Most hospitals would be happy to do it. Not only do you get the employees, you get their families.” Both provider and corporation derive income from the space, Ward adds.
Cerner Corp., a healthcare technology firm based in Kansas City, Mo., administers the software for Cisco's medical center, which offers wireless check-in and high definition monitor screens in its 14 exam rooms.
Medical costs have risen as the workforce ages, says Dr. Pamela Hymel, senior director of Cisco's corporate medical programs. “We wanted to get in front of that medical trend and make a difference on the health care and health outcomes.”
Workers have responded well, with 85% rating the health services highly. The corporate clinic concept has piqued the interest of numerous firms trying to manage medical costs, Hymel adds. “A lot of companies are coming to visit us right now.”