Memorandum
City of Lawrence
City Manager’s Office
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To: |
David L. Corliss, City Manager
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From: |
Ryann Pem, Recruiter
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cc: |
Diane Stoddard, Assistant City Manager Lori Carnahan, Human Resources Manager Michelle Spreer, Benefits Specialist
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Date: |
September 6, 2011
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Re:
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WellCare Clinic |
I. BACKGROUND.
As discussed in previous healthcare memos, the objective of the WellCare Clinic is to reduce the healthcare plan claims dollars through promotion and facilitation of a healthier workforce and in turn cost avoidance. The WellCare Clinic would provide employees with disease prevention and health management resources. The primary goal for the implementation of the clinic is to provide accessible and demonstrated health and wellness activities to city staff and retirees in order to better maintain and/or enhance the health and wellness of the employees and retirees of the City of Lawrence, Kansas.
Through an RFP process in late in 2010, Lawrence Memorial Hospital (LMH) submitted a cost effective proposal that would give the city flexibility to be charged based on actual utilization of the clinic which would include number of hours needed and number of employees that utilize the clinic. Estimated annual costs to operate the clinic for 500 employees and 1,040 hours would be $163,820.
The city will require participation in the Health Risk Assessment and follow up visits as recommended based on overall health (high, medium, low risk factors) with the WellCare Clinic professional staff in order to have access to the WellCare Clinic.
The healthcare plan, to date, has received approximately $32,000 from the Early Retiree Reinsurance Program (ERRP) based on our 2010 claims from June – December. An additional $97,000 was requested on June 21, 2011. Future reimbursements are dependent on claims utilization. These reimbursements can help offset the cost of the clinic in 2012.
II. RETURN ON INVESTMENT.
Engaging plan participants to use preventive health services could reduce risk to the health care plan thereby lowering or maintaining the rate of increase to claims costs. The success of implementing such a clinic is based on its utilization, and it is highly recommended that participation be incentivized.
Respondents to RFPs for health clinic services were all confident they would attain a 3:1 Return on Investment (ROI) if the program was properly incentivized. The Health Care Committee and the CHAMP Wellness Committee were confident that the ROI for implementing a clinic that lacked incentives to be 1:1. The City of Lawrence also contacted the City of Lenexa, Kansas and the City of Olathe, Kansas. Both have successfully implemented an on-site health and wellness clinic. To date, the City of Olathe has seen a ROI of 3:1.
Staff will work with LMH to generate reports regarding ROI and demonstrating the return related to wellness activities and other cost avoidance activities. These will be monitored on an ongoing basis.
III. FINANCIAL IMPACT.
Lawrence Memorial Hospital has provided the fee schedule in the attached service agreement. The range in the cost to operate the clinic will be contingent upon the number of participants that utilize the clinic.
The City is already spending approximately $14,000 annually on biometric clinic expenses. The total costs listed in the LMH agreement includes all costs associated with biometric clinics. Backing the biometric clinic expenses out of the costs below, the clinic would cost in the range of $118,000-$189,000 annually in additional Healthcare Fund expenses, depending upon utilization. Again, staff believes that there will at least be a direct return of these expenses in savings in healthcare claims.
IV. REQUESTED ACTION.
Authorize City Manager to sign attached Employee Wellness Service Agreement with Lawrence Memorial Hospital effective October 1, 2011.