The recent explosion of interest in onsite clinics – not just by employers, but by health plans, hospital systems, public health programs, and others – is anything but just another health care fad. At once, clinics’ growing popularity signals purchasers’ weariness with an intransigent, self-interested health system, as well as their guarded optimism about a better way.

Today’s best clinics are single-mindedly focused on what works best for the patient and purchaser within a competitive health care marketplace. They are a return to the hard-learned care management lessons of the last several decades. They look like what experienced health care professionals would develop if they could start fresh, without the perverse incentives that drive so much of health care today. But by leveraging new tools, programs and incentives, they also create a uniquely powerful, contemporary design for managing care and cost.

It would be a mistake to confuse the onsite clinics of the past 25 years with those incubated over the past five. For most of their history, onsite clinics were favored only by large companies with money to burn. Palatial and convenient but without much in the way of modern management tools, the care typically was modeled on an old-fashioned doctor’s office. Many of these clinics were friendly and employees loved them, but often they were more designed to handle walk-in care than life management issues. In most cases, though, it was impossible to demonstrate that the quality of care was better than out on the network. It was also rare for a clinic to produce a quantifiable return on the investment.

Not so anymore. A new generation of on-site clinics firms has streamlined physical plants but expansive capabilities. In addition to providing comprehensive primary care, they are fully-realized medical homes and integrated medical management engines. They produce documented quality improvements and savings using a variety of techniques: Rx step therapies, empowered primary care that reduces specialty visits, data-driven decision-support, chronic disease management, influence over downstream care, referral into high performance networks, occupational health management. There are many variations on the theme, but most modern clinics incorporate medical management located at the front end of the care delivery system, where it can get the most traction over the rest of the continuum.

The results, nearly (but not quite) unilaterally, range from promising to astounding. In a system rampant with waste, most clinic firms claim to improve quality while saving money. Some show very significant, verifiable savings immediately upon implementation, as much as 30 percent in group health, and equally significant (though harder to measure) impacts in occupational health. They undeniably encompass a better way to organize and manage care delivery.

Two great leaps forward are the foundation of this new approach.

Start by realigning the incentives

Clinics gain the high ground, first, by rejecting fee-for-service reimbursement, the heroin of the health care industry, which insidiously promotes excessive care in the service of revenue generation. Many clinic firms now divide their ongoing pricing structure into two components: reimbursement, without markup, for the costs associated with daily operations – staffing, drugs, labs, office supplies – and a management fee that covers enterprise costs – medical direction, clinic oversight, marketing, accounting, IT – and profit.

Unlike virtually everyone else in health care, this model contains no financial incentive to provide unnecessary services or, more importantly, to deny necessary ones. The clinic vendor is paid only to manage care processes, and is judged on how effectively it does that.

This is a welcome revelation to employers who have endured a decade of health care costs skyrocketing at four times general inflation. One of modern clinics’ genius innovations is obtaining risk-bearing sponsors – mostly employers so far – to invest in the process. That sponsorship allows the clinic to manage as an independent fiduciary, outside fee-for-service, creating impacts that are realized in savings to the far larger group health plan and occupational health programs.

Elevate primary care to a medical management platform

Second, clinics embody a renewed appreciation of the primary care physician’s power as a patient advocate and guide. And they leverage the primary care practice, making it a platform that can integrate and coordinate a wide range of care coordination tools, programs and incentives, all aimed at tracking and orchestrating the patient’s needs for primary care and throughout the continuum.

It is impossible to overstate the value of liberating primary care, especially given it’s reduced standing in recent years. It’s worth noting that, while America’s primary/specialty physicians percentage split is 30/70, in all other developed nation’s health systems, the ratio is reversed and their costs are approximately half ours.

In a specialist-dominated health system that primarily pays primary care doctors to do office visits, dis-empowering primary care has been corrosive in two ways. It has pushed patients, often unnecessarily, to specialists, who cost far more. At the same time, primary care physicians have too often been disengaged by overwhelming case loads to maintain accountable relationships with the specialists they refer to, neutralizing the collaborative oversight that is critical to assuring medical appropriateness.

Relieving primary care physicians’ worries that they’re spending too much time with a patient pays big dividends. With the breathing room of a 20 minute office visit, they can more readily explore the issues of their patients, address those that are within their capabilities, and refer far less often, generally with better results.

The litmus test for the effectiveness of a particular clinic’s (or physician practice’s) approach is whether the data show a significant improvement in population health status, and in cost savings that outweigh the investment. Different models produce different results, so medical management impact is the key differentiator among vendors. As purchasers become more discriminating, demonstrated performance will become both a requirement and the all-consuming focus of clinic vendors.

But the infrastructure associated with excellent medical management is not only costly, but complex to develop and put into place. We may find that, as a rule, it is highly unlikely for  individual doctors or small physician groups to build these capabilities, especially while grappling with the dominant fee-for-service system. Instead, the best clinics may be focused efforts solely dedicated to all facets of medical management, sponsored through corporations or, possibly, through more traditional health care entities, like health plans or health systems.

There is no question that the intensifying cost crisis has increased pressure on both purchasers and on the health industry. The recent Kaiser Family Foundation employer benefits survey found that, in 2010, employers passed along all health care cost increases to employees, an unprecedented trend suggesting that purchasers’ ability or willingness to absorb additional cost is saturated. This environment, with few alternatives, offers the best possible opportunity for mechanisms that can rationally reduce cost and risk.

Which is why the new generation of clinics are applicable to far more than employer environments. As their capacity to reliably improve quality and cost becomes more clearly demonstrated and accepted, the approaches they represent will be embraced by any organization that has assumed health care clinical and financial risk. Health plans are already beginning to focus on them. Accountable care organizations are likely next.

Clinics’ transformative power resides in medical management models that can be used by anyone focused on managing population-level health and financial risk. Against a backdrop of a health care bubble poised to burst, that is a simple, compellingly stable value proposition that can help stave off disaster or prove effective in a new environment with fewer resources.

Brian Klepper is Chief Development Officer of WeCare TLC and blogs at Care and Cost.

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