In-House Doctors Give Some Firms a Health Care Remedy : Medicine: Company clinics can help cut costs, but some critics are worried about patient privacy.

Ten miles south of the billowing steam, the light-strung towers and the rows of transformers relaying power to the unslaked furnaces of its Gary Works, U.S. Steel has opened an unlikely new venture.

Here, amid a more conventional townscape of shopping malls and chain restaurants, stands a low-slung brick building off Route 53. This is the three-month-old USS Family Medical Center, on which the troubled company has pinned much of its hope for the future.

Inside, mill hands and retirees from the Gary Works, as well as their spouses and children, get checkups from salaried physicians on U.S. Steel examining tables, X-rays on U.S. Steel machines, stress tests on U.S. Steel treadmills, minor surgery with U.S. Steel scalpels and lab work with U.S. Steel supplies. Each visit costs a maximum of $15.

For the Gary Works site, its largest, U.S. Steel is reviving the turn-of-the-century notion of the “company doctor.” Over the past two years, dozens of other large businesses, mostly manufacturers and mostly in the heartland, have followed a similar course. Deere & Co. the heavy-equipment maker, enlisted the prestigious Mayo Clinic last year to oversee a medical center in Moline, Ill. The presses at Quad Graphics in Pewaukee, Wis., print Newsweek and Time magazines while doctors cure bunions, unclog babies’ tear ducts and perform vasectomies.

While the doctor of yore was imported to tend workers in isolated settings where they could get no other care, the new breed, in an age of explosive growth in health care costs, is hired for the sake of efficiency, for cutting out the middleman and the presumed savings that result.

It is a movement born of desperation. “We certainly didn’t want to get into this business,” said David A. Pryzbylski, employee relations manager for the Gary Works. “We know how to make steel .”

The relationships between corporations and physicians span a wide range. In a survey of 2,400 employers by A. Foster Higgins, a management consulting firm, 12% retained a doctor in 1992, up from 8% in 1991. The majority performed duties relating only to the job, such as drug testing, examinations required to meet government regulations or first aid for injuries at work.

Others go further. Southern California Edison Co., for example, reorganized its health care in 1989 and allowed employees to choose in-house doctors as their primary-care physicians under their managed-care insurance plan. The utility’s eight clinics recorded 63,000 patient visits last year.

The new company doctors cross the line to full-scale family practice. Gillette Co., based in Boston, was the first firm in the modern era to start such a comprehensive system. But it was much more recently that the concept started emerging as a last-ditch attempt to find cost-effective medical care.

Every few months now, another firm, be it Mercury Marine of Fond Du Lac, Wis., or GTE Corp. in Tampa, Fla., announces a clinic in its future. The Higgins survey found that more than a third of the businesses with doctors are offering services to dependents too.

Although early indicators are promising, everyone involved in these experiments is still cautious about declaring success.

The companies are nervous because they have invested substantial amounts in setting up the clinics. If the workers don’t use them and opt for other health plans, the medical cost inflation will continue. Even if they do, it is not totally certain that the economic theory behind the centers will translate into long-term relief.

The doctors are a bit unsettled because some of their colleagues in private practice snipe at the arrangement. Those practitioners complain because, on top of all the other tumult in their field, they wonder how many patients they’re about to lose to this .

Most of all, the workers are wary--very intrigued but wary.

“It’s a good concept,” said Claudia Bradbury, a health care specialist for the AFL-CIO in Washington, “but it raises a number of concerns.”

At first glance, employees win too: The care is cheap, no small consideration for a retiree on a fixed income or a parent with young children constantly due for a physical.

It is generally convenient as well, located very near or even at the work site. And, with only a few exceptions, they say they have been quite satisfied with the medical treatment they’ve received.

Still, some say they fear the potential for conflict of interest, the kind that brought the first wave of company doctors a reputation for being company spies.

“The historical record isn’t clear” on whether the charge was widely deserved, said Diana Chapman Walsh, a Harvard University professor of public health. “But it’s impossible to be neutral when there’s money at stake, no matter how hard you try.”

This time around, will the company find out which worker-patients have AIDS or cancer or a problem with substance abuse, and then find pretexts for firing them?

Will the company doctor find other ways to explain health problems that are in fact caused at work?

Will the company close down a clinic in the case of a strike?

Will the company at some point anoint its own center the sole health care option and then let the quality decay?

These are not idle questions. In 1984, a staff doctor at a hospital owned by Phelps Dodge Corp. accused the copper company of using the facility to help break a bitter labor dispute by charging high fees to strikers. He offered free treatment and was fired.

It is also not unheard of for unions to file grievances alleging that occupational doctors provided medical records or other confidential information to supervisors.

“I’m watching like a hawk, I’ll tell you that,” said John Fritz, financial secretary of a Gary Works union, United Steelworkers Local 1014, which represents 3,900 employees.

It was last October that Pryzbylski’s deputy met with union officials to inform them that the clinic was coming.

U.S. Steel, based in Pittsburgh, Pa., had already tried the usual solutions. The share of costs that employees were assessed, in the form of deductibles and co-payments, had been increased. They were offered inducements to switch to health maintenance organizations and managed care. Costs nonetheless had ballooned 12% to 15% annually over the past five years.

In 1992, the medical bill for the 35,000 workers and retirees at the Gary Works alone was more than $85 million.

The expenditure for the entire company was $210 million, responsible for $24 a ton in the price of its steel last year--a big disadvantage for a firm that lost $830 million over the last two years in a competitive world marketplace.

Something obviously had to be done.

Over the long haul, a company clinic “can really pay off” because staff doctors have no incentive to order extra tests or procedures, while costs of operations and equipment can also be controlled, health care analyst James Norton of A. Foster Higgins said in an interview.

He said the company can practice the HMO style of preventive medicine designed to quash problems before they loom large in a patient’s life and a company’s purse. But HMO fees need not be paid.

But the clinics are not for every company, he said. Several thousand employees--he suggests between 7,500 and 15,000--in a concentrated geographic area are needed to make a center cost-effective. Even so, he said, it will probably take a few years for a business to recoup its investment in the enterprise.

But the idea made sense to Harry V. Quadracci, president and founder of Quad Graphics. His decision to open Quad/Med at his largest plant in July of 1990 was “a no-brainer,” said Quadracci, who is fond of exhorting his employees to action with the slogan: “Ready, fire, aim!”

“The system we had wasn’t working,” Quadracci said. “What’ve I got to lose?”

He hired a local osteopath, who in turn recruited a retired corporate physician and a third doctor whose practice had declined while he spent 18 months under treatment for leukemia.

These days, an obstetrician/gynecologist; an ear, nose and throat specialist and a general surgeon are also available several days a week. The firm’s 5,000 Wisconsin workers can go to other doctors and pay 20% of the bill if they like, but 30,000 patient visits a year testify to the lure of absolutely free care.

Last year, Quadracci said, Quad Graphics shaved 15% off the average 1991 employee health care expenditure.

By then, U.S. Steel had been mulling over the idea of a company clinic for two years.

Pryzbylski pored over numbers, trying to discern patterns, to figure out why health care for the Gary Works employees was so expensive. The average age of a worker was 45, but that held true at other U.S. Steel locations and the Gary Works outspent them.

“We thought: ‘Maybe Gary people party more,’ ” Pryzbylski said. “We drink more, we party more. But that wasn’t it.”

It turned out that employees of the local county government also were being hospitalized at higher rates than the national average.

Pryzbylski’s conclusion was no compliment to the local medical Establishment: “Doctors in northwest Indiana were doing more than necessary,” he said. “And more medicine isn’t always good medicine. Exposing people to more medical care, especially when you’re talking about invasive surgery, can pose added risk.”

He chopped the air with his left hand for emphasis and said: “We were being victimized, and we think many of our employees were being victimized.”

There was no thought of waiting for national health care reform, even after Bill Clinton was elected President and promised to achieve it.

“We could not wait,” Pryzbylski said. “By the time it trickled down to U.S. Steel, we’d be out of business.”

Instead, company executives’ talk last fall was not of whether to open a medical clinic, but where and how. U.S. Steel officials settled on a leased structure near Methodist Hospital’s Southlake campus.

They bought the equipment. They contracted with a medical management company to run the billing system--in part to ease confidentiality concerns--and to hire the center’s staff. This last was not an easy task, given the suspicion the enterprise was generating among the area’s physicians.

Michael Kovacich, chief of the family-practice division at Methodist Hospital, sent letters to about 80 colleagues, warning of the advent of the clinic. “Some of our members were a little apprehensive,” he said in an interview. “It may affect our private practices. A lot of doctors really value their freedom of choice, and health care in America is changing.”

Three physicians finally signed up, all with roots in the region, if not the immediate area.

All told, it cost U.S. Steel $1.2 million to open the clinic doors.

After layoffs in the 1980s, the steel workers’ union represented more than five retirees for every active member. Some of the widows were actually spending more on insurance than they received in pension, Fritz said.

So it wasn’t hard to interest Local 1014 in a clinic where the patient’s price tag would be very low and where anyone on Medicare would generally receive treatment free.

Indeed, two Local 1014 officers now count themselves as satisfied customers. Paul Foley, the recording secretary, whose previous doctor provided a misdiagnosis for his daughter, decided to get help for non-insulin-dependent diabetes at the company’s clinic.

“I (had) lost all my zip,” he said. “Now I feel much better.”

And Local 1014 President Larry McWay went in for a fluid-filled lung and ended up referred to a heart specialist, then hospitalized for an angiogram. His doctor called him every day, and when he got home, he says, the staff mailed him a get-well card.

“A lot of my suspicions,” he said, “have been laid to rest.”

But when the union phone rings, as it does several times daily, with rank-and-file inquiries about the local’s stand, “we don’t give our blessings,” said Willie Moore III, the vice president.

“In order to make it work,” Fritz said, “they have to give you good health care. My worry is what will happen down the road.”

Still, plenty of steel workers are willing to give the new center a try. Indeed, 5,400 appointments were scheduled during its first 90 days. Two more doctors were hired to accommodate the crowds and get the waiting time down.

Joe Fernandez, for one, has been by three times already.

At age 53, the crane operator said he hadn’t seen a doctor regularly for several years. But his brother, eight years younger, had had some heart trouble, and he figured that for $15, he might as well find out what he could do to avoid such a fate himself.

Under the guidance of his company doctor, Sharon Harig, he has dropped eight pounds. While she was at it, Harig checked Fernandez’s asthma medication and cut back the dosages.

“I think we’re going to get a lot more of this in this country,” he said, perched shirtless on the edge of an examining table. “All companies are getting more cost-conscious.

“You learn to go with the flow,” he said. “Whatever you can save the company, you save yourselves in the long run. You might even save your job.”